Monday, December 13, 2010

Stormclouds on the Horizon?

Market alarm as US fails to control biggest debt in history

Stormy times ahead for any nascent economic recovery?

Posted by alan_540 @ 02:52 PM (1575 views)
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12 thoughts on “Stormclouds on the Horizon?

  • Alan, I’m not sure you’re supposed to retrieve this story from under the carpet.

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  • Can I just put a question, which might be self-answering: Are the Yanks, again using the rest of the world to enable it to appear to, or actually grow itself out of it’s self made crisis? By which I mean almost all other nations are going to be hit by austerity and higher taxes, lower social standards etc.but the Yanks continue to cut taxes to the wealthy and find money to fund their medicare and medicaid programmes. When will the world actually call in the ever growing debt the US is piling up? Just a question I feel needs to be posted. I would be interested to hear from Flash and techie as to their views on the astronomic rise of stocks etc. over the past two years and the fact that many of the S&P are now at all time, not just year, highs???. Is this really sustainable or are we eventually going to get the mother of all corrections, which even the Fed can’t stop with it’s printing presses.

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  • Say again Rumble? Not following you.

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  • Hi bystander, like you I’m hoping one of the more technically minded contributors might like to comment on this, but everyone’s comments welcomed of course.

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  • general congreve says:

    Buy physical gold and silver, that’s about all you need to know about this. One day everything will be ‘business as usual’, the next day it will be ‘TOTAL PANIC!!!’. Roll on tomorrow…

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  • The situation has been mentioned for a few years, but is too dramatic for consideration, born of the blogosphere, it’s not feasible. I await an explanation, but if you take GC’s “‘business as usual’, the next day it will be ‘TOTAL PANIC!!!”, for some reason it’s absurd to move beyond that comma. You may have noticed the same re EU issues, or the hole of Pytel’s blog (‘scuse the four letter word).

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  • The reserve status of the dollar obviously enabled the US to get China Japan etc. to buy $ trillions of US T-bonds, but there’s also a big bondholding class in the US and we need to think about how this came about.

    In the US the starting point is the Reagan tax cuts for the rich (disguised as Laffer-curve thinking that said if you cut taxes the resulting economic expansion will generate more tax revenue than before – this was just a cover for un-taxing the rich), along with significantly increased defence spending. The deficit expanded and the relatively untaxed rich were provided with both the funds and the investment opportunity – lending to the Treasury by buying its bonds/notes/bills to make up for the taxes they hadn’t paid. The government created both the big deficits and the bondholding class to finance them (at the high interest/yield rates of that time). The bond market is thus a Wall Street welfare institution to which ordinary taxpayers pay a bondholders’ tax via G.Sachs et al.

    Technical discussions of “the markets” should take this into account.

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  • As a reserve currency the US can push this further. The devaluation of the dollar and loan indebtedness will go on for some time, I suspect.

    However, one day the game will not work anymore. When that is and what triggers it, nobody can analyse in advance. On that day, lots of people will get hurt.

    The American government is well aware of how the game is playing out. They have made much of the difficulties of Ireland and Portugal in the last month. It is clearly in their interest to draw attention to the Euro problems and forget about (say) California. They also have the whip hand over the rating agencies….

    IMHO – its all about credibility – no wonder they don’t want Wikileaks to start spreading bad information about the US banks.

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  • on that last point [email protected] – when are the wikileaks due , as promised, on a large US bank??

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  • @Bystander, I don’t know.

    The way Wikileaks has operated in the past is: 1) After verification, make announcement, 2) Distribute evidence to chosen media (Guardian, etc), 3) Go public.

    I would think the Guardian are already in possession of the information. Wikileaks are keen to keep themselves in the media spotlight, so I guess that they will let the US leaks run a little longer before revealing the banking info.

    The longer they stay in the spotlight, the more likely disaffected people will approach them with leak material. and so it goes on….

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  • Intelligent comment below the article
    jonlivesey
    Yesterday 04:05 AM

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