Only a Few Short Years

As usual, Zero Hedge (one of my absolute favorite blogs) is at the forefront when it comes to funny money-era milestones:

"US Debt/GDP Hits Post WW2 High 99.5% Following $55 Billion Overnight Debt Increase: Total Debt Now Over $15.1 Trillion"

It seems like it was only yesterday that we celebrated 15,OOO,OOO,OOO,OOOBAMA day. Two weeks later, we are now well over 100 billion in debt over this historic landmark, or $15.11 trillion to be precise, following the predicted $55 billion increase in debt with the settlement of all auctions from last week. And aside from the mind-staggering rate of new debt increase why else is this number notable? Because as we learned 10 days ago, total Q3 GDP in current dollars is $15.18 trillion. In other words, US debt/GDP is now 99.5%, the highest it has been in the post WW2 period, and rapidly rising. What is worse is that the delta to 100% debt/GDP is only $70 billion: this is about half of the next two weekly gross issuances of 3,10,30s and 2,5,7s of about $160 billion over the next two weeks. In other words by the end of 2011, debt/GDP will finally be a triple digit number percentage. And the other notable thing is that the debt limit still is $15.194 trillion. It is ironic that the economic growth ceiling and the debt issuance ceiling are now one and the same: if the the debt target number does not rise neither will the US economy. Q.E.D.

One thing ZH doesn't make too much note of -- this time, at least -- is the fact that it's only taken a few short years of reckless profligacy to get us to the point.

Can't wait to see what this chart will look like when Financial Armageddon 2.0 is fully underway.

Comments

[And who knows what else they're hiding?]

Wall Street Journal: Corzine and his regulators

MF Global customers are still waiting to be made whole, but the
larger importance of this story relates to the effectiveness of the
Dodd-Frank, Sarbanes-Oxley regulatory model. Americans have been told
that, in response to the 2008 financial crisis that regulators failed to
predict or prevent, regulators needed to have vast new powers to
prevent the next crisis. But in MF Global the regulators failed the
law's first serious test.

MF Global also shows how this new era of regulatory power puts a
premium on political connections. Mr. Corzine was named CEO of the
company in part—maybe in substantial part—because he had close ties to
regulators and could help MF Global navigate the many new rules. This is
the new financial crony capitalism, and it also failed its first test.
The mistake is to believe in regulator prescience, as opposed to
simpler, straightforward rules on, say, leverage or capital.

Mr. Gensler, for his part, has a response to the cronyism charge.
Since the firm went bankrupt he has announced that he will recuse
himself from issues affecting MF Global.

Now?

Congressman Randy Neugebauer sent a letter to Mr. Gensler this week,
and Wednesday night Senator Richard Shelby contacted the CFTC's
inspector general seeking an answer to the question of how and when Mr.
Gensler decided that recusal was appropriate. This is another answer Mr.
Gensler should bring to today's hearing.

http://gata.org/node/10726

[Does anyone know what a regulator looks like?]

How do you think the money managers tipped off by Paulson were positioned?

I'd like to take Paulson to task in the strongest possible way for
dereliction of duty, violating the public trust and for generally
screwing over the American taxpayer.

As reported by Bloomberg,
Paulson's meeting and alleged comments did not violate insider trading
laws; technically it was legal. But just as insider trading by sitting
members of Congress is wrong and offensive, Paulson's gift to his hedge
fund buddies - including several alum of Goldman Sachs, where he was CEO
prior to becoming Treasury Secretary -- is so grotesque and wrong it
boggles the mind; more especially considering what Paulson told the
press about Fannie and Freddie that same week was in stark contrast to
what he told the money managers.

http://finance.yahoo.com/blogs/daily-ticker/taken-task-capt-cronyism-hank-paulson-124007702.html

[Get serious, mute msm]

You CAN'T Be Serious

To sum it up, here's the truth that you will not see reported in your daily newspapers tomorrow or hear on your nightly local news, CNN, CNBC, Bloomberg or MSNBC: There are less people working as a percentage of the total population, the total number of employed people as a percent of the population continues to decline, it's harder to find a job for those still looking, and those who do find a job are earning less - especially after factoring in inflation. Sounds a bit different that the rosie headlines reported by the media and promoted on CNBC.

http://truthingold.blogspot.com/2011/12/you-cant-be-serious.html

[Walter Wit Man]

My main problem with Zero Hedge (as well as this site I guess--no offense intended b/c I like everything else about it), is the idea that debt matters this much. It's this Austrian tilt that once made sense to me that I how can't help but view suspiciously since I've been exposed to Modern Monetary Theory arguments and thought more about the harsh libertarian distopia of this Austrian viewpoint.

I mean I agree in this instance the debt levels are "worrying", but for fundamentally different reasons.

1. The U.S. is sovereign in its currency and can create and spend dollars at will. It should never have to default (nor does a country like Japan have to default--which is a pet issue of Zero Hedge it seems). The only reason a sovereign defaults on debt in its own currency is because people force it to do this illogical action (and both parties succeeded in wildly misinterpreting U.S. law as NOT to allow "printing" dollars in this way). Austrians reinforce this scam.

2. There is no need to even issue bonds. The whole thing is a scam from the beginning. We are paying too much for the privilege of borrowing our own money when there is no need to borrow this money in the first place (why not simply pay for everything in dollars the gov. either has or creates?).

3. Evidently the fed and Congress semi-secretly spent over $30 Trillion on the banks over the last few years. Let's not lose our sense of proportion here. Fixing Social Security would be a couple Trillion in a few decades from now. We just "printed" tens of trillions for bankers, and there has been little inflation, why can't we "print" a trillion or two for the people? I'll start worrying about debt when the worry warts (most of whom have ulterior motives), start proportionally dealing with the problem. But we all know questioning the Empire, the war machine, the police state, and the corporate welfare will be off limits, so it will be average people's health care, pension, and public schools that will have to be sacrificed to the debt monster.

In short, Austrians are simply willing tools of the fascists.

[Securitizations make it all possible until they don't]

B Chilton CFTC (Text/Mails), CCC White Paper MF Gl Warehouse Certs

Warren Edward Pollock (wepollock) goes into bulldog mode once again as he trades texts and emails with media darling CFTC's Bart Chilton. Warren likes to talk to the issue not the person so my words to Bart was to get away from the media and congress and to get himself into the bankruptcy court on our behalf.. I do believe he is one of the good guys, but using the corporate strategy of success at the cost of failure is not acceptable. I review that pending status of commodity certificates as either pooled or identifiable property. I talk about DSRO Designated SElf Regulatory Organizations and the idea of Fiduciaries where you are supposed to care for others assets in preference and in advance of your own interests. I mention a call pending front the COO of the CME. Also, I discuss the idea of leadership as a solutions point, where are the leaders? where are the executives? I mention the concept of a PUBLIC fiduciary which something the banks still do not get this day. I contrast accounting standards and application by Price Waterhouse to that of now defunct Arthur Anderson. I mention a 2005 article I wrote predicting this very thing... Where is FASB Financial Standards?

For a tidy commission, Wall Street firms are happy to establish trust funds to organize, place, sell and administer asset-backed securities. In these instruments, your debt via a car loan represents someone else's asset. Behold the magic of creative credit. Individual car loans are no longer illiquid, nor limited by the constraint of a corporate balance sheet.
The cash flow from any seemingly illiquid revenue stream can be monetized. Almost everything financial - tobacco settlements, future tax revenues, credit card balances, sovereign debt and spreads - can be packed up and sold.

http://www.youtube.com/watch?v=RFdNP3wGm9Q&feature=colike

[The company store]

US Employment and Wages, Modern Monetary Theory, Trade, and Financial Reform

"The problem becomes then how to implement a fiat currency without the discipline of issuing debt through private markets.

This is the important point that most MMT adherents seem to ignore, but it is their greatest area of strength.

One cannot print money at will. The limitation is always and everywhere the willingness of the markets to accept it in exchange for labor and real goods without coercion. To make counter claims is to undermine your own position.

It is a tautology to say that a state that controls its own fiat currency cannot become insolvent in that currency, since they can never lack that which they can create from nothing. The state does not run out of its currency, rather, it runs out of people who will accept it at the official face value."

http://jessescrossroadscafe.blogspot.com/2011/03/us-employment-and-wages-modern-monetary.html

[Sometimes I think its Monday on Tuesday but then I look at the calendar]

No inflation? everything has gone up if you pay for it out of your own pocket...maybe your on the dole???

Commodity Index up 252% in last 10Y. Hence… Deflation?
Stop to consider the fact that these price increases have occurred despite stagnant wages (the Keynesian’s preferred deflation argument being that inflation cannot occur without matching wage hikes) AND crawling money-velocity since the crunch. No matter what the Fed does, it is screwed going forward.
http://www.bearishnews.com/post/4692

Verify The CPI

The Place to Compare Real People's Cost of Living to Official US Statistics
http://www.verifythecpi.com/

[Blissex]

As presented here this is just political propaganda masquerading as information.

Because what really matters is not the ratio to GDP of public debt, and not just from 1993, but of total debt from 1970, as reported here for example:

http://research.stlouisfed.org/fred2/graph/?g=34K

And the enormous recent increase in public debt was due simply to swapping a lot of private debt for public debt to avoid a collapse of markets caused by private debtors.

And it has not taken just four years of Bush profligacy, as the total debt graph above shows, but total debt has been growing reckless;ly faster during the Republican majorities after 1980 "morning off america" (Reagan) and after 1994 "contract on america" (Gingrich) that enabled a colossal expansion of total debt to fuel speculation.

[Mark]

Not only is debt-to-GDP past 100%, the US is only $149b away from breaching the debt ceiling again.

http://seekingalpha.com/article/311662-warning-u-s-debt-crisis-as-early-as-next-month