Those numbers include the disasterous raiding of SS money. The real deficit is around half a trillion a year even this year, especially this year.
We will be bankrupt soon enough. Already, we are so beholding to the Japanese to buy our debts that we no longer run any Asian foreign policy that isn't first vetted by Koizumi.
Do you suppose there is a relationship to the yield curve? Like maybe, the Treasury has been negligent in not moving more of the National Debt into long-term securities, reducing the pending roll-over, while the getting was good.
Bruce, maybe some of the thinking behind reintroducing the 30-year TBill is for the express purpose of locking in low long term rates. in any case it's all a bit too late. we're awash in $8 trillion in debt and there's no way out of this rabbit hole. i must say i still find it astounding that the 'last superpower' could put themselves in such a hole willingly.
I've been following foreign exchange rates lately, and see that most currencies are getting weaker against the US dollar in the last 8 months or so, especially in the last month.
Ostensibly this is because US interest rates are rising and attracting bond investments, which increases the dollar's value.
But inflation is rising in the US, which is the ostensible reason for raising interest rates. Inflation is a risk to weigh against the value of interest rates one can earn by buying US bonds.
But there's no sign of hesitation due to such risks, except in the stock markets. Global stock/equity investors seem more reticent than bond buyers.
I don't really "get" the dynamic in today's situation. Got ideas?
In short it appears they are 'investing' all the profits they make selling stuff to us (trinkets & parts alike)... back into US bonds & MBS... the flow of which counters the flows going out of the country which holds the dollar strong...
He says that although this appears to be against all 'reason'... or at least 'reason' from a western capitalist rate-of return perspective... it is what they are doing....
Maybe to keep their currency weak to continue to 'buy work' & create jobs...
Maybe because they ultimately anticipate social unrest & want the loot 'safe' - outside their country.
Whatever - they are sending it here and until that changes this house of cards we are living in will continue get higher & we deeper.
That's my 25 second elevator speech on 'why'... anyone have a better answer, I'm all ears.
Nobody should be surprised by this. George W. did this same thing in the business world before the American people decided he was just what this country needed. See the following link for some interesting history. The Failed Corporate Record of George W. Bush
The upcoming 30 year Treasury auction, in Feb I believe, is the reason long term rates have started to rise. There will finally be some competition for the long money.
th --there is also Prescott, W's grandfather, who provides the family's base/fortune by banking and selling arms to Nazi Germany.
But that was then and this is now. Many revelations and transformations have occurred since...
OldVet's view is ostensibly to make us wonder about what isn't ostensible in our present economy. Yes, the interest rates are helping the dollar. Ostensibly. Yes, the stock market seems to be teetering. Ostensibly. Yes, the bond market seems slow in responding to the increasing interest rates. Osten... Curency uncertainty has helped push gold and precious metals...osten...
This seems unostensibly clear to me: great uncertainty abounds with the unmistakable signs of consumer exhaustion.
CR -- "Now that interest rates are rising, the additional interest payments will add significantly to the General Fund deficit."
I believe that I would state the situation differently.
Interest payments on the U.S. Debt are mandatory obligations from a budgetary perspective. As such, increased interest payment obligations do not necessarily represent a larger General Fund deficit. Rather, the growing mandatory interest payments crowd out a larger percentage of discretionary spending under existing budget caps. It is the deficit funding of the discretionary spending that represents the first component of deficit spending. If all discretionary spending represents deficit spending and if additional deficit spending is required to satisfy other budget requirements, i.e., mandatory obligations, then some portion or all interest payments may fall in that category. But only if such payments are viewed as a less critical and nonadjustable component of all mandatory spending. In other words, interest payment obligations are the most mandatory and unadjustable obligation of the mandatory budget obligations at the time such obligations are incurred.
Does it matter, you say? Yes. The alternative to additional deficit funding of discretionary programs are funding reductions. Cuts could be applied to discretionary budget line items to offset some of the mandatory program crowding (in this case, interest payments). And similar measures can be undertaken with some presently mandatory obligation programs.
And we still haven't discussed raising the U.S. debt ceiling cap...
Why do I have an uneasy feeling when we look at one issue at a time?
More importantly, as these issues come together, they form a tightly braided rope with which we will slowly hang ourselves.
We look at issues as if they were separate one from the other, like the proverbial blind men confronted with an elephant.
Pull them all together:
Rising Health Care and education costs
Stagnant wages
Rising Energy costs
Rising deficit
Rising trade deficit
No or little investment
Housing market out of reach of average consumer
Credit being extended in every direction
Loss of manufacturing
More and more offshoring in IT and other service areas
Sometimes I think that economists are like medieval scholastics arguing over how many pennies can balance on the head of a pin. Meanwhile...
Thanks for above ideas and references. It may be that exporter governments (Middle East, Asia) dominate the currency trade and FX values. I read B.Setser with great interest, from time to time.
But are not the US$ currency markets wide and deep enough, and include enough private investors, that pure central bank manipulation would be difficult? The list of related or somewhat related economic realities referenced by Stormy would tend to give any investor pause, I would think. But there's little sign of that.
The rise in both debt levels and interest rates cited by Calculated Risk are bad signs for the domestic US economy in the way M.Guy says. For example, India pays some 40% of revenues in servicing debt, which severely constrains infrastructure development. The US is headed that way as well. Massive debt is a heavy stone for any economy to carry.
If foreign private investors are thinking the US is immune to the revolts and revolutions that are always bubbling up elsewhere, they should think again. The main revolt they should fear is a US refusal to pay its debts - an idea not inconceivable in today's political climate.
Stormy's post (esp the tentacular list) made me think of a nightmare encounter I had with an octopus (squid? I was too scared to make the distinction). It wasn't the left hook but the plethora of left hooks.
OldVet's "If foreign private investors are thinking the US is immune to the revolts and revolutions that are always bubbling up elsewhere,"
brought Paris to mind (pushing Pakistan out), but I think the private foreign investors are not like the guy next door. They are money managers (for the guys next door who might have worries about the neighborhood). When the DOW moves, it is because of these money managers, not Joe next door.
This bit aroused me too:
"that pure central bank manipulation would be difficult?"
With fx, the cbs (who have taken a step back it seems to me) are the large players but not compared to the trillion/day fx market. Like the Fed, it is not what they do so much (move the interest rate up/down 25bp) but the perception/expectation (We are gonna get clubbed to death. Strangulated by Incessant Tightening. Merciless Tightening.) [This is why Greenspan is chairman and Bush is President.]
The light should go on when you consider the net FDI flows. GM is not investing in the USA. American business does not think that the US is the best place to invest, no matter what the pundits/politicians say.
Ok its a dim bulb and/or the place is pretty dark...
CR - I think you might have found net interest, which subtracts interest collected by the government. I think paid interest on the debt is a higher number.
Those numbers include the disasterous raiding of SS money. The real deficit is around half a trillion a year even this year, especially this year.
We will be bankrupt soon enough. Already, we are so beholding to the Japanese to buy our debts that we no longer run any Asian foreign policy that isn't first vetted by Koizumi.
This is why he can openly insult us now.Surrendering our power to Japan
Do you suppose there is a relationship to the yield curve? Like maybe, the Treasury has been negligent in not moving more of the National Debt into long-term securities, reducing the pending roll-over, while the getting was good.
Bruce, maybe some of the thinking behind reintroducing the 30-year TBill is for the express purpose of locking in low long term rates. in any case it's all a bit too late. we're awash in $8 trillion in debt and there's no way out of this rabbit hole. i must say i still find it astounding that the 'last superpower' could put themselves in such a hole willingly.
I've been following foreign exchange rates lately, and see that most currencies are getting weaker against the US dollar in the last 8 months or so, especially in the last month.
Ostensibly this is because US interest rates are rising and attracting bond investments, which increases the dollar's value.
But inflation is rising in the US, which is the ostensible reason for raising interest rates. Inflation is a risk to weigh against the value of interest rates one can earn by buying US bonds.
But there's no sign of hesitation due to such risks, except in the stock markets. Global stock/equity investors seem more reticent than bond buyers.
I don't really "get" the dynamic in today's situation. Got ideas?
I don't really "get" the dynamic in today's situation. Got ideas?
Brad Setser has been covering this for years (?)... long time anyway. I'm sure you are aware of his work but if not go here & did deep...
Dr. Setser
In short it appears they are 'investing' all the profits they make selling stuff to us (trinkets & parts alike)... back into US bonds & MBS... the flow of which counters the flows going out of the country which holds the dollar strong...
He says that although this appears to be against all 'reason'... or at least 'reason' from a western capitalist rate-of return perspective... it is what they are doing....
Maybe to keep their currency weak to continue to 'buy work' & create jobs...
Maybe because they ultimately anticipate social unrest & want the loot 'safe' - outside their country.
Whatever - they are sending it here and until that changes this house of cards we are living in will continue get higher & we deeper.
That's my 25 second elevator speech on 'why'... anyone have a better answer, I'm all ears.
Nobody should be surprised by this. George W. did this same thing in the business world before the American people decided he was just what this country needed. See the following link for some interesting history.
The Failed Corporate Record of George W. Bush
The upcoming 30 year Treasury auction, in Feb I believe, is the reason long term rates have started to rise. There will finally be some competition for the long money.
th --there is also Prescott, W's grandfather, who provides the family's base/fortune by banking and selling arms to Nazi Germany.
But that was then and this is now. Many revelations and transformations have occurred since...
OldVet's view is ostensibly to make us wonder about what isn't ostensible in our present economy. Yes, the interest rates are helping the dollar. Ostensibly. Yes, the stock market seems to be teetering. Ostensibly. Yes, the bond market seems slow in responding to the increasing interest rates. Osten... Curency uncertainty has helped push gold and precious metals...osten...
This seems unostensibly clear to me: great uncertainty abounds with the unmistakable signs of consumer exhaustion.
Oldvet, more good synoptic stuff on Why investors don't get creamed when they bet on high-yield monopoly money like ours.
Raising rates may create a curious dilemma that has not been considered:
Draw even more money into T-bills and away from the equity market. If more money does move that way, then that will again flatten long term rates.
This whole system that has been created is so delicately balanced that touching anything may be just enough to destroy it all.
Hard for me to get my head around a solution.
CR -- "Now that interest rates are rising, the additional interest payments will add significantly to the General Fund deficit."
I believe that I would state the situation differently.
Interest payments on the U.S. Debt are mandatory obligations from a budgetary perspective. As such, increased interest payment obligations do not necessarily represent a larger General Fund deficit. Rather, the growing mandatory interest payments crowd out a larger percentage of discretionary spending under existing budget caps. It is the deficit funding of the discretionary spending that represents the first component of deficit spending. If all discretionary spending represents deficit spending and if additional deficit spending is required to satisfy other budget requirements, i.e., mandatory obligations, then some portion or all interest payments may fall in that category. But only if such payments are viewed as a less critical and nonadjustable component of all mandatory spending. In other words, interest payment obligations are the most mandatory and unadjustable obligation of the mandatory budget obligations at the time such obligations are incurred.
Does it matter, you say? Yes. The alternative to additional deficit funding of discretionary programs are funding reductions. Cuts could be applied to discretionary budget line items to offset some of the mandatory program crowding (in this case, interest payments). And similar measures can be undertaken with some presently mandatory obligation programs.
And we still haven't discussed raising the U.S. debt ceiling cap...
>
Why do I have an uneasy feeling when we look at one issue at a time?
More importantly, as these issues come together, they form a tightly braided rope with which we will slowly hang ourselves.
We look at issues as if they were separate one from the other, like the proverbial blind men confronted with an elephant.
Pull them all together:
Rising Health Care and education costs
Stagnant wages
Rising Energy costs
Rising deficit
Rising trade deficit
No or little investment
Housing market out of reach of average consumer
Credit being extended in every direction
Loss of manufacturing
More and more offshoring in IT and other service areas
Sometimes I think that economists are like medieval scholastics arguing over how many pennies can balance on the head of a pin. Meanwhile...
Thanks for above ideas and references. It may be that exporter governments (Middle East, Asia) dominate the currency trade and FX values. I read B.Setser with great interest, from time to time.
But are not the US$ currency markets wide and deep enough, and include enough private investors, that pure central bank manipulation would be difficult? The list of related or somewhat related economic realities referenced by Stormy would tend to give any investor pause, I would think. But there's little sign of that.
The rise in both debt levels and interest rates cited by Calculated Risk are bad signs for the domestic US economy in the way M.Guy says. For example, India pays some 40% of revenues in servicing debt, which severely constrains infrastructure development. The US is headed that way as well. Massive debt is a heavy stone for any economy to carry.
If foreign private investors are thinking the US is immune to the revolts and revolutions that are always bubbling up elsewhere, they should think again. The main revolt they should fear is a US refusal to pay its debts - an idea not inconceivable in today's political climate.
Stormy's post (esp the tentacular list) made me think of a nightmare encounter I had with an octopus (squid? I was too scared to make the distinction). It wasn't the left hook but the plethora of left hooks.
OldVet's "If foreign private investors are thinking the US is immune to the revolts and revolutions that are always bubbling up elsewhere,"
brought Paris to mind (pushing Pakistan out), but I think the private foreign investors are not like the guy next door. They are money managers (for the guys next door who might have worries about the neighborhood). When the DOW moves, it is because of these money managers, not Joe next door.
This bit aroused me too:
"that pure central bank manipulation would be difficult?"
With fx, the cbs (who have taken a step back it seems to me) are the large players but not compared to the trillion/day fx market. Like the Fed, it is not what they do so much (move the interest rate up/down 25bp) but the perception/expectation (We are gonna get clubbed to death. Strangulated by Incessant Tightening. Merciless Tightening.) [This is why Greenspan is chairman and Bush is President.]
The light should go on when you consider the net FDI flows. GM is not investing in the USA. American business does not think that the US is the best place to invest, no matter what the pundits/politicians say.
Ok its a dim bulb and/or the place is pretty dark...
CR - I think you might have found net interest, which subtracts interest collected by the government. I think paid interest on the debt is a higher number.
No, maybe I'm wrong. I got tripped up by that once...
Consumer credit stalling
jm - the link failed... got a url for us?
how does this( i mean the rising of interest payment on national debt) will affect the US domestic economy in the future?
what is the current interest rate on the national debt? 2%?