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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (12134)4/18/2004 2:25:22 PM
From: Wyätt Gwyön  Read Replies (2) of 110194
 
most of the noise made by bond bears has been about the "twin towers" as well as the precariousness of the support provided by Asian Mercantilists and Leveraged Speculators (hedgies playing the carry), coupled with unreported (deliberately or otherwise) real-world inflation.

i almost hate to bring this up, seeing as i have stood on the bullish side of the bond argument and profited from it in the past, but to me it seems the above arguments are not the most bearish ones against bonds. you may recall a report commissioned by O'Neil while still Treasury Secretary, which was nixed from the 2004 Budget since it showed an "off-balance-sheet" liability of some $45 trillion due to Medicare, Social Security, etc.

this liability is the Net Present Value, and is actually calculated quite conservatively--i.e., it probably UNDERSTATES the true NPV of the liability, which might be closer to $70 trillion already.

given that total US "net worth" is around $40-50 trillion, such a liability can give the impression that the US, collectively, is technically bankrupt.

in any case, the off-balance-sheet liabilities are so large that all the conventional arguments against govt debt pale in comparison. i am coming around to the idea that the US Govt. may have to default on its official debt at some point in the future.
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