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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?


To: Crimson Ghost who wrote (5327)1/16/2004 8:21:50 PM
From: mishedlo  Respond to of 110194
 
To make sure that everybody had a nice holiday, the Treasury released billions of dollars in actual cash, foreign central banks bought up American debt, and the Treasury issued a humongous clot of new debt, the size of which is so huge that I dare not look at it with the naked eye. Earlier, and I shudder to think of it, I had gotten a glimpse of it as I was scanning some other number, and the impact from that brief fleeting peripheral vision glance caused my heart to - urk! - momentarily seize up. So naturally I am afraid that if I look directly at the heights to which Official Government Debt has grown I will turn to stone, just like what happens when you look at a Gorgon, of which Medusa was one, she of the hideous hair of snakes, and whom Perecles and was supposed to slay or something, and I think the Three Stooges were somehow involved, but, then again, Greek mythology was never my long suit.
So we will wait just a few moments here while my wife comes to look at the number for me, and I suggest taking a few deep breaths of pure oxygen in preparation - inhale exhale inhale exhale - and here she comes, and she snatches the paper rudely out of my hand and, adjusting her glasses, starts off by saying "Six trillion," which I already knew it was probably in the six trillion range somewhere, so my heart rate is about eighty-five now. Then she goes on to say "Nine hundred and...," and I breathe a little easier, as it did not break the seven trillion dollar milestone. Already I have almost stopped paying attention out of relief and lack of emergency, and then she said, and I remember it like it was yesterday, she said, real fast, "Ninety billion dollars!"

I am proud to say that the computer-like brain of the Mogambo sprang immediately into action, and as soon as I regained consciousness I instantly demanded that the surprised paramedic take that damn cardiac needle out of my chest and his hand off my wife's thigh, and to immediately unhook all of these damn lines and tubes and wires, and then I asked her to repeat that number, and I wrote it down as she repeated it. $6,990 billion dollars!

Almost immediately, Barb, over at 321.gold, sent me an e-mail to keep me current on the state of the national debts, as her site keeps tabs on the official debt level, as she figures that I would be interested in the fact that the national debt has now officially soared over $7 gazillion, I mean trillion, but when you are talking about money in mountains that big it really makes no difference whether it is gazillions or trillions, as numbers that big are too huge to be comprehensible, and when you think about them you get dizzy, and then you get a headache, and pretty soon you're real grouchy, and then your conversational skills subset is reduced to snarling "What in the hell are YOU looking at, scumbag?" But either way, seven gazillion or seven trillion, it is a lot of money, roughly comparable to what it would take in plastic surgery and personality transplants to make me appear to be almost human, and then paying somebody to be nice to me so that I could get used to how that feels.

dailyreckoning.com



To: Crimson Ghost who wrote (5327)1/16/2004 8:23:47 PM
From: NOW  Respond to of 110194
 
"Mr. Faber goes on to say "This highly artificial recovery is, in our opinion, not sustainable for very much longer, although we should all realize that the Fed is fully aware that asset prices must, under no circumstances, be allowed to decline.
In fact, the Fed will try to make them appreciate even further through highly expansionary monetary policies." And this is why the stock market was almost guaranteed not to go down before December 31, and, sure enough, it didn't."



To: Crimson Ghost who wrote (5327)1/16/2004 8:24:18 PM
From: mishedlo  Read Replies (2) | Respond to of 110194
 
Deflation Here We Come

prudentbear.com

Over the last few days Central bankers have been making statements to firm the dollar. There are also signs that they are taking less visible, coordinated action. While this action may provide short-term stability - by providing supply-side stimulus to inflate financial assets - in total these actions are actually deflationary.

The move to reduce the supply of guaranteed long-dated debt, which began with the withdrawal of 30-year notes, means that any debt retired must be replaced with debt at the shorter end of the yield curve. Of course, this action reduces the government's cost of capital, at least in today's environment. But in our view, this move also was made to encourage the issuance of mortgage-backed securities. Regardless of the reason, this shortening process is ongoing and it represents a major deflationary exposure in a way that investors may not have noticed.

...

Yes, the government's debt becomes more serviceable as rates move lower. However, every short-term piece of paper printed makes it more a difficult policy questions of when to raise interest rates. Thus, interest rate policy locks itself into an environment of zero percent return (and chronic negative real return) until liquidity becomes unavailable.

Currently, an inflationary bias is also reflected in the weakening dollar and rising gold prices. But it is the long term interest rate that provides clues as to whether or not we will experience a deflationary depression, stagflation (deflation-inflation), or hyperinflation.

A deflationary depression would be the worst scenario possible.



To: Crimson Ghost who wrote (5327)1/16/2004 8:25:09 PM
From: mishedlo  Respond to of 110194
 
Very much on target. I would add that the speculative frenzy has advanced so far, that the market must either continue to surge or go down HARD. No more healthy corrections or consolidations possible in this manic environment IMHO.

We agree
Mish