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To: CalculatedRisk who wrote (234464)	12/27/2009 4:09:14 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 306849

CR, 1. do you think the banks have enough money to cover off balance sheet losses? if so, why continue with mark to myth? 2. do you think the banks have enough free cash flow to pay out billions in bonuses in light of deteriorating housing prices, a deteriorating private economy, increased defaults and decreasing debt outstanding (ie, money supply is shrinking)? 3. do you see china, japan, americans, etc... covering $2.5 trillion in roll over debt (as opposed to diversifying) AND the $1.8 trillion to keep debt from collapsing (money supply collapsing)? i understand china is no longer a net buyer of marginal treasuries (they are holding tight with what they have) and japan has outright threatened to sell their treasuries in the open market. 4. do you see rates staying low given japan is threatening to sell off treasuries and china has apparently decided not to buy additional treasuries? 5. obviously, if rates don't stay low then housing gets hammered. how do you see the economy going forward if housing prices were to get hammered with increased rates? tia...

To: CalculatedRisk who wrote (234464)	12/27/2009 5:46:49 PM
From: Skeeter Bug	Respond to of 306849

CR, given the deficits, it seems impossible for the government to stop their QE program. yet, they promised to stop at the end of march. do you think they can stop as they issue a total of $4.8 trillion onto the market? if not, won't a high stock market and an extension of QE past the end of march be one heckuva warning shot off the bow that QE is here to stay until the dollar is replaced?

To: CalculatedRisk who wrote (234464)	12/27/2009 11:48:58 PM
From: GST	Respond to of 306849

Many thanks. You did not dwell much on unemployment. The official view seems to be that it is a lagging element that will take care of itself. In places like CA, this could be crushing as unemployment benefits and low income tax receipts are a real problem.

To: CalculatedRisk who wrote (234464)	3/18/2010 1:47:02 PM
From: GST	Read Replies (1) \| Respond to of 306849

The central finance issue facing the US today is who is going to finance the current account deficit. There are three options: 1) We might save enough to finance it ourselves -- but our savings rate is nowhere near enough for this to happen. 2) Others in the world night invest trillions of dollars in the US -- this was the way we financed the current account deficit until this year -- but the current account deficit is exploding to the upside and the supply of global investment has dried up -- so this option is now off the table. 3) We will throw up our hands and just print -- and this is where we have arrived today. As I see it, this grim reality is the fulcrum of everything that happens in global financial markets from this point forward. The major government players -- whether it be the US Fed, the Europeans or the Asians -- all have to respond to the stark reality that the world's sole 'superpower', the world's 'researve currency' and the world's dominant central banker is in a financial crisis much larger than the meltdown of the private banking system that has been dogging us for the past couple of years. There is no quick fix for this problem. The Fed cannot solve it. It is the culmination of decades of living beyond our means and not investing to build our productive resources and capabilities. We have been living by consuming our capital, and now we don't have anything left to sell that will pay our bills at the end of the month. The US will be humbled by this experience -- but judging from the tenor of the public conversation at the moment, we are nowhere near ready to come to grips with the situation and do something to turn he ship of state, or our personal lives, in a new direction. The real crisis lies dead ahead -- there is no longer any non-inflationary way for the US to finance its gigantic, swelling current account deficit. The dam is about to break, and those living right below the dam are too busy throwing tomatoes at each other to look up and see it coming.