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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: TideGlider who wrote (95553)	11/18/2010 8:16:18 AM
From: lorne	4 Recommendations Respond to of 224756

UPDATE: Rubin Warns of Bond Market "Implosion": U.S. in "Terribly Dangerous Territory" Posted Nov 17, 2010 by Aaron Task in Newsmakers finance.yahoo.com Warning of the risk of an "implosion" in the bond market, former Treasury Secretary Robert Rubin says the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory." Speaking at an event at The Pierre Hotel in New York City honoring Sen. Kent Conrad (D-N.D.), Rubin joined the growing number of current and former officials (foreign and domestic) to criticize QE2. The Fed's plan to buy $600 billion of Treasuries "has a lot of risk," he said, calling the international reaction "horrendous." Rubin, who issued a similar warning about the bond market at The FT's "Future of Finance" conference in October, said Congress' vote on raising the deficit ceiling next spring could be the "trigger" for a rout in the Treasury market. Several Republican and Tea Party candidates vowed to not increase the government's debt ceiling unless Democrats agree to sharp cuts in spending that may not be politically tenable. A Congressional standoff on the debt ceiling could spook international investors, Rubin said, alluding to a market event similar to the Dow's 778-point plunge on Sept. 29, 2008, when the House initially voted no on TARP. While most pundits worry about the potential for China to dump its Treasury holdings, the former non-executive chairman of Citigroup said a financial version of the Cold War concept of Mutual Assured Destruction will likely prevent them from doing so. But he is worried about selling by the government's of Singapore, Hong Kong and Malaysia. "They could say ‘the Chinese are stuck but we're not,'" Rubin predicts. (Update: Ignoring Rubin's warning, Treasury prices jumped Wednesday following a tame report on U.S. consumer inflation and a weaker-than-expected report on housing starts.) Rubin's comments came during a panel discussion that also featured Sen. Conrad, chair of the Senate Budget Committee, former Nebraska Senator Bob Kerrey and former U.S. Comptroller General David Walker. The panel was moderated by former Commerce Secretary Pete Peterson, the senior chairman and co-founder of The Blackstone Group as well as founder of the Concord Coalition. Update: The main thrust of the panel was to discuss what should be done - and what can be done politically - to address America's dire fiscal straits. Repeating his warning about the dire need for action, Walker called the initial recommendations by President Obama's deficit commission, of which Sen. Conrad is a member, "a good start." The recommendations are constructive," Walker said, because they put "everything on the table," meaning taxes, entitlement programs and defense spending, as well as discretionary spending, and government waste, fraud and abuse. (See: Deficit Commission's Proposal D.O.A., But Make Congress Vote On It Anyway, Pento Says) On Wednesday, a separate panel led by former Senator Pete Dominici and former Clinton economic adviser Alice Rivlin offered a competing proposal with similar themes -- and a greater emphasis on raising taxes. Political Reality vs. Economic Necessity "We have to work both sides of the equation," Sen. Conrad said. "If we fail [to act] our nation will be condemned to second-class status." Saying the U.S. is facing a "defining moment," Sen. Conrad chastised Republicans and Democrats, respectively, for being in "deep denial" about the need to both raise revenue and cut spending. Yesterday, for the first time, Conrad said he was "hopeful... by some act of God...about possibly finding a way to get" the 14 votes necessary to send the panel's recommendations to Congress for a vote. Then (political) reality set in. "Even if you do [get 14 votes], what are the odds of getting it through the House and Senate," Rubin asked, spurring Conrad to quip: "Thanks for coming Bob." That exchange spurred laughter but also highlighted the sobering truth, as described by former Sen. Kerrey: The commission's recommendations are "beyond what's politically possible and short of what's economically necessary.