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A Trip Down the Road to Squanderville
Although still seen as the world’s economic superpower, the United States has found itself with a myriad of problems: Skyrocketing federal debt, growing annual budget deficits, an almost nonexistent personal savings rate, and the dubious honor of being the country with the largest current account deficit, of which trade makes up the largest part.
A trade deficit occurs when you are importing more than you are exporting — in other words, you are consuming more than you are producing. So the next time you are at Wal–Mart (WMT) or Target (TGT), take a look around. Just about everything you can purchase there…
25Nov2008 | Money Morning | 1 comment | ContinuedOctober 2008 budget deficit sets record
The federal government began the new budget year with a record deficit of $237.2 billion, reflecting the billions of dollars the government has started to pay out to rescue the financial system.
The Treasury Department said Thursday that the deficit for the first month in the new budget year was the highest monthly imbalance on record. It was far bigger than analysts expected, over four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year.
The October deficit began a period in which economists are forecasting the red ink for…
Bailout Plan Forcing U.S. to Borrow $1.4 Trillion, Creating a $1 Trillion Deficit
The U.S. Treasury Department plans to borrow a record $550 billion in the current quarter, and another $368 billion in the first three months of the New Year – money needed to fund the $700 billion bailout plan the government is using to battle the worst financial crisis since the Great Depression.
Wall Street bond traders estimate that the U.S. government will have to borrow a record $1.4 trillion during the current fiscal year – an unprecedented amount of debt that’s nevertheless needed to cover a federal budget deficit that’s expected to approach $1 trillion for the fiscal year, CNNMoney.com reported.
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Balooning Deficits…But Who Cares?
In the first 16 days of the new fiscal year the U.S.’ national debt grew by $300 billion. That’s a growth rate of 75% and equates to a debt load of $17 trillion by this time next year. But, as the title of this post states, who cares?…
…definitely not U.S. regulators. You see, it’s very simple. With the greatest creation of money and credit ever seen in the U.S. underway, our fiscal balance becomes irrelevant to those who continue to put our nation further in the red.
The debt must be looked at in real terms not nominal, and we must…
23Oct2008 | The Real Deal | Comments Off | ContinuedInvesting in Innovators
Looking for the Innovators
While in Vienna last month, I grabbed hold of the international edition of The Wall Street Journal. Over a classic Viennese breakfast of coffee, a boiled egg and pastry, I stumbled across an interview with Ted Forstmann, titled, “The Credit Crisis Is Going to Get Worse.â€
I hadn’t seen Forstmann’s name in years. He once lorded over one of the world’s most famous private equity firms, Forstmann Little. For a time, it was, as the Journal notes, “the most successful private equity firm in the world, renowned for both its outsized returns and its caution.†When things got…
29Aug2008 | Whiskey and Gunpowder | Comments Off | ContinuedWELCOME TO A TRILLION-DOLLAR DEFICIT, MR. PRESIDENT
If you are a typical citizen, you like deflation. You want your wages and investment income to stretch as far as possible. Falling prices, or rising purchasing power, are a sign of economic progress – the progress resulting from productivity gains and competition.
If you are a modern central banker, anxious to implement your ivory-tower theories, deflation is enemy No. 1. (For the sake of clarity, by “inflation,” I mean rising prices, and by “deflation,” I mean falling prices).
Central bankers must be the only people who celebrate a 3 or 4% annual reduction in purchasing power.
Why is this? Because “moderate” inflation…
29Aug2008 | Daily Reckoning | Comments Off | ContinuedPrepare to Profit From the Trillion Dollar U.S. Budget Deficit
The federal budget deficit hasn’t received a lot of press lately, what with all the worries about the U.S. financial system, the home mortgage market, and the rescues that might be necessary to save both. In fact, it’s a bad sign, since the Bush administration and the Democrats in Congress have joint responsibility for keeping the budget deficit under control, so they would both be crowing about it if they were doing a good job.
We already know the budget deficit is going to return to the $400 billion level – actually $410 billion – in Fiscal 2008, which ends…
25Jul2008 | Money Morning | Comments Off | ContinuedThe Limited Shelf Life of Dollar Fruit
Today, we’ll keep it short and sweet.
The Dow managed only a piddling 32-point rise yesterday; still no recovery from last week’s big losses.
Oil rose another $1.30 – to close over $141. Gold jumped $16; it will now cost you $944 to buy an ounce.
“Caught between a fragile economy and banking system and rising inflation,” writes James Saft, “Bernanke and other Fed policy makers seem to have arrived on a strategy of jawboning the dollar higher and inflation lower.
“But talk is only effective if your audience judges that you have the means and willingness to follow through.”
Based on the last few…
3Jul2008 | Daily Reckoning | Comments Off | Continued
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