What would you call this? ‘Mismanagement’ comes to mind. The Portuguese Treasury put the country at risk. Rather than point fingers it would be ‘nicer’ to conclude that Portugal had no option but to borrow short-term. It would be fair to blame the economic leaders of the EU. They knew for years that Portugal’s ST debt was a time bomb. The lessons of Greece and Ireland and their dependence on money with a short string are fresh in their minds.
Okay. You got that? ST debt = death. The greater the reliance on ST financing the greater the systemic risk. Now look at the US debt profile. Compare it to Portugal. Who looks worse to you?
When looking at a country’s aggregate debt and maturity profile it is important to look at the borrower's current status. But it is much more important to look at the relative change of ST debt on a year over year basis. Clearly the US is going in the wrong direction. It's happening at a pretty good clip.
The argument that will be put to me is that the USA is a Reserve Currency and therefore can never be faced with the Portuguese disease of “no rollover”. Hogwash. Like I said, “Mismanagement” comes to mind.
Posts
Good thing we can rely on the Fed to step up and buy as needed. . . :>)
ReplyDeleteYou are treating national financing like it is your household/trader financing. It is not.
ReplyDeleteThe U.S. debt is denominated in USD's. Portugal can't inflate their way out.
At the U.S. scale of borrowing, it is not our problem. It's the lender's problem. Sucks to be them.
Look at it this way, the banks made money issuing the debt. The banks probably have inside information regarding the disposition of the debt and are positioning for another killing. It's a win-win for investment banking!
Isn't that the beauty of unfettered markets?
Even if we buy into the Modern Monetary Theory that the U.S. can't go broke, it doesn't mean we are prosperous.
ReplyDelete80% of Americans live paycheck to paycheck. They're not broke either.
Don Levit
intellectual_property: when the Fed is the largest actual lender, how can this not be the taxpayers problem?
ReplyDeleteA simple solution: let the banks fail, and impale all the bankers in Count Vlad style on Wall Street as the perfect object lesson for future generations of the consequences of serial theft and corruption.
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ReplyDeleteOil $200? Gold $2,000? Silver $100? A loaf of bread for $50?
ReplyDelete"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."
ReplyDeleteAnon at 7:55
ReplyDeleteYes we have that printing press. But does it solve the problem, or just make it worse?
When (if) there is a need for the Fed to step in and truly print money it will be a very sad day. It will be a higwater mark for the USA.
Print money to inflate, pay debt at the same time you rack up trillion dollar deficits and debt for years to come. What could go wrong?
ReplyDelete"Print money to inflate... What could go wrong?"
ReplyDeleteWell, for starters the entire rest of the world will see the USD as a phony. All those Bernanke Bux will be virtually worthless.
So you won't be able to use them for any foreign trade 'cause nobody will want them or accept them. They'll want a currency they trust or hard assets for trade.
And back home state-side anyone who's just a tiny bit intelligent won't accept them either. They'll want to trade in some other currency or barter hard assets.
Treat your currency like it's gold and that's the kind of perceived value it will have.
Pump it out like so much toilet paper and eventually it won't be worth sh*t.
Consider: if you inflate away the debt, what happens to all of those social and other programs that are linked to the CPI (as phony as that number is) like Social Security?
ReplyDeleteIt's a Red Queen's Race - the more you print, the more you need to print. It won't work.
Not that TPTB won't try...
.....FED to Americans, "Hey citizen friend, can you bend over and pickup my soap one more time please?"
ReplyDelete