Saturday, January 03, 2009

Look at the national debt clock; can we trust the government? Bubble in T-bills coming?

A couple of New Year’s stories highlight the potential gravity of the growing national debt. According to a Washington Post front page story Saturday Jan. 3, it will increase by $2 trillion this year in this playout of “bailout nation.” The story title is “U.S. Dent Expected to Soar This Year: $2 Trillion Increase May Test Federal Ability to Borrow,” link here.
You can look at the National Debt Clock online here (it increases as you refresh the web page). It is over $10 trillion, or over $30000 per person in the United States.

About 40% of the private debt matures in less than a year, causing government to borrow more. What’s particularly dangerous is the debt held by countries like China, on which we depend on cheap labor.

On Friday, January 2, John P. Opdyke offered a piece on the front page of the Wall Street Journal, “The Doomsayers Who Got It Right: More bad news in store for 2009? Last year’s cassandra’s are still Gloomy” link here. The link is here.

The story mentions Bob Rodriquez, of the FPA New Income Fund, as predicting “a massive bubble in Treasurys,” adding “quite frankly, we do not trust the U.S. government.” How libertarian! Rodriquez says that the first warning signs appeared as Alt-A mortgages began going south as soon as 2005: the were people with good credit but unsubstantiated or low income. That alone is an interesting observation about the nature of our labor markets.

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