Tag Archives: debt default

Pentagon Warns EU To Expect “Radical” Change In US Government Soon

9 Oct

change-hitler-obama-lenin

Obama the Dictator?

This is the kind of end game that arises as a result of the power of usury, to enslave through endless debt growth.

From the EU Times:

A highly troubling “urgent bulletin” issued earlier today by the Ministry of Foreign Affairs (MoFA) states that it has received information from the Main Intelligence Directorate (GRU) warning to expect a “radical change” in the government of the United States, possibly within the next fortnight, based on information they have received from “highly placed” sources within the Pentagon.

According to this MoFA bulletin, GRU intelligence assests were notified by their Pentagon counterparts this past week that President Barack Obama is preparing to invoke the powers given to him under 50 USC Chapter 13 to hold that various American States are now in a “state of insurrection” thus allowing him to invoke the National Emergencies Act under 50 USC § 1621 and invoke the highly controversial “continuity of government” plan for the United States allowing him, in essence, to rule with supreme powers.

Specifically, this bulletin says, Obama will invoke 50 USC § 212 that states: “ the President shall have declared by proclamation that the laws of the United States are opposed, and the execution thereof obstructed, by combinations too powerful to be suppressed by the ordinary course of judicial proceedings”

To the specific “combinations too powerful” Obama will cite in his declaration of National Emergency as being needed to be defeated by extraordinary measures, the MoFA says, is a faction of the US House of Representatives popularly known as the Republican Tea Party whom the President and his allies have likened to “hostage takers” and “political terrorists.”

Obama’s greatest fear, and reason(s) for declaring a National State of Emergency, this bulletin continues, was outlined yesterday by his US Treasury Department who released a report yesterday warning of potentially “catastrophic” damage should Congress fail to raise the debt ceiling and prevent the government from defaulting on its debt.

As the current US government shutdown crisis and debt ceiling fight have now merged, the MoFA warns in this bulletin, Obama further warned yesterday that an impasse on the debt ceiling beyond 17 October, when the US government will be essentially out of cash to pay its bills, could start a downward economic plunge worse than the recession of five years ago – with credit markets seizing up, the dollar’s value plummeting and US interest rates soaring and even coming close to the brink of such an unprecedented default that could roil both domestic and foreign financial markets.

Preparing to oppose Obama, should he, in fact, declare a National State of Emergency, the GRU grimly warns, is the US military who themselves are preparing to invoke 50 USC § 842 which allows them to protect America from “The Communist Party of the United States, or any successors of such party regardless of the assumed name, whose object or purpose is to overthrow the Government of the United States, or the government of any State, Territory, District, or possession thereof…”

Not known to many Americans is that the Progressive movement Obama belongs to, and whose media acolyte “presstitutes” swept into office, have long been associated with the Communist Party.

And, as the World Net Daily News Service reported this past August, John C. Drew, Ph.D., the award-winning political scientist, met Obama in 1980 and wrote in 2011: “[Obama] believed that the economic stresses of the Carter years meant revolution was still imminent. The election of Reagan was simply a minor set-back in terms of the coming revolution. … Obama was blindly sticking to the simple Marxist theory … ‘there’s going to be a revolution.’ Obama said, ‘we need to be organized and grow the movement.’ In Obama’s view, our role must be to educate others so that we might usher in more quickly this inevitable revolution.”

Another civil war in America?

Full story here.

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Global Debt Accumulation: “You Know How This Ends, Right? This Ends In War”

23 Mar

To those who know, hedge fund manager J. Kyle Bass needs no introduction.

In the following “must watch” keynote lecture delivered in October 2012, in his usual calm, matter-of-fact, pragmatic and incisive style he shared his thoughts on a number of key issues facing the world over the next few years. These include the inevitability of a major war, escalation of social unrest and food riots, and why our governments will never tell us the truth about the nation’s financial situation:

Highlights (with comments from your humble blogger)

 

4:00 – Largest peacetime accumulation of debt in world history … ends through war

“Something that I think is really important to pay attention to; in the last ten years, debts around the world… has grown from $80 Trillion to just over $200 Trillion. So debts have grown, at almost an 11% compound annual growth rate, over the last ten years. We sit today at the largest peacetime accumulation of debt in world history.

One of the things we talked about in the back after the last panel – and very few people are willing to go out there and say this – you know how this ends, right? This ends through war

We don’t have a playbook for the enormity of debt at 340% of global GDP, and that’s why we have such a hard time thinking about how this plays out. But I can tell you that – again, I don’t know who’s going to fight who – but I’m fairly certain that in the next few years you will see wars erupt and not just small ones.”

8:00 – Deficit spending going into a war

“If you think about what’s happened in the past; if you study history, you see that when sovereign nations get to 250% total credit market debt to GDP, they’re both deficit spending going into a war. And at the conclusion to the victor go the spoils and to the loser go defeat and default. That’s the playbook that we’re actually familiar with.”

9:00 – Central banks have created $10 Trillion out of thin air

“Central bank balance sheet expansions are really important. We talk about money printing; today… the four largest central banks in the world have $13 Trillion on balance sheet. From the beginning of the [GFC] crisis to today, they’ve expanded by $10 Trillion. Ten trillion dollars has been created out of thin air. How are we supposed to think about that? Well I know we are all worried about it… You are starting to see the first signs of what happens when you expand central bank balance sheets limitlessly.”

13:00 – More worried about the sovereign balance sheet

“I went and met with (Kenneth) Rogoff in February of 2009 and delivered our work here to him, and I said to him: “I’m looking at this and it’s really, really worrying me” – and if you remember, in February 2009 we (financiers, traders) were mostly focused on which bank is going under, and who was going to bail this bank out and that bank out and how the financial system is going to stay together, but I was more worried about what was going on on the sovereign balance sheet – when your banking system gets to ten times your GDP, and you lose 3% of your banking system, you’re finished. And that’s what’s happened; Iceland, it’s what happened to Ireland, it’s really what happened in a number of different nations…

So at the top of what’s going wrong with the world, no one was paying attention to how large these systems were getting. You know, in February of 2009 when Rogoff looked at this he said to me: ‘I can hardly believe it’s this bad,’ and I was thinking: ‘Oh shit, who’s paying attention to the size of those countries’ banking systems, because if you, the father of sovereign balance sheet analysis isn’t, then I know who isn’t’.”

This observation serves as solid justification for the concerns that Senator Barnaby Joyce has, for some years now, been expressing (to much derision by “experts”) about ever rising sovereign debt – the “trajectory”, as he calls it – in the USA, Europe, and in turn, here in Australia.

Moreover, Bass’ observations about the dangers of an expanding financial sector ring out like the tolling of funeral bells when one considers the size of ours. In late August 2012, the Bank of International Settlements (BIS) issued a warning about the size of Australia’s banking sector:

Finance has grown too big around the world and cross-border lending too large, according to BIS chief economist Stephen Cecchetti.

Experience shows that a growing financial system is great for a while — until it isn’t,” he told the BIS annual conference in Switzerland, arguing there is an optimal size beyond which the financial industry drags down the rest of the economy…

In Australia, the finance sector accounts for 11.5 per cent of all industry value added, having doubled its share of the economy since the mid-1980s.

This compares with the 2008 peak of 7.7 per cent in the US and 10.4 per cent in Ireland…

The extraordinary dimensions of Australia’s banking sector were highlighted by Bank of America Merrill Lynch research last week showing that Australia has the second-largest banking system in the world by market capitalisation, surpassing those of the eurozone, Japan, Britain and China.

It is absurd for a nation of 22 million to have a banking sector that represents more than 8 per cent of the world banking industry by market value. Banking now represents just under half Australia’s listed market.

Back to Kyle Bass:

12:00 – GDP is a homogenizing denominator, we use government tax revenue as a better denominator

“When we think about private sector leverage becoming a public sector problem, back in 2008 when we were trying to understand this transference of risk from the private balance sheets to the public balance sheets, very few people – in fact, I couldn’t find it when I went out looking for it – had done the work to try to understand On Balance Sheet debts, and then the acuity of the banking system problem. So when I was thinking about how to get my arms around how this is going to go forward, we were saying, ok let’s forget about contingent liabilities, let’s forget about social welfare, let’s forget about promises that had been made to various people in various nations; let’s just look at On Balance Sheet obligations. Let’s just look at how big banking sectors are in relation to GDP – and actually, GDP is a pretty good homogenizing denominator; we tend to use central government tax revenue as a better denominator, because certain countries are much more productive than others, in our opinion…”

There are two important observations here that I wish to highlight.

The first is Bass’ concern over private sector (ie, banking system) “leveraging” (ie, mega-debt) being transferred on to the public (taxpayer) sector, in a banking system crisis. This is the #1 reason why, even though it is true that private debt is much worse than public debt, I believe that Barnaby Is Right in constantly expressing concern over the rapidly rising trajectory of public debt in Australia. Because, regardless of whether or not you agree that our public debt is “low compared to other OECD countries,” the undeniable fact remains that our rapidly rising government debt does represent a weakening of the government’s balance sheet… even before any banking crisis arrives! Foreseeing that our banking system was, just like the rest of the West, our key vulnerability, and that weakening the government balance sheet unnecessarily would only make our future problems far more calamitous, was one of the main reasons why I launched this blog in early 2010. When you hear some distinguished-looking, eminent economic “expert” – or politician – reassuring us that Australia’s public debt is “low”, just keep one word at the front of your mind. Ireland. And remember what happens to the public debt level, when a government with previously “low” public debt suddenly finds itself borrowing to the stratosphere – often from the IMF – in trying to bail out an over-leveraged banking system.

The second important observation – on GDP as a “homogenizing denominator” – is one that thrilled your humble blogger, and made him feel a lot smarter than he actually is. How so?

For years I have argued that using “GDP” as a measuring stick is bogus, and deliberately misleading, because:

(a) “Gross Domestic Product” (GDP) is really just a blunt measure of total volume x notional “value” of transactions in the economy… irrespective of whether those transactions were actually a result of “productive” activities or not; as such
(b) it only serves the purpose of helping politicians and bureaucrats to obscure the truth about the economy, and the government’s financial management; and so
(c) governments should be required to report key budget figures like government spending, and public debt, as a percentage of government tax revenue instead.

Bass is both subtle and brilliant, in describing GDP as a “pretty good homogenizing denominator”. One definition of that word is: “to form by blending unlike elements”.

That’s exactly what the GDP figure does – it blends unlike elements. It is a meaningless quantitative measurement, that simplistically blends together every transaction in the economy in one huge number (all the better for making things like government spending or debt “as a percentage of GDP” sound like a small number). In so doing, it obscures any qualitative measurement of activity in the economy. That is, unlike “GDP”, a qualitative measurement would distinguish between the volume x value of transactions resulting from real, productive activities, versus that which resulted only from (eg) non-productive money-shuffling between financial institutions. In theory, an economy could boast a China-like level of annual GDP “growth”, while actually producing nothing. All it takes to achieve that, is a sufficient increase in the volume x notional “value” of electronic digits that are transacted each year. “GDP” as a measurement is utterly ridiculous, once you see it for what it is.

This blogger can greatly appreciate the wisdom of Kyle Bass and his hedge fund team, in choosing to assess economies based on a recognition that “certain countries are much more productive than others”, and that GDP as a measurement does not help to identify which countries have quality (ie, productive) activity, and which do not.

15:00 – We think inflation causes default 90% of the time

“When your debts get to be 20, 25 times your central government tax revenue, a non-linearity develops between your revenues and your expenses. So if you try to inflate your way out of this problem which – again, the academics, the central bankers of the world believe that when you get to this proverbial fork in the road, that fork is either inflate or default, and those two roads are mutually exclusive of one another – we tend to think that 90% of the time one causes the other. And when you develop this non-linearity… when your debts are 20 times your revenues and you try to inflate your way out of this through revenue, it moves your swaps curves or your debt costs, ok? Your expenses grow exponentially while your revenues grow in a linear fashion … it just makes sense, this is logic.

So when you think about Japan, they’ve got 24 times their central government tax revenue in debt. If Japan ever moves to an inflationary bias, they’re finished.”

Oh dear. Remember, this talk was given in October last year. As of March this year, the government of Japan has moved to an inflation bias, after 15 years of deflation. They have set the central Bank of Japan a 2% target for inflation, to be achieved within two years.

19:00 – More social unrest

“You’re going to see more social unrest. You saw huge riots in Greece and you’re seeing huge riots in other parts of the world over food, and lack of food, and those are actually tertiary and secondary derivatives of the financial problems, in my opinion, that we’re exporting inflation to some other nations. So going forward it’s going to be a problem.”

24:00 – They’re not going to tell you when this happens… Their job is to promote confidence, it’s not to tell you the truth

“They’re not going to tell you when this happens, you’re going to have to see it for yourself. How many of you remember Mexico in ’94 when we had the ‘Tequila Crisis’? The government gave affirmative determinations that they would not devalue, they would not default, almost daily. And the day after they said we won’t devalue, they devalued 60%. The government’s never going to tell you that it’s going to happen. (Greece’s) Yunker, when asked in 2010 if there was a secret meeting to discuss restructuring Greece, he said: ‘Oh no, there’s no meeting’. And then they talked to two other Finance ministers the next day, and they said: ‘Oh yes, we had a meeting and Yunker was in there’. And so the press went back to him and said: ‘You told us there wasn’t a meeting’, and he said: ‘Look, when it becomes serious, you have to lie’.

You have to realise that these guys are never going to tell you the truth, because they can’t tell you the truth. Their job is to promote confidence, it’s not to tell you the truth.”

26:00 – There is no chance the Japanese can ever repay their debts

“We all know Japan’s On Balance Sheet situation is now 240% debt to GDP, 25 times central government tax revenue; they have over a quadrillion Yen of debt, On Balance Sheet. That’s a one with fifteen zeros after it. If you were to try to count to a quadrillion, and if every number only took you one second to get there, how long do you think it would take you to get to a quadrillion? Thirty-one million years. There is no chance the Japanese can ever repay their debts. Plain and simple. And they will have a crisis. They will have a bond crisis in the next two or three years, in our opinion. It will be a big one.”

Japan is our second largest trading partner, last time I looked.

42:00 – Global sovereign restructurings … people are going to lose a lot of money

“What this means, is that the globe is about to enter into a period of sovereign restructurings. And what does that mean to you?  Well, to me it means people are going to lose a lot of money.”

54:00 – Gold is not the panacea that people think… Currency system should be linked to population growth

“It (gold) is not the panacea that people think… Having our entire currency system tethered to something that’s either convertible into a fixed asset or – I think something that’s better, maybe, tied to population growth – makes a little bit more sense. But limitless credit creation is probably a bad idea.”

This too, impressed me. And made me feel smarter than I am. How so?

Fundamental to my own alternate currency system idea, is the view that gold (or any other ‘commodity’ whose stocks, supply, or public reporting of reserves can be manipulated) should not be used as the basis for a future currency system. And – per Kyle Bass – my idea ties currency issuance directly to population size.

See The People’s NWO: Every Man His Own Central Banker.

Watch the whole talk, on Youtube. Highly recommended.

“We Should Make The Legs Of The Bankers Tremble”

17 Dec

Some politicians, at least, are finally waking up.

Since everyone missed the sterling example (pun intended) of Iceland defaulting on British and Dutch bankers, perhaps some will now sit up and take notice of the Portuguese Socialist Party threatening to take the “nuclear option” on German and French bankers:

“We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won’t pay,” said Pedro Nuno Santos, vice-president of the Socialist Party in the parliament.

Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble,” he said.

Mr Santos is right.

Debt as a weapon can be a two-edged sword. At the level of nations, at least.

The bigger the debt, the bigger the danger for the lender.

If you or I default on our debts, we’re in the poorhouse.

If a nation defaults … things get better. Faster.

Icelandic politicians woke up. Only after nearly the entire population took to the streets, of course.

Rather than have “the nation” (ie, the taxpayer) take on the debts of its collapsed banks, the people insisted on telling the British and Dutch bankers where to go (ie, they defaulted).

In the face of enormous international pressure to “do the right thing”, and “honour the debts” by “socialising the losses”.

The Icelandic people didn’t fall for the “Too Big To Fail” con.

And so, how is Iceland travelling today?

From a must-read article in Business Insider:

Iceland’s basic economic indicators are now stronger than countries that received bail-outs.

Iceland’s economy will have shrunk by an average of 0.75% a year in the 4 year period of 2008-2012. For comparison, Ireland’s economy has declined at a rate just under 2% while Greece will have decline 1.6% a year.

Unemployment has been less of a problem in Iceland as well:

  • Iceland: 5.8%
  • Ireland: 14%
  • Greece: 15%
  • Portugal: 12.4%

Iceland’s economy today is growing, with 3% annual growth expected in 2012, and the government anticipating a budget surplus by 2013:

Click to enlarge

All the fearmongering that is pushed by banksters, their shadow banking overlords in the IMF, World Bank etc, and of course, their political muppets, about the “dire” consequences of letting banks fail or defaulting on national debt … is self-serving lies.

It’s long, long past time that all the rest of the people of the world followed Iceland’s lead, and chose to “make the legs of the bankers tremble”.

Australia On Target To Hit Debt Ceiling By Mid-2012

2 Nov

Click to enlarge | Source: Australian Office of Financial Management (AOFM)

Your humble blogger met Senator Joyce for the first time on 1 July this year.

On introducing myself and mentioning this blog, Barnaby’s very first words to me … were words of humility.

He immediately referred self-deprecatingly to his now-famous warning in late 2009 about the risks of rising US Government debt leading to “possible” default.

You remember. His was the warning that no one wanted to hear; that drew the wrath and mockery of Rudd, Swan, Tanner, Chris Bowen, then Treasury Secretary Ken Henry, and of course, all of our lamestream media economic “experts”. Ignorant, arrogant, foolish ridicule, that prompted the launch of this blog.

Barnaby was quick to volunteer that his warning about US debt was nothing special; rather, in his opinion it was simply obvious that the rising trajectory of US Government debt must eventually run smack into their debt ceiling.

As we all know from the early August kerfuffle over raising the US debt ceiling, a political crisis that threatened to blow up the world economy … Barnaby was right.

Since this blog began in early 2010, we have seen time and time again, that when it comes to matters financial, Barnaby is the only one on the ball.

Doubtless a big contributing factor is that he is an experienced Chartered Accountant, and not a lawyer cum union hack, or a career political hack with an Arts degree.

In May, for example, Barnaby was the first to rail against the Green-Labor minority government quietly sneaking in a budget provision to raise Australia’s debt ceiling by 25%, to a quarter of a Trillion dollars ($250 Billion). Even though no one is supposed to dare question Wayne’s authority:

As Treasurer Wayne Swan was congratulated by colleagues after Tuesday’s budget speech, Assistant Treasurer Bill Shorten introduced draft laws allowing the government to increase the amount it can borrow from $200 billion to $250 billion.

The proposed legislation would also remove a requirement that the Treasurer explain why the extra money is needed.

In recent weeks, Barnaby has upped the ante in continuing to make good on his pledge to never rest in pointing to the dangers of rising government debt.  And fair enough too, when they’re continuing to borrow on the national “credit card” at a staggering rate.

Indeed, Wayne and Co have blown out our total Gross Debt Outstanding by over $7 billion a month in September and October, to a new record $215.6 Billion.

Which begs the question, “When will we run into our new debt ceiling of $250 Billion?”

That is, the new one Wayne set only 5 months ago, in May this year.

The chart above tells the story.

Our debt trajectory suggests that our Green-Labor government will bang into our new debt ceiling around mid-2012.

Unless something goes pear-shaped first, of course.

Like, say, a big fall in our Terms of Trade? Due to a big fall in the price of our biggest export, the iron ore sold to Chinese steel mills, perhaps?

Steel China Iron Ore Fines cfr main China port USD/dry metric tonne (MBFOFO01:IND)

Oops.

Like, say, a 32 month low in the latest measure of Chinese manufacturing? (h/t ZeroHedge)

China Manufacturing PMI prints at 50.4, down from 51.2, when consensus was expecting an increase to 51.8. This is the lowest print in 32 months, and the lowest since February 2009. But wait, before concluding that this is very bad news, uh, ahem… well, sorry, we haven’t taken the CNBC spin school yet. It’s bad news and the hard landing is coming. We leave the spin to the professionals.

Click to enlarge

Oops.

And there’s a lot more “oopses” where they came from. Including internal “oopses” … like Australian house prices and sales both falling … and the Reserve Bank starting to cut interest rates again; which means trouble’s afoot, and they are hoping their action will prompt you to be a complete idiot and start borrowing and spending like a drunken sailor Green-Labor politician.

Dear reader, the signs are all there that a real SHTF moment draws near once again, a la 2008.

Only worse.

Much worse.

Can you say “stimulus”?

Wayne can.

Do you think our government will stop spending more than they bring in from taxing us when they smack into our new debt ceiling?

Not if new Treasury Secretary and former student of US Federal Reserve chairman “Helicopter” Ben Bernanke has anything to do with it.

We already know his views on endless debt.

Here’s what happened back in June, when Barnaby kicked up a stink over our government jacking up Australia’s debt ceiling on the sly:

On Wednesday in Senate Estimates, our [new Treasury Secretary] Martin Parkinson was challenged by Senator Barnaby Joyce over this utterly incompetent and reckless Labor/Green government’s decision, just before the Budget, to sneak in new legislation to raise our debt ceiling too.  By $50 Billion – a 25% increase. To a new all-time record debt level of $250 Billion.

Just like America. The only difference is the scale.

And what did Mini-me Parkinson have to say?

Nationals senator Barnaby Joyce wanted to know what would happen if the government was prevented from lifting its gross debt ceiling by a further $50 billion to $250 billion, as proposed in the budget.

“I couldn’t imagine that parliament would be so foolish,” Parkinson replied.

It would have “serious ramifications” for the operation of government.

So, dear reader, you already know what is going to happen in this country.

Green-Labor are firmly on course to bang up hard against our new debt ceiling, in 2012.

Even without another round or two of “stimulus” borrow-and-spending, to prop up the economy.

The all-knowing genius of Treasury Secretary Mini-me Parkinson will (of course) support the government in raising the debt ceiling even higher.

Our interest-on-debt bill of $1.59 million per hour will rise even higher.

And at some point … sooner rather than later, your humble blogger would suggest … the great external debt-driven forces of the USA, Europe, and/or China, will send the wave that collapses our own financial house of cards.

You can bet your falling house price on it.

“If you do not manage debt, debt manages you”
~ Barnaby Joyce, February 2010

Barnaby is right.

UPDATE: 12:41am

Ummmm, what was that I was saying? … “the signs are all there that a real SHTF moment draws near once again, a la 2008. Only worse. Much worse”

Greek Prime Minister George Papandreou plunged the euro and stock markets back into crisis on Monday [evening, northern hemisphere time] with a shock announcement that he would put a hard-fought rescue deal to a referendum…

All of Europe’s main stock markets registered sharp falls at the new risk of Greek default and contagion, with the German blue-chip DAX 30 stocks index slumping by more than five percent, French shares were down over four percent and London’s stocks fell more than three percent.

Athens witnessed a meltdown as stocks plunged 6.31 percent amid warnings that a rejection of a deal that is deeply unpopular in Greece would force it to leave the 17-nation bloc which uses the euro single currency.

“This is a referendum, in which they’re effectively voting on Greece’s euro membership,” Alexander Stubb, the Europe minister for Greece’s fellow single currency member Finland, told the commercial MTV3 network.

In a sign of the deep unease in European capitals, French President Nicolas Sarkozy and German Chancellor Angela Merkel were to hold talks by phone.

Italian Prime Minister Silvio Berlusconi, another leader under pressure as a result of the eurozone crisis, registered his sense of shock and annoyance.

“There is no doubt the Greek decision to hold a referendum on the European Union’s rescue plan is having a negative effect on the markets,” he said. “This is an unexpected decision that generates uncertainties after the recent European Council and on the eve of the important G20 meeting in Cannes.”

Italian stocks plunged 6.12 percent, led by big falls for banks…

In an online commentary, the Moneycorp currency broker said Papandreou had presented Greeks with “the ultimate Hobson’s Choice”.”

“They could either have their financial eyes ripped out by austerity measures or by the chaos that would follow the total bankruptcy of Greece and the wipe-out of its financial institutions,” it said.

Nicola Rossi, an opposition senator in Italy, warned the mounting cost of borrowing for the government in Rome had the potential to further scupper attempts to safeguard the euro.

Under last week’s deal, the eurozone plans to increase the stockpile of cash in a bailout fund to some one trillion euros but many observers suspect that it will be an insufficient firewall if a country of the size of Italy collapses.

“The Greek government’s decision has unleashed havoc on the markets. It wasn’t very well thought through,” Rossi, an economist, told SkyTG24.

“The problem is that Italy is the weak link in the euro chain so we are under particular scrutiny.”

“We all know that when our borrowing rate is close to seven percent our debt risks becoming unsustainable. The situation is extraordinarily serious.”

And from Bloomberg:

Greece’s referendum poses a threat to financial stability in the euro region and increases the risk of a “disorderly” default, Fitch Ratings said. Papandreou’s grip on power weakened before a confidence vote on Nov. 4 as six senior members of the ruling party called on the prime minister to step down, state- run Athens News Agency reported, without citing anyone.

The risk of a Lehman-style disorderly default now looms a bit larger than before, including some residual risk that Greece may leave the euro zone if it rejects the offer of orderly debt relief in exchange for harsh new spending cuts and reforms,” Holger Schmieding, chief economist at Joh. Berenberg Gossler & Co. in London, wrote in a note…

The cost of insuring against default on sovereign debt surged the most in almost four months with the Markit iTraxx SovX Western Europe Index of credit swaps linked to 15 governments jumping 29 basis points to 333 basis points. Contracts on Italy soared 46 to 498 basis points, France was up 16 at 192 and Germany climbed 10 to 94 basis points.

Remember When …

28 Jul

From the Australian, 27 July 2011:

Fitch Ratings today revised to negative the outlook for Queensland and warned a potential downgrade was likely if it didn’t limit the growth of its debt.

Remember when Senator Barnaby Joyce dared to suggest that not only was there a “distant but real” risk that the US could default on its debts, but that some Australian states were over-indebted too?

From the Sydney Morning Herald, 11 December 2009:

The Opposition finance spokesman, Barnaby Joyce, believes the United States government could default on its debt, triggering an ”economic Armageddon” which will make the recent global financial crisis pale into insignificance.

Senator Joyce told the Herald yesterday he did not mean to alarm the public but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by a local state government.

Senator Joyce said the chances of a US debt default were distant but real and politicians were not doing the electorate a favour by refusing to acknowledge the risk.

He said the Federal Government’s debt would push up interest rates and predicted that some state Labor governments would not be able to repay their borrowings.

”The Federal Government has $115.7 billion in debt, Australian government securities, notes and bonds on issue, and the states have another $170 billion in debt.

”We have to ask whether the states have the capacity to repay that. I would say in some instances they do not, particularly Queensland.”

Remember when, a couple of months prior to those statements, Barnaby raised his concerns in Senate Estimates hearings with former Treasury secretary Ken Henry?

From The Age, 23 October 2009:

The Nationals Senate leader Barnaby Joyce is openly canvassing an economic upheaval that would dwarf the current global financial crisis, triggered by the US defaulting on its sovereign debt within the next few years.

In unusually pessimistic comments for a senior political figure, Senator Joyce said the US Government was running such large deficits and building up so much debt that it was in a similar position to Iceland or Germany before World War II.

In a Senate estimates hearing on Wednesday night, he asked Treasury secretary Ken Henry what would be the implications of an American debt default for the Australian economy.

Dr Henry warned that canvassing extreme scenarios could alarm the community.

”I don’t mind discussing hypotheticals in general … [but] one has to be careful not to discuss publicly hypotheticals that are that extreme,” Dr Henry said.

”I don’t, myself, consider that outcome to be a high probability outcome, certainly not one that I would want to say much about in a public forum.”

But Senator Joyce insisted yesterday that the dangers to the global economy from the run-up in US private and public sector debt were real and should be debated.

”It is the elephant in the room,” Senator Joyce said. ”This is a huge risk that Australia faces. What is the game plan, what happens if it comes unstuck?

Remember when former PM KRudd joined Ken Henry, Wayne Swan, and then Finance spokesman Chris Bowen, in ridiculing Barnaby day in day out for his concerns about debt, until he lost his job as Opposition Finance spokesman?

From The Age, 11 December 2009:

Joyce blasted for ‘extremist’ views on debt

Senior government figures have taken aim at Barnaby Joyce’s dire warning about a global financial meltdown if the United States government defaults on its debt. Mr Joyce also came under fire for comments about the financial health of Australian states.

”That’s shooting from the lip, making it up on the run,” Prime Minister Kevin Rudd said of the new opposition finance spokesman’s comments.

Senator Joyce is concerned that demand for Australia’s resources would ”go through the floor” if the US was not able to pay off its burgeoning foreign debt.

Senator Joyce told Fairfax Media he did not mean to alarm the public but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by a local state government.

”How would Australia go forward in a position where the dynamics of the global economy are all changed,” he said on ABC Radio today.

Mr Rudd dismissed the senator’s comments, describing them as ”not responsible economic policy”.

Assistant Treasurer Chris Bowen went further saying Senator Joyce’s comments were extremist.

”His comments on the United States need to be taken with a grain of salt,” he said, adding the vast majority of economists believed US debt levels were manageable.

He accused Senator Joyce of engaging in a series of thought bubbles that were unbecoming of a senior economics spokesman from either government or opposition.

”Senator Joyce adopts very extreme positions, he is an extremist.”

States ‘rock solid’

Separately, Mr Rudd criticised comments made by Senator Joyce that some Australian state governments might not be able to repay billions of dollars in debt.

The states were carrying $170 billion in debt and rising interest rates were affecting their capacity to make repayments, Mr Joyce said.

”I would say in some instances they do not, particularly Queensland,” he told Fairfax Media.

The Prime Minister said such ”erratic and ill-considered” comments should not be made by a senior opposition spokesman.

Mr Rudd described as the ”most serious charge” the coalition’s view that state governments could default on their debt.

”It’s got to produce evidence of that,” he told Fairfax Radio Network today, adding Opposition Leader Tony Abbott and his treasury spokesman Joe Hockey needed to confirm or repudiate Senator Joyce’s claim.

Mr Rudd said any message to international financial markets about the ability of state governments to repay debt needed to take into account the national interest.

State and territory governments had some of the strongest credit ratings in the world and Australia had a ”rock-solid and robust” reputation for public finance.

”There are basic interests for Australia at stake here and responsible, calm, considered policy suggests that the sort of remark … should simply not be made,” Mr Rudd said.

”This is gross economic irresponsibility, policy on the run and shooting from the lip.”

Remember when the media pack joined the Rudd Labor government in rounding on Barnaby too?

From Economics Writer Jessica Irvine, for the Sydney Morning Herald, 11 December 2009:

Barnaby, mate, you gotta stop being a boofhead about the economy

Hark!

What’s that sound?

No, it is not the sound of abject apologies from the Labor party, the Treasury department, the RBA, and the Australian media.

Nor is it the sound of public applause for Australia’s solitary modern-day economic prophet.

No.

It is the sound of deafening silence.

Well … except for this, from the impressive John Roskam at the IPA, 25 March 2011:

We’re in debt to Barnaby

Wayne Swan and Ken Henry owe Barnaby Joyce an apology. A year ago Joyce, then the Coalition’s finance spokesman, warned of “economic Armageddon” if the United States government defaulted on its debt. He said the threat was “distant but real” and politicians should at least acknowledge the possibility of default, however remote it might be.

Treasurer Wayne Swan accused Joyce of coming from the “reactionary fringe of our economic debate”. Ken Henry, then the secretary of the Treasury Department, claimed that Joyce shouldn’t be talking about such things because it would frighten people.

So on that basis Austan Goolsbee must be from the reactionary fringe too. The trouble for Swan is that Goolsbee is a professor of economics at the University of Chicago, the chairman of US President Barack Obama’s council of economic advisers and a member of the US cabinet. Presumably for Swan and Henry it’s OK when Goolsbee speculates on the US going broke, but it’s not OK when Barnaby Joyce does.

In January Goolsbee contemplated the result of the US House of Representatives, controlled by the Republican party, not allowing the US government to increase its debt. “If we hit the debt ceiling, that’s essentially defaulting on our obligations, which is totally unprecedented in American history,” he said.

The context in which Joyce and Goolsbee spoke was different. Joyce was talking generally about the sustainability of US government debt, while Goolsbee was contemplating the unlikely event of the Obama administration being unable to raise its debt ceiling. But in essence Joyce and Goolsbee were talking about the same thing – namely the US government running out of money.

In the US Goolsbee’s remark was taken as a simple statement of fact. In Australia Joyce’s remark provoked outrage from Labor politicians and economics commentators. It was one of the reasons Opposition Leader Tony Abbott subsequently removed Joyce from the fmance portfolio.

The treatment of Joyce reveals just how ignorant Australians are about the financial situation of the United States government.

It’s understandable that Swan and Henry, who presided over the biggest growth in Australian government debt since Gough Whitlam, didn’t like Joyce talking about the consequences of government debt. But it’s Australia’s policymakers – who refuse to face the facts of the long-term consequences of America’s financial situation – who are the ones being irresponsible.

Barnaby Joyce is the only politician in this nation

who was right.

Barnaby mockers? Be damned.

The whole damned lot of you.

Our New Treasury Secretary Is America’s Mini-Me

5 Jun

America’s Treasury Secretary, Tim Geithner – the former IMF bankster who Paul Keating rightly called a “gigantic fool” – now  has his very own Mini-me right here in Australia.

New Treasury Secretary Martin Parkinson. Former student of money-printing madman, US Federal Reserve Governor “Helicopter Ben” Bernanke.

What do Tim and Martin share in common?

An insistence on raising our respective nations’ debt ceilings.

The only difference between these two #JAFA lunatics, and the public (taxpayer) debt levels over which they preside … is one of scale.

Consider.

Recently we have seen the USA run into its $14.3 Trillion debt ceiling. And giga-fool Geithner has been loudly proclaiming the dire consequences if the US Congress refuses to raise it even higher.  In another ominous warning of where Australia too is heading, Geithner has started stealing federal employees pensions to keep the government running until August 2, when America will default on its current massive debt unless the #JAFA’s in their Treasury department can get “permission” to borrow-and-spend the American people even deeper into oblivion.

And in Australia?

On Wednesday in Senate Estimates, our Mini-me Martin Parkinson was challenged by Senator Barnaby Joyce over this utterly incompetent and reckless Labor/Green government’s decision, just before the Budget, to sneak in new legislation to raise our debt ceiling too.  By $50 Billion – a 25% increase. To a new all-time record debt level of $250 Billion.

Just like America. The only difference is the scale.

And what did Mini-me Parkinson have to say?

Nationals senator Barnaby Joyce wanted to know what would happen if the government was prevented from lifting its gross debt ceiling by a further $50 billion to $250 billion, as proposed in the budget.

“I couldn’t imagine that parliament would be so foolish,” Parkinson replied.

It would have “serious ramifications” for the operation of government.

It gets worse.

According to Mini-me Parkinson, he is simply not concerned about our ever-rising, all-time record high national debt. And, it seems he would only begin to view our national finances from a position of “concern”, if our national debt level was the highest in the world:

During a budget estimates hearing, Nationals Senate Leader Barnaby Joyce asked the Treasury secretary if increasing government debt concerns him.

But Dr Martin Parkinson says it does not.

“If you were to say to me that Australia had the highest level of public debt in the world… if you were to say that to me, then I would start from a position of much greater concern,” he said.

Brilliant.

Our nation is held hostage to the “genius” of yet another ivory-towered, disconnected-from-reality,”theory”-obsessed, white-collared, smarmy idiot.

A #JAFA.

This former head of the Department of Climate Change, no less, is now the new “Sir Frank Gordon” responsible for advising the Goose, Wayne Swan, about how to (mis)use the billions of dollars that this Government is borrowing every week from China, et al:

Given the abundantly clear evidence that America is rapidly swirling its way down the financial toilet bowl, the last thing we need is a Mini-me of Timmy, and a former student of money-printing madman, “Helicopter Ben”.

Another useless #JAFA – just like Senator Joyce’s previous nemesis at the Treasury department, the green cargo-cult member, Ken Henry – one whose towering, commonsenseless intellect insists that the government be permitted to keep borrowing-and-spending our nation into oblivion too.

Martin Mini-me Parkinson.

Remember the name.

So you know who (else) to blame, when we all get flushed down the green-tinted economic toilet bowl.

15x More Debt

9 Mar

From the Sydney Morning Herald:

Australians now owe financial institutions more than $1 trillion in housing mortgages, almost 15 times as much as 20 years ago, new Reserve Bank figures show.

The Reserve revealed that people paying off their own homes now owe banks and other lenders $763 billion – almost 12 times more than the $65 billion owed in January 1990, when figures were first compiled.

Rental investors have increased their mortgage debt even more spectacularly. In January 1990, landlords owed banks $10.5 billion, but by January this year, the figure had swollen more than 30 times over, to $324 billion.

Household disposable income also rose in that period, but it only trebled. In January 1990, home mortgages ate up just 28 per cent of our disposable income. By January 2000, that had ballooned to 66 per cent, and by January this year, it doubled again to 134 per cent.

Even in the past year, despite the global financial crisis, the debt we owe on home mortgages climbed relentlessly, up $83.5 billion to $1087 billion.

Households’ willingness to take on greater debt powered much of Australia’s economic growth from 1990-2010 but with our households now as indebted as any in the Western world, economists say that will not be repeated.

This is a perfect illustration of how the Reserve Bank of Australia has indebted the nation by its inflationary policies, that have made our currency lose 968.1% of its buying power.

By creating ever more money (as debt, or ‘credit’ loaned to home buyers and consumers), the prices for everything are silently, relentlessly pushed ever higher.

But our wages never rise enough to match. So, we are driven ever more deeply into debt.

Now that Rudd Labor has so rapidly indebted the Federal government as well, we are in huge financial danger.  There is simply no ‘capacity’ for households, or the government, to keep on spending and support the economy when another crisis strikes.

Thanks to too much debt, the only way forward is… even more debt. And we all know what happens when you reach a point where your debt is so great that you cannot pay it back.

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