by Larry Levin
Thursday morning was replete with very bad news. Result? Higher equity markets thanks to the non-stop POMO/rigging/Fed-backstopping-the-world operations. But hey, we already know that.
So what was the news? The early reports were durable goods and weekly unemployment claims data. Both were far, far worse than expected. And to add to the terrible data, Standard & Poors rating agency weighed in with a whopper: it slashed Japan’s sovereign debt rating.
The durable goods report came in last month at -1.3%. Today’s report was supposed to show a nice 1.5% gain, but shocked us with a -2.5% reading.
The weekly unemployment report confirms that only Fraud Street is flying high. The morning report was to show claims of 405,000 but was far worse at 454,000 new unemployment claims. The government and the financial parrots in the media said it was due to heavy snow in the North East. Uh-huh. Isn’t it odd that when retail sales are LOWER than expected poor weather is always to blame? After all, people aren’t able to go out and shop in the inclement conditions. Now, however, we’re expected to believe that the poor weather made people go out INTO the soup to make claims? Give me a break.
Japan’s sovereign debt rating was cut this morning to round out the hat trick of terrible news. Japan has a debt-to-GDP ratio of about 200%. Like American politicians, Japanese politicians don’t really give a damn and they keep spending money they don’t have. Maybe the S&P rating cut will wake them up?
The Japanese government cannot default on its bonds when nearly all of it is owed to its own citizens; can it? It is widely known that if interest rates reach just 3%, Japan is cooked. At 3% interest, nearly 100% of its tax revenue would go to paying interest on its debt. Game over. I wonder what’s going to happen when it aging population begins to cash in those bonds – selling them into the market – thus raising interest rates. (Lower prices = higher yields)
Question: How does a bankrupt nation like Japan bail out bankrupt European nations like Portugal again…? (…the sound of cricket chirping is deafening)
Never fear. Helicopter-Ben Bernanke has the “helo” warmed up and is ready to spread your money across the globe to save his banker pals – in Japan if necessary.
Oh, and this came in last night: Social Security is now running deficits! “The Congressional Budget Office said Wednesday that Social Security will pay out $45 billion more in benefits this year than it will collect in payroll taxes, further straining the nation's finances. The deficits will continue until the Social Security trust funds are eventually drained, in about 2037.”
But let’s be clear about something here: there is no money in any trust fund…NONE. The S.S.A. has trillions of dollars of literal IOUs that now must be cashed in. You see, the US Congress grabs all of the S.S. tax money that comes in, spends it immediately, and then Treasury gives back the Social Security Administration an IOU. According to the CBO, the S.S.A. will now be claiming that money, which means the Treasury must issue MORE DEBT NOW AND FOREVER.
Alas, one should never fear with Ben Shalom Bernanke on the job. He’ll just print up more cash.
(Just how far can the can be kicked down the road, anyway?)
Thursday morning was replete with very bad news. Result? Higher equity markets thanks to the non-stop POMO/rigging/Fed-backstopping-the-world operations. But hey, we already know that.
So what was the news? The early reports were durable goods and weekly unemployment claims data. Both were far, far worse than expected. And to add to the terrible data, Standard & Poors rating agency weighed in with a whopper: it slashed Japan’s sovereign debt rating.
The durable goods report came in last month at -1.3%. Today’s report was supposed to show a nice 1.5% gain, but shocked us with a -2.5% reading.
The weekly unemployment report confirms that only Fraud Street is flying high. The morning report was to show claims of 405,000 but was far worse at 454,000 new unemployment claims. The government and the financial parrots in the media said it was due to heavy snow in the North East. Uh-huh. Isn’t it odd that when retail sales are LOWER than expected poor weather is always to blame? After all, people aren’t able to go out and shop in the inclement conditions. Now, however, we’re expected to believe that the poor weather made people go out INTO the soup to make claims? Give me a break.
Japan’s sovereign debt rating was cut this morning to round out the hat trick of terrible news. Japan has a debt-to-GDP ratio of about 200%. Like American politicians, Japanese politicians don’t really give a damn and they keep spending money they don’t have. Maybe the S&P rating cut will wake them up?
The Japanese government cannot default on its bonds when nearly all of it is owed to its own citizens; can it? It is widely known that if interest rates reach just 3%, Japan is cooked. At 3% interest, nearly 100% of its tax revenue would go to paying interest on its debt. Game over. I wonder what’s going to happen when it aging population begins to cash in those bonds – selling them into the market – thus raising interest rates. (Lower prices = higher yields)
Question: How does a bankrupt nation like Japan bail out bankrupt European nations like Portugal again…? (…the sound of cricket chirping is deafening)
Never fear. Helicopter-Ben Bernanke has the “helo” warmed up and is ready to spread your money across the globe to save his banker pals – in Japan if necessary.
Oh, and this came in last night: Social Security is now running deficits! “The Congressional Budget Office said Wednesday that Social Security will pay out $45 billion more in benefits this year than it will collect in payroll taxes, further straining the nation's finances. The deficits will continue until the Social Security trust funds are eventually drained, in about 2037.”
But let’s be clear about something here: there is no money in any trust fund…NONE. The S.S.A. has trillions of dollars of literal IOUs that now must be cashed in. You see, the US Congress grabs all of the S.S. tax money that comes in, spends it immediately, and then Treasury gives back the Social Security Administration an IOU. According to the CBO, the S.S.A. will now be claiming that money, which means the Treasury must issue MORE DEBT NOW AND FOREVER.
Alas, one should never fear with Ben Shalom Bernanke on the job. He’ll just print up more cash.
(Just how far can the can be kicked down the road, anyway?)
Trade Date: 1/27/11
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