A Run On The Global Banking System—How Close Are We?

Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.

Once he looks down, then he’ll begin to fall.

My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.

So first off, what happened with MF Global?

Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.

Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.

But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.

From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.

Read more »

The European Central Bank Loses Its Virginity

And it means more than is apparent.

This post is adapted from analysis which appeared in The Strategic Planning Group.

Mario, relax . . .

So yesterday, the European Central Bank (ECB) doled out €489 ($639) billion in loans to the European banking sector.

Why’d they do it? ‘Cause Europe’s banks are broke: That is, if all the crap they collectively hold on their books were marked to market, their liabilities would be greater than their assets. American banks shouldn’t smirk: The only reason they aren’t declared bankrupt for the same reason is because of the suspension of FASB 157 back in March 2009.

The ECB lent out the €489 billion against any and all collateral the European banks would put up. In exchange for this collateral—no matter how damaged—the banks got 1% loans, which is not merely free money but essentially subsidized money: Eurozone inflation is around 3%, and except for German and Dutch debt, all sovereign bonds are yielding more than 3%. Thus a 1%-interest loan from the ECB is like being paid to take out a loan—and who wouldn’t want that deal?

Ordinarily, no bank wants to be seen to be taking money from the central bank, because it makes the bank look weak, and therefore hurts its reputation on the markets. But in this case, 523 banks—count ‘em, 523—took the ECB money: Which proves both how fragile the situation really is, and how generalized that fragility really is. European banks no longer care what it looks like, as survival has trumped appearances.

Be that as it may, the banks took the money. And like their American counterparts, who took the Federal Reserve’s $7.7 trillion of free money and used it to buy Treasury bonds, the European banks are likely to plow this ECB largesse into sovereign debt: Thus they will make risk-free profits. And what bank doesn’t want that.

This was a major move, by the way: The ECB—after protesting for months that it was not and would never be the lender of last resort—has become . . . the lender of last resort: It has finally lost its virginity. Not only that, the ECB—like every recently deflowered naïf—will find it next to impossible to say “No” the next time the European banks come looking for nookie.

There are three aspects to this situation that I want to look at here:

Read more »

About Gold: Don’t Panic!!!

It’s momentary—and it’s because of the euro.

This post is adapted from analysis which appeared last week in The Strategic Planning Group.

For those of us watching the gold markets—that is, those of us anticipating the collapse of the euro and the eventual collapse of the dollar—the last week has been a scary ride: Gold has fallen over 8.6%, from a high of $1,730 on December 7 to $1,580 on December 14.

WTF???, I can practically hear everyone say. The fundamentals would point to gold being a safe haven play—it should not be falling: If anything, it ought to be rising.

But a fall of 8.6%? In a week?

The first thing that pops into my head is, Don’t Panic!!

The second thing that pops into my head is, This is to be expected—and is only a temporary pullback.

Let’s take the second notion first: The reason the fall in gold is to be expected—and the reason it might well fall further—is because of the euro.

Read more »

Why Gay Marriage Doesn’t Make Sense—and Isn’t Fair

I took a lot of slack recently, for saying I’m against gay rights. In a 2,000 word piece, my disagreement with the concept of gay rights was a passing reference of all of three words—exactly three words.

A slogan on a t-shirt
is not a reasoned argument.

The extent of my “homophobic rant”?

“Gay rights—no.”

From the reaction of a surprisingly large number of people, you’d think I’d called for every homosexual to be rounded up and put into Black Marias with no tailpipes. And since I have identified myself philosophically as a conservative Catholic (though not spiritually, as I do not believe in God), a lot of people took my objection to gay rights to mean that I was some close-minded Bible-thumping bigot who hates all gays for the mere fact of being gay.

Amazing, what people will infer out of thin air.

I don’t have an issue with homosexuals or homosexuality. My own sense—which seems to be confirmed by science—is that homosexuality is an inborn predisposition, no different than, say, alcoholism or left-handedness: There isn’t much a person born with the characteristic can do about it.

Those with an inborn predisposition—any inborn predisposition—can choose to not carry out the urgings of their predisposition: That is, they can choose to repress their predisposition. Alcoholics go to AA meetings precisely so as to repress the urge of their predisposition to drink themselves to death; my grandmother (born a lefty) had her left hand tied to her belt when she was taught to write in the 1930’s.

But though people can repress their predisposition—whatsoever that predisposition might be, be it positive, negative or neutral—they can’t choose to have or not to have their particular predisposition. As Lady Gaga says, they were born this way.

As an inborn predisposition which I do not share, I am indifferent to homosexuality, to the same degree that I am indifferent to left-handedness or alcoholism: Two other traits which I do not share. (Parenthetically, I’ve always suspected that those who belligerently “hate the gays” are secretly afraid that they themselves might be gay; but that’s for another post.) And just as I think that people who are left-handed or alcoholic should not be discriminated against, I think it’s wrong to discriminate against homosexuals qua homosexuals.

But what I am saying is that homosexuals should not receive certain privileges that society has deemed befit some citizens and not others.

Like the benefits of marriage.

Our society grants married people certain rights and privileges—certain benefits—which homosexual couples believe they ought to receive as well. Read more »

Why I Support The Occupy Movement

I am a Conservative—and proud of it.

I am against abortion, including in the case of rape or incest. I don’t believe in any form of entitlement program, much less the concept of a welfare state. I am opposed to progressive income taxes—and in fact am against using the tax code as a vehicle to foment or discourage any social goal, as I think it inevitably leads to the tax code being gamed by interested parties (as has indeed happened with the U.S. tax code, beholden to paid lobbyists who have carved out so many loopholes that it looks more like a sieve than a tax code). Thus I’m in favor of a flat tax: Zero-percent for citizens, 20% for corporations.

I am in favor of a reduced government, a reduced military presence, compulsory military service, and a compulsory national guard system requiring 100% citizen participation, similar to the Swiss model. I am completely against foreign military adventurism, foreign military bases, and foreign military aid.

I believe that the government should be the enforcer of the law, and of a regulatory framework which—when it comes to issues affecting the common good—is strict to the point of anal.

For instance, food regulation, financial regulation, building code regulation—all of these regulations obviously serve the common good, and protect us all from unscrupulous people seeking to get an advantage by poisoning or otherwise hurting us all. Thus the government should have a tough regulatory framework—think of it like traffic laws: Tough government regulations that are simple, transparent, and which protect us all from each other, while making our interactions smooth, convenient and graceful.

I don’t have a problem with some people making boatloads of money, while others are homeless. I don’t believe it is the State’s or society’s or the government’s responsibility to take care of you in your old age—it is your responsibility.

Gun rights—yes. Gay rights—no. States’ rights—yes. Affirmative Action—no.

There are only three issues on which I don’t toe the Hard Right line: The death penalty, the war on drugs, and health care.

I am against the death penalty—not because I think that the State and society do not have the right to execute one of its members: They do, to my way of thinking, if the citizen has committed an especially heinous act. But the death penalty is permanent: You can’t take it back if you screw up. And since no justice system made by fallible men is infallible, mistakes are inevitable. So I am of the opinion that it’s better to have 1,000 murderers sit in jail at society’s expense, than allow one innocent man be put to death. Because you can free an innocent man after twenty years in jail for a crime he didn’t commit—but you can’t bring back the dead.

I am against the War On Drugs: First of all because it doesn’t stop the consumption (and thus flow) of illegal recreational drugs; second because I believe recreational drugs (up to and including cocaine, heroin, meth and acid) ought to be legalized and taxed, like booze, and its production regulated for safety standards, again like booze; third, because the “War On Drugs” has created a huge penal class—citizens who have spent time in jail for non-violent offenses, and thus are marginalized from general society because of this stigma on their record—which hurts people who have committed non-violent infractions, and enriches people who thrive on building and staffing more and more needless prisons.

I am in favor of trashing the current American health care system, and making it either entirely private, or entirely socialist: This hybrid system the United States has not only does not work, it is extraordinarily expensive. The fact that the French of all people spend less of their gross domestic product on their socialist health care system, yet have a lower infant mortality rate and a longer median and average lifespan than people in America, is a wake-up call: If the full-Commie Frenchie system is better and cheaper than the American one, then literally any health care system is better than the one that exists in the United States.

But all in all, I’m a good Conservative. (Though certainly not a Republican—a political party dominated by Neo-Conservatives, who are not Conservative at all, but rather, Corporatists.)

I believe that America should be the land of opportunity and risk: You can fly high—but you can also crash and burn. A society that eliminates risk—that tries to somehow torque risk down with “safety nets” and “systemic protections”—is begging for a Mommy Dictatorship when all is said and done.

Now, why do I go into all this detail about my political beliefs and ideas? Because I want to make clear where I stand, before I come out and say that I am in favor of, and fully support, the Occupy Movement.

The Occupy Movement is inarticulate—but not because of it nonsensical: The protestors are against the travesty that has become the American Republic. And though its origins are on the political Left, it should not be considered a “Leftist” movement.

Rather, it is an anti-Corporatist movement.

Read more »

We’re In The Middle Of A Run On Europe—And It’s Gonna Get Worse

Specifically, a run on European debt.

So this morning, I woke up—hung over and alone, except of course for the Nympho Twins and the Thai hooker they insisted we hire last night—and was confronted with some bond market action that was . . . absurd.

Yeah, I know: A spread like that
doesn’t seem humanly possible.

Actually, kind of scary.

Yeah, Italian bonds are back to yielding over 7%, Greek debt is ludicrous (28.85%? Really?) as it has been for the last year, Portuguese 10-years are at 11.29%, the Irish at 8.20%, Spain at 6.33%—numbers that more or less fit where we are supposed to be insofar as the PIIGS are concerned, following the whole Greek Drama and Italian Farce, right?

So what’s up with Austria’s debt? Nevermind France’s debt, which is of course higher because of the whole Italy thing—what about Holland’s debt? Finland’s debt? In short, what’s going with the debt of the non-PIIGS who are not Germany?

Take Austria: Read more »

SPG Sampler

Here’s a sample of the latest Week In Words—a weekly broadcast where we analyze what has happened, and what it means. A regular feature of my Strategic Planning Group:

The live broadcast took place on Nov. 13, at 7pm EST. It ran 80 minutes. The full recording is available on the Strategic Planning Group site, exclusively for SPG Members.

If you are interested, visit the site—or better yet, check out our preview page.

GL

A Beginner’s Guide to the European Debt Crisis

For ordinary, non-specialist people just tuning in to the horror-show which is the European crisis, the whole mess can seem daunting and almost hermetic—almost like a secret language, or a really complicated code.

Euro-this and euro-that and euro-the-other—that’s all everyone seems to be talking about. That, and words like troika, haircuts, bailouts, yields, not to mention an alphabet-soup’s worth of acronyms like EC, ECB (they’re different), EFSF, PIIGS, IMF, EMU—

—OMFG!

For us dweebs neck deep in this stuff, it’s all mother’s milk. At my Strategic Planning Group, we’ve been game-playing what do when the eurozone breaks up since May—but for people who’ve just realized, “Hey! Something’s going on over there in Europe!”, it can be a bit much, like tuning in to a soap opera five minutes before the end of the episode: Everything seems terribly portentous and important and shocking . . . but basically incomprehensible.

Which wouldn’t matter if this was a soap-opera—but this is real life. This European crisis will affect your financial future, no matter if it’s happening on another continent. This is major—

—which is why so many ordinary people are confused and frightened: Because it seems terribly complicated.

But like all things which seem complicated at first glance, when you break it down, it’s simple.

This is what happened:

Read more »

Waiting for Lehman

This is an adapted version of a post which appeared in my Strategic Planning Group. Adapted how? Well, the full argument is reprinted below—but the ugly money-grubbing stuff about what to do and what investment opportunities are good have been cut. After all, readers of the free version of my blog aren’t interested in such base dealings, right? GL

In Samuel Beckett’s play Waiting for Godot, the four main characters wait in vain—Godot never arrives.

In the financial markets, the same thing is happening now—we are all waiting for Lehman: That sudden bankruptcy-crisis-calamity which sets off a whole series of credit events, which in turn causes massive sell-offs, plunging markets, collapsing confidence, and ultimately—just like the bankruptcy of Lehman Brothers did back in 2008—shoves the entire global financial edifice right up to the very edge of the cliff.

To the edge—and perhaps this time over it.

We have good reason to be waiting for Lehman—our current situation is simple and stark: Sovereign nations and individual citizens are over-indebted—to the point where they cannot pay back what they owe. We all know that this overindebtedness at the sovereign and individual level is going to end, and end badly: Worse than 2008.

So along with everyone else, I’ve been waiting for Lehman—and fruitlessly trying to guess which will be the Lehman-like event this time around. Will it be the bankruptcy of Dexia? BofA? UniCredit or SocGen or one of the Spanish banks? Will it be a war in the Middle East? Bad producer index numbers from China? A fart by a day-trader in Uzbekistan?

When will Lehman arrive!?!?

But lately, my thinking has changed: Like the characters in Godot, I think that we’re waiting in vain. The Lehman-like event will never arrive because it won’t be allowed to arrive. So this miserable slog we are going through will continue—indefinitely. (Yeah, I know: Sucks to be us.)

My thinking is based on two assumptions: One, that the central banks and government financial authorities and regulators around the globe are absolutely terrified of a repeat of a Lehman-type bankruptcy or trigger event. And two, that those self-same central banksters and government drones will do absolutely anything to prevent another Lehman-like credit event from setting off another cascade of consequences.

And when I say “absolutely anything”, I’m not using hyperbole: Fuck principles, fuck the law, fuck legal constraints, fuck even basic long-term economic and fiscal health—or sanity. The clowns running the circus were so freaked out by the effects of the 2008 Lehman bankruptcy and the domino-effect that it triggered, that they will not let it happen again—ever. Come what may.

Hence, this endless Waiting for Lehman: This endless slog of ad hoc solutions and fiscal half-measures that brings us only tension and misery—and erodes our economy even further.

But this certainty that the bureaucrats in Washington and the eurocrats in Brussels and Frankfurt will do absolutely anything to avoid a Lehman-like event adds something key to the equation:

Predictability.

Since we know how the central banks and economic leadership will react—that is, if we start from the assumption that the political/economic leadership will do absolutely anything to prevent a major credit event from taking place—then we can predict what they will do in the three main areas of weakness:

• Sovereign debt and the possibility of default.
• Financial sector weakness and the possibility of insolvency.
• Geopolitical crisis and the possibility of another Oil Shock.

What follows is a discussion of those three areas of weakness—and what the central banks and economic leadership will do about each of them.

Read more »

Germany Will NEVER Leave the Eurozone—Because It Can’t

There’s No Upside, Only Downside

Late last week, there was a spike in random speculation that the German government was preparing to exit the eurozone—and that in fact, the Germans had gone so far as to print new Deutsche mark bills and mint new Deutsche mark coins.

Several alternative news sites, including Zero Hedge and others, gave serious credence to this rumor—enough credence that the euro took a hit against the dollar and gold.

But at the end of the day, it was just random speculation from one Dr. Philippa Malmgren, who was interviewed by a Swedish newspaper as saying “My impression is that the German Government sent us a number of signals that, from their perspective there is no other solution [than for them to leave the euro].”

This random speculation—coupled with last year’s random speculation from Hartgeld.com, a German fringe site that claimed with absolute certainty that on May 12, 2010, the Germans would for sure go back to the Deutsche mark, having already printed and minted the new bills and coins—gave the Malmgren nonsense some legs.

The fact of the rumor is no big deal—there are always rumors.

The fact that the financial community took such nonsense so seriously points to the big deal in this situation—the underlying worry that a lot of market participants are fearing: What if the Germans all of a sudden cry, “Fuckit!”, and let slip the bonds of the eurozone?

Can they leave the eurozone?

Read more »

Our Affirmative Action President

If I wrote a piece arguing that Barack Obama is our first Affirmative Action President, would I be put down as a racist? Or a realist?

Most people under fifty who went to academically competitive universities in the United States saw what has come to be known as Affirmative Action babies: Minority students, mostly black, who simply could not cut the work at the competitive college level.

Forget bringing up some Herrnstein & Murray Bell Curve arguments about “racial differences in intelligence” or some such: A lot of the minority students simply did not have the cultural and educational background to cut it.

In my own case in the early ’90’s, I remember quite clearly talking to an African American student who had no idea who Napoleon III was. The first Napoleon—Napoleon Bonaparte? Sure, he’d seen the movie. But Napoleon III? President of the Second Republic, ruler of the Second Empire, the Revolution of 1848? Not a clue. In fact at first, I think he thought I was pulling his leg about there being a “Napoleon the Third”.

This young man was smart—smart enough to realize that he had been accepted to Dartmouth because he happened to be black. He struggled academically all the while—because he was simply unprepared for the exigencies of a place like Hanover. His high-school had not equipped him with the tools needed to succeed—

—which was of course the tragedy of Affirmative Action:
Read more »

Forget Gold—What Matters Is Copper

People are freaking out that gold has fallen to $1,650, from its lofty highs above $1,800—they are freaking out something awful. “Gold has fallen 10%! The world is coming to an end!!!” I myself took a shellacking in gold—

—but copper is what has me worried.

Copper fell from $4.20 to $3.25—close to 25%—in about three weeks. Most of that tumble has happened in the last ten days, and what’s worrisome is that, as I write these words over the weekend, there is every indication that copper will continue its free fall come Monday.

From the numbers that I’m seeing—and from the historical fact that copper tends to fall roughly 40% from peak to trough during an American recession—there is every indication that copper could reach $2.67 in short order. And even bottom out below that—say at $2.20—before stabilizing around the $2.67 level.

But we’ll see. The price of copper is not the point of this discussion. The point of this discussion is what the price of copper means.

What it means for monetary policy.

We all know the old saying: “Copper is the only commodity with a Ph.D. in economics”, or words to the effect.

Read more »

What I Learned At Dartmouth

Update below. 

“The more you understand, the less you forgive.”

—Terrorism Expert

In the Fall of 1991, shortly after the Clarence Thomas nomination and the Anita Hill hearings, the Class of ‘95 matriculated at Dartmouth College.

Dartmouth Hall, by Stephanie Gagnon.

One of the freshmen—or “first years”, as they were beginning to be known—was accused by another first year of sexual assault and harassment. In the hot-house political environment at the time—product of the Thomas/Hill hearings, which revolved around workplace sexual harassment—these were serious allegations.

The young woman making the claim against the freshman said that he had visited her in her dorm-room around lunchtime one day during Orientation Week, and had “forcibly tried to kiss” her. She had rebuffed him, told him he was being “selfish”, after which he had left, without further incident.

This was the sexual assault allegation.

The young woman also claimed that the freshman had then started to harass her via electronic mail, in the days and weeks after. She claimed he had sent her “obscene messages”, which she had purged from her e-mail account, as she hadn’t wanted any of that “filth” on her computer.

This was the sexual harassment allegation.

The young woman said she wanted to “protect” the Dartmouth campus—and the other women at Dartmouth College—from the danger that the freshman represented. This was why she was reporting this incident three weeks after it allegedly took place.

The accused freshman, being unsophisticated, went through the disciplinary channels of Dartmouth College without contacting attorneys or even his parents. He was confident that the allegations would be shown to be lies—because he knew they were lies.

More to the point, he could prove that they were lies.

Read more »

They Didn’t Win—We Lost

America will never be destroyed from the outside. If we falter, and lose our freedoms, it will be because we destroyed ourselves. 

—Abraham Lincoln

Mr. Cheney’s Victory Lap

Dick Cheney is taking a lap around all the talk shows, peddling his memoir while giving his reputation one final spit-shine before he dies and goes straight to hell.

Dick Cheney

Oh—so you actually doubt he’ll go to hell? With the shit he’s pulled? Cabrón, please . . .

It is remarkable that relatively few people seem outraged by Mr. Cheney. Here is the man who, as Vice-President of the United States, violated some of the most important rights, freedoms and liberties that America has defended for over two-hundred years. Not only did he commit what in other times would have been considered war crimes and crimes against humanity—he is proud of having done so!

He boasts about the torture he ordered, he defends the wars of aggression that he fomented, and he is silent about the sweetheart deals he gave his former employer, Halliburton, in the “reconstruction” of countries that he helped destroy.

In short, he violated every rule in the book—yet no one is throwing the book at him. There are no Congressional hearings into his violation of the Constitution. There are no prosecutors sharpening their chops, getting ready to indict him on charges of corruption.

Most of all, there is no public outrage at him.

Sure, some loony Lefties and some old-style hard-ass Conservatives such as myself bitch and moan about him—but no one is seriously arguing for his arrest, indictment and prosecution for the despicable things he did while in office. Or if they are advocating his arrest and prosecution—like me, and perhaps you—then they are on the extreme fringes of the political discourse—like me, and perhaps you: Marginal, and inconsequential.

Read more »

110

How easy would it be, to distill a point into 110 words or less? I got the idea from J.D. Considine’s blog, where he talks about his time as the reviews editor at Blender magazine: The rule was, any review had to be no more than 110 words. So far, I’m about halfway there—now.

The beauty of enforced brevity is that you have to focus your thinking on just the one thing. My particular situation—too many thoughts, coupled with limitless space, thanks to Blogger—means that my pieces have been too long and too digressive, yet also too infrequent.

So let’s see if the 110 word rule helps.

What Distinguishes the Rich from the Poor Today, Part I

In Part II of this series, I’ll be covering education. In Part III, I’ll be covering something I call “structural pliancy”. —GL

One of my brothers-in-law, C., is moving from Chile to America to take over a fairly large corporation. He is a highly educated, highly successful guy in his late-thirties—a big strapping guy of about 6’3”, a former rugby player, big on golf, with four small kids and a tall willowy wife who looks like a model.

[Originally a picture of a two-headed chicken.
I didn’t have the ©, so Blogger blocked it.]
Yeah, it has two heads—but it was
raised organically. So it’s safer 
than your lunchtime Chicken McNugget.

Though he’s been to the United States many times, for business and pleasure, he’s never actually lived there. So over a Sunday lunch, we talked about his first impressions about daily life in America—and what struck him was the food:

“It has no taste,” C. told me. “Or rather, supermarket food has no taste: Beef, fish, chicken—it all tastes bland and watery.”

He told me how vegetables too tasted oddly bland, and on top of that, he and his wife were worried about what is actually in the food.

The reason they’re worried about American food is because of the size of American children in his kids’ new schools:

“Our kids were among the tallest in their class in Chile—but they’re among the smaller kids in their U.S. classroom. On top of that, the girls in my older daughter’s class are starting to menstruate—and they are nine years-old! That’s not normal.”

C.’s conclusion: “It’s the industrially processed foods—God knows what they’re sticking in it. But we’ve got four children—and we want them to be healthy. So that’s why we started buying all our food at organic markets. The food bill is triple what it would be, but I don’t care, I can afford it: I want my family healthy.”

That—in a nutshell—is what will begin to distinguish rich people from poor people in the XXI century, as it has for millenia before: Diet.

But what kind of diet is the issue.

If in ages past, the diets of the wealthy had more calories, in this century and the future, the diets of the wealthy will have less chemicals and hormones.

And as in the past, we will see the difference in their children.

Read more »

Letter to George Washington, Regarding Paul Krugman

I wrote a letter to George Washington, the pseudonym for a well-known finance and economics blogger, with regards to a blog post he wrote on August 15.  

The letter might sound a bit like score-settling—but there is a serious point to it, a point that applies to both the Left and the Right. So be patient. 

Here is my letter to him in full, with a few light editorial touch-ups:

Hi GW,

It’s been so long!

I’ve been skiing like a madman down here in Chile—but I did catch something you wrote, which I’d like to comment on, now that a blizzard has hit the slopes and I’m stuck inside with not much to do.

Paul Krugman

You wrote a post yesterday, picked up by Zero Hedge and others, pointing out that Paul Krugman is advocating war as a fiscal stimulus solution.

You pointed out that this position he holds is not only blatantly immoral, it is a position Krugman seems to have no problem openly pushing—your unspoken implication being that this is disastrous, considering how influential Krugman is in major policy circles.

With regards to K. pushing for war as the ultimate Keynesian economic solution: I hate to say “I told you so”—but in this case—

I told you so!

(Cheers, mate.)

I pointed out the exact same thing almost a year ago: That once you strip away all the B.S., it turns out that Nobel Laureate Paul Krugman, Keynesian par excellence and darling of the Wonk Left, is essentially pushing for war as the ultimate Keynesian stimulus solution.

For pointing this out, I got slimed by the Krugman Defense Industry (KDI).

Read more »

“The Sequel”: How 2011 Is A Repeat of 2008—Only Bigger, Longer, and Uncut by Bailouts

I might have missed it, but I don’t think anyone has noticed this simple truism:

The structural causes that led to the Global Financial Crisis of 2008 are identical to the structural causes that are leading us to another systemic financial crisis in 2011.

You saw this one already?

The only difference is the kind of debt at the core of the looming crisis: Mortgage-backed securities in 2008, as opposed to European sovereign debt in 2011.

And of course, the debt hole in 2011 is bigger than in 2008—a lot bigger.

That’s why I am confident in predicting we are about to have another Global Financial Crisis—I’m calling it The Sequel: Same movie, same players, same story. Only this time around—like all good sequels—the financial crisis we are about to experience is going to be bigger, longer, and uncut by bailouts.

By the way, that is the key difference between 2008 and 2011: We’re not going to have a Hollywood Ending this time around. The governments of Europe and the United States, as well as their respective central banks, do not have any weapons to fight off this 2011 financial crisis, as they did in 2008, for the simple reason that they used them all up—they’re out of bullets, both monetarily and politically.

So when The Sequel hits the big screen, there won’t be a Big Daddy Government deus ex machina to come save the day in the third act twist. When The Sequel hits, we’re on our own.

Let’s discuss the structural similarities between the original and The Sequel:

In both 2008 and now 2011, you had unpayable debts at the center of a fragile financial system. In 2008, it was mortgage backed securities and collateralized debt obligations—the so-called “toxic assets”. I think we all know that story pretty well.

In 2011, we have European sovereign debt. And just like the toxic assets of 2008, the Euro-bonds might have been rated AAA, but they certainly aren’t blue-chip—they are more like brown-chip: That deep brown color peculiar to fast-sinking dog-turds.

Read more »

The Week in Words #4

To my Gentle Readers and Kind Fans,

This Thursday, July 28, at 9:00pm EST, we are having:

The Week in Words #4
A web seminar where we will be discussing the most important news items currently affecting the markets.

And remember: It’s free.

This week:

Charles Hugh Smith will be joining me, to discuss . . .

. . . guess.


Here is the link to register.

Do check it out—and remember to have a microphone plugged into your computer, as attendees will be able to ask questions, live.

Until this Thursday at 9pm EST, all the best,

GL

If you are interested, do check out the preview page of The Strategic Planning Group, and see what it’s about.

Your Humble Blogger on Max Keiser

Enjoy my crazed ramblings:



Source.

The Week in Words #3

To my Gentle Readers and Kind Fans,

This Thursday, July 21, at 9:00pm EST, we are having:

The Week in Words #3
A web seminar where we will be discussing the most important news items currently affecting the markets.

And remember: It’s free.

This week:

• The UK's Phone Hacking Scandal: It's turning ugly, even after the Murdochs’ generally favorable appearance before Parliament. The important developing issues are the Cameron government’s reaction, and the possible prosecution of the Murdochs under the American Corrupt Foreign Practices Act.

• European Debt Crisis: It is spreading like a red tide—and the likelihood of a break-up of the European Monetary Union is all but a certainty. The issue now is, What will be the shape of this break-up?

• The Field of Republican Candidates, Oh My!: A discussion of America’s Republican Party presidential candidates: Which ones are the best, and which one looks to be the likely winner.

Here is the link to register.

Do check it out—and remember to have a microphone plugged into your computer, as attendees will be able to ask questions, live.

Until Thursday at 9pm EST, all the best,

GL

If you are interested, do check out the preview page of The Strategic Planning Group, and see what it’s about.

Full Spectrum Decay

The Pentagon has a policy which can only be called the zenith of militaristic arrogance and stupidity: “Full Spectrum Dominance”.

As the name implies, the policy’s aim is for the United States’ military to control all aspects of a battlefield—or as proponents of the doctrine call it, the “battlespace”: Air, land, sea, space and cyberspace.

The doctrine’s concept, in its essence, is for the American military to be “better” than anyone else at everything else: The most carrier groups, the biggest nuclear subs, the latest military technology, etc., etc., etc., all of these pieces fitting together to overwhelm—and not merely defeat—any enemy or any threat, be they real or unlikely, or even imaginary. (For the American military’s hunt for imaginary threats, look up Iraqi WMD.)

Read more »

The Beginning of the End of Europe

Reminder: The second Week in Words web seminar is this Thursday, at 9:00pm EST. It is of course free to all. The registration link is here. Hope to see you there! —GL

Yesterday, the European contagion spread to Italy and Spain. The sovereign debt of those two countries swooned—for no discernible reason.

No discernible reason whatsoever: The Italian and Spanish bond markets just sort of . . . plopped, like when a learning-to-walk toddler suddenly plops on his behind? Exactly like that: For no reason whatsoever.

Please select the straw you think
broke the back of the eurobond markets.

The only conclusion that I can draw from this Monday swoon is that we’ve hit the tipping point: This is the start of the eurozone endgame. It is now only a matter of time before the eurozone breaks apart. Therefore, get back in your seats, buckle up, and brace yourselves good—‘cause it’s gonna be a bumpy ride.

Let me explain my thinking:

For those of you who somehow have missed out on this movie: Europe has been in trouble because the nations of the periphery—Portugal, Ireland, Italy, Greece and Spain, the so-called PIIGS—have massive sovereign debts which they simply cannot pay.

Read more »

The First Week in Words

To my Gentle Readers
and Kind Fans,

Technology is a wonderful thing.

Because of the web seminar technology—and because of the support of the Strategic Planning Group Members—I'm starting a new regular feature today:

The Week in Words
The concept is simplicity itself: Every week, I'll have a free, live web seminar, where I’ll discuss the major news events—and what they mean.

What’s more, I'll be able to take questions from the audience—live.

This Thursday, I’ll be discussing the turn in the Dominique Strauss-Kahn case, and what it might mean for French politics; the Mulligan Mortgages that the banks are quickly, quietly trying to push through—and the reasons why; and finally, the Greek bailout, the ratings agencies, and what it all means for the European situation.

In the future, I’ll be having guests and open discussions in The Week in Words. The show will last 90 minutes, including question-time, and it will be every Thursday, at 9:00 pm EST. The registration link for this Thursday’s broadcast is here.

Do check it out—I hope you enjoy it, and if you do, I do hope you’ll become a regular attendee.

Until then, all the best,

GL

If you are interested, do check out The Strategic Planning Group, and see what it’s about.

“Dream A Little Dream”: How Long Would It Take To Pay Off The U.S. Federal Government Debt?

Let’s dream: Let’s imagine that the American political leadership decides to get serious about U.S. Federal government debt reduction—crazy as it may sound.

“Porcus Washingtonianus”:
Recently discovered new species,
native to the District of Columbia.

Actually, that’s too crazy. The American political leadership will never “do the right thing” with regards the deficit. After all, last spring, the American political leadership couldn’t agree on a measly $50 billion worth of cuts—a mere 1.4% of the total Federal government budget.

Okay, so in order to give our daydream a veneer of verisimilitude, let’s pretend instead that the members of Congress and the president are the victims of a cunning biological terrorist attack—they are infected with truly massive doses of both the Responsibility Bug and the Austerity Virus.

And then—under the unnatural effects of these sneaky terrorist pathogens—the American political leadership decides to cut the deficit outright, and start retiring the national debt.

Yeah: That’s much more realistic.

How much would they have to cut, in order to pay off the national debt? And how long would it take, to retire that national debt in its entirety?

Well, in order to figure this out, first they’d have to get honest about exactly how much is the U.S. Federal government’s debt. (Honesty is a perverse side-effect of the Responsibility Bug and the Austerity Virus. Scientists are working feverishly to try to stop this honesty stuff.)

Total outstanding Treasury debt is $9.7 trillion—but that’s not the entire Federal government debt. To those $9.7 trillion, you have to add another $4.6 trillion, which corresponds to “intragovernmental holdings”—basically IOU’s or markers the Federal government has put in the famed “Social Security lockbox”.

Thus the total Federal government debt: $14.35 trillion.

Read more »

IBG–YBG: Owning vs. Managing—Democracy vs. Kleptocracy

There’s a saying in Chile: “La vaca engorda bajo el ojo del amo”—“The cow grows fat under the watchful eye of the owner.”

Are you keeping an eye on her?

I bring up this saying because of a financial scandal we’re having down here: There’s a retail chain called La Polar—fairly big, catering to lower-middle- and lower-income consumers—that’s been caught cooking the books.

Ordinarily, a financial scandal in a second-tier retailer in an out-of-the-way Latin American country doesn’t rate much of a reaction. A shrug, maybe, but that’s about it.

However, it seems to me that the La Polar scandal illustrates something not just about corporate governance, but about political governance as well. And not just in Chile—more to the point, it reflects corporate and political governance in the United States and Europe today.

This trivial financial scandal reflects why the political and economic leadership of both Europe and the U.S. are not acting in the long-term best interests of their countries. Rather, they are acting in the short-term best interests of themselves—to the detriment of the nations they are responsible for.

The reason is simple: IBG–YBG.

Let me recap the scandal first.

Read more »

If Greece Defaults, What Happens to Portugal and Ireland—and Spain?

So it looks like Greece is about to go down the toilet.

What the Eurocrats Think of Greece

Last year, Greece got a bailout—so this year (wouldn’t you know it), they want another.

But it’s looking like France, Germany, Holland and the UK are all balking at the reality of having to save the Greek’s hide once again. Boris Johnson, the flamboyant Mayor of London, openly called for Greece to exit the euro in an op-ed in the Telegraph. Several of the participants in the negotiations are asking for Greece to make deeper austerity cuts first, before getting more bailout money—

—and of course, the Greeks won’t do that: Their population won’t stand for any more austerity measures, as they believe (correctly) that the reason Greece is in the hole it’s in is because rich people shirk their obligation to pay taxes. Also, the Greek people are getting handouts left and right from their government—paid for with deficits and debt.

So no European bailout, no money for Greece to continue funding its government.

So like I said, Greece is about to go down the toilet.

So now that we can, we have to step back, look up, and figure out what’s coming up next on the horizon, once Greece defaults.

The answer is obvious: Portugal, Ireland and Spain are coming up—and coming up fast.

Specifically, Portuguese and Irish debt: As of this writing, the 10-year Greek bond is yielding a staggering 17.34%. But the Irish 10-year bond? Safe as houses, you ask?

Read more »

I’m Back

Ignore her innocent look: It was all Claire's fault.

Dear Gentle Readers and Kind Fans,

Due to circumstances beyond my control, I’ve had to lay off the writing of the blog for the last couple of weeks.

Some people have complained that, now that I’m running The Strategic Planning Group, I don’t have time for my regular blog.

Au contraire. SPG had nothing to do with my forced absence from the blogosphere.

The reason I was out? Personal stuff . . . mostly having to do with girlfriends and bitches. Literal bitches: My dog Claire has had cancer. I’ll post about her over the weekend.

But I’m back—and will be posting regularly for the foreseeable future.

Thanks for your patience.

GL

Europhrenia

According to the dictionary, schizophrenia is “a long-term mental disorder of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”

Read up on it.

In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control.

In the one hemisphere of this divided brain, the political/financial leadership is convinced the European union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.

In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integretation “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.

Now, like a lot of schizophrenics, europhrenia has been latent over the past dozen years—since the 1999 monetary union, as a matter of fact—because everything’s been going great guns.

This is natural—and completely predictable: You ever see a schiphrenic have a break-down when he’s happy, high, and just got laid? No you do not—he only has his little “episode” when he’s stressed.

Same with europhrenia: Everything was copacetic between 1999 and 2008—though there were signs of the disease. In fact, lots of unmistakable signs of europhrenia:

Read more »

SPG Supplement: Is Farmland A Smart Hedge Against Inflation?

This piece originally appeared in the Strategic Planning Group, as a Supplement exclusively for Members. It has been edited for content.

So recently, the New York Observer ran one of its snooty, fawning pieces about hedgies in New York.

“So you’ll give me 2% of your money up front,
then 20% of any winnings,
plus you’ll eat all the losses on my bad bets:
Isn’t that a great deal I’m giving you?” 

Hedgies—hedge fund drones, essentially used car salesmen dolled up in Paul Stewart suits—are morons, for the most part; though they do display a certain rat-like cunning of the low-IQ variety.

That sharp-toothed rodent cunning was on display in the Observer story: These hedgies were boasting about buying farmland left and right, as a hedge against inflation.

So: Is farmland worth buying as a hedge against inflation?

This is a reasonable question.

Bottom line, the answer is: No.

The reason, however, is worth examining in some detail, because insofar as farmland is concerned, there would be a period of time when it is a clever investment, and then a point after which it would be a terrible investment. And as with everything in life, the dividing line between the terribly clever and the terribly stupid is as smeared and undefined as roadkill on an Interstate.

Read more »

The Money In Blogging

Some readers have criticized me for starting up The Strategic Planning Group.

They object to the fact that it’s a paid site, closed to non-members. One reader wrote, “It's a pity you did not find a way to finance it using advertising—I think you would have retained a larger readership, which in the long run keeps your profile higher.”

Not exactly a $ sign.

Well, see, at the end of the day, it’s not about keeping a high profile—for me, the motivation is to write whatever I want, and earn enough from it so that I can continue.

And that just doesn’t happen through advertising alone.

Let me make an example out of my own situation: My site is one of the more popular economics and finance sites on the web. To put numbers to that claim: In April, I had an average of 13,760 pageviews per day, and an average of 7,167 unique visitors. In May so far, I’ve had 12,850 pageviews per day, and 6,970 unique visitors per day. (At the bottom of this page, there’s a link so that you can verify my stats.)

According to Gongol’s EconDirectory, those figures put me in the Top 10 of econ and finance blogs—very impressive, you would think.

However, the advertising income I have earned from these numbers is nowhere near what would be commensurate with that readership.

Read more »

“It’s On Like Donkey Kong!”—SPG Is Here

To all my Kind Readers & Wonderful Fans:

We call him Fred, by the way.

This past Wednesday, I launched my new website:

The Strategic Planning Group.

It was not a full-on, wall-to-wall, mass-market, throw-everything-at-it-including-the-kitchen-sink sort launch—quite the opposite, SPG’s launch was more on the QT than the rah-rah!

But even so, the response has been overwhelmingly positive, which is both thrilling, and tremendously satisfying—satisfying in the exact sense of the word: Of achieving what I had set out to do.

SPG isn’t a Blogger Blogspot, thrown together casually, as shaggy as an English sheepdog—on the contrary: The Strategic Planning Group is a polished, carefully built site, the product of several months of work and research, quite a bit of money, and conversations with dozens of experts, both in computing and in economics.

In short, I wanted to put together a tight, polished site—and judging from the Members’ reactions, I think I succeeded.

So to everyone who has joined this exciting new project, I just want to say: Thank you, and enjoy the adventure.

To those who are thinking about joining, I say: Good—better to overthink a decision than to not think about it at all.

And to those who didn’t know about SPG but want to find out more, then go check out the Membership Preview Page and FAQ.

Like Pynchon says: Keep cool, but care.

GL

  

  

SPG Supplement: Is the Gold/Copper Ratio Predicting A Drop In the S&P?

To give my regular readers a taste of what’s on my Strategic Planning Group site, here's this week’s Supplement—though a few days after SPG members got it:

People are always talking about the silver/gold ratio—but the copper/gold ratio seems to be much more predictive of market trends.

My friend Michael Hampton has this very interesting chart—check it out:

The top chart is a ratio of copper-to-gold prices. The bottom chart is of the S&P index. If you notice the timeline, you’ll see the chart covers the last three years.

Read more »

What Do You Think?

Here’s a presentation video for my new site, the Strategic Planning Group, which will be launching (if all goes well) around next Monday.

What do you all think?



So is it— smart? stupid? agree? disagree? definitely would join? wouldn’t join on my life?

Be as frank as you’d like—I want your honest opinion.

GL

P.S.: Oops! Forgot to make the video public—now it is. Enjoy!

Best Description of the Mortgage Mess EVER

Check out this hour-long interview with William Black—in fact, listen to it twice. He explains simply and straightforwardly how the mortgage fraud was carried out:

Fiscal Spending—The Steroids of GDP

Last week, first quarter GDP numbers came out—they weren’t pretty: GDP grew at a pace of 1.8% per year, during January through March. These figures are supposed to be adjusted for inflation. But if you think as I do that the Bureau of Labor Statistics is off in its inflation estimates, then at this pace, the American economy is probably contracting.

Body-builder, after a round of
Keynesian steroids—
I mean, “stimulus”.

Apropos of the announcement, Brad DeLong said, “Contractionary fiscal policy is contractionary.” Andrew Leonard at Salon added, “When you cut government spending in a slack economy, you practically guarantee a slowdown.”

DeLong and Leonard presuppose several things by these statements. One, of course, is that there have actually been cuts in government spending. Two, that the GDP number would have been better if there had simply been more government spending—so therefore, anyone opposed to increasing government spending is also against increasing the GDP.

But the third assumption they make is the assumption I’m interested in discussing: The notion that the GDP number is something we always want growing. The notion that a positively growing GDP number is always and with absolute certainty the thing we want most, as a society.

First off, let’s put away DeLong and Leonard:

Read more »

Sorry, But I Don’t Believe This

(Before I begin, I just have to say: Oh boy—here I go really stepping away from the shores of the mainstream.)

When the Bolivian Army killed Che Guevara in October 1967, they displayed his body as proof that he was indeed dead. The Bolivians in fact staged the body so that ordinary people—and the world’s journalists—could get a good view of the corpse, up close and personal.

Ernesto “Che” Guevara’s body on display,
October 1967.

The attached photograph, grisly though it may be, is one of hundreds taken of Che’s body. It—along with the pictures and testimony of hundreds of journalists and ordinary people who saw his corpse—puts to rest any notion that Guevara somehow survived—which of course was the whole point: The Bolivian Army wanted there to be no doubts that El Che was really dead.

My readers know I don’t truck in conspiracy theories. I believe Elvis is dead, I believe Paul never died, I believe 9/11 was a terrorist incident, and I believe Neil Armstrong did in fact land on the moon.

But I don’t believe Osama Bin Laden was killed over the weekend.

The story goes this morning that Bin Laden was tracked down to a multi-storey compound in the middle of the Pakistani hinterlands, where he was shot twice in the head by American Special Forces. These soldiers then took his body, and buried it at sea.

That’s the story. But I don’t buy it.

Just to be clear, I do not believe Bin Laden is still alive. I believe what a lot of intelligence analysts have been privately saying for a long time now: That Bin Laden died of kidney failure in December 2001, and that he was buried by his followers in an unmarked grave in the mountains between Afghanistan and Pakistan.

Read more »

The Strategic Planning Group

Sorry for the drought of posts.

I’ve been going a little crazy—but good crazy—prepping for the launch of my new site:

It’ll be a place where I’ll be analyzing black swan events.

The basic question we’ll be asking is, What happens if ______? [Fill in the blank with something the mainstream says is totally unlikely and indeed, impossible—but which just might come true.] 

What happens if China’s debt bubble blows up, and the country sinks into a revolution. What happens if the eurozone breaks down, and member states begin to leave the monetary union. What happens if the Federal government starts forcible conversion of retirement accounts into Treasury bonds.

These are some of the questions we’ll be discussing at the Strategic Planning Group, in the coming weeks. 

But it won’t just be a place to daydream about scary/cool possibilities—it’ll be a place where there’ll be practical, actionable ideas as to what to do during these potential crises. Ideas you can use. Members will not only get a précis of potential crises—they’ll also get clear indications of the tell-tale signs that the crisis is coming, and what to do to prepare, if and when the crisis hits.

Think of it as your own private contingency planning group—hence the name: The Strategic Planning Group. 

The site will be launching the week of May 6—I'll give you all a heads-up when it’s online. At the launch of the site, there’ll be two complete Scenarios: “Hyperinflation in America”, and something I’m calling “Exit America”. 

I’m very excited about “Exit America”. In this Scenario, I discuss what happens if the United States becomes unlivable.

What would happen if—because of environmental, social or economic reasons—it became impossible to remain in America. What would you do? How would you protect your family, and your assets? Where would you go? How would you get there?

In “Exit America”, we first analyze the various reasons that would make life in America intolerable, and then analyze the best places to move to—as well as how to get there. Hint: Most tropical islands don’t fit the bill. In “Exit America”, I’ll explain why. 

“Exit America”—like all the Scenarios at SPG—is a combination of written analysis and audio-visual material, as well as web-seminars and audience interaction: A full-spectrum learning unit. 

New Scenarios will appear every six weeks or so. Between each Scenario launch, SPG will present featured guests, Scenario updates, and live web discussions about relevant topics—content that will be exclusive to members.

Coach Wooden said, Confidence comes from being prepared. That’s the whole idea behind the Strategic Planning Group:

Being prepared. 

I think this is not only a cool project, but a worthwhile project as well—and I do hope that some of you, Dear Readers & Kind Fans, will join me in this exciting new adventure.

All the best,

GL

Shakedown Nation

True story: Harold & Maude are a forty-something couple with two teenaged kids. Both are educated, both work in IT, both are fairly sophisticated, financially speaking. 

The Road to Hell, by Paul Stevenson.

Back in 2003, they bought a vacation condo, in Mono County, California—you know, where Mammoth Lake and the Mammoth ski resort are located, right next to Yosemite National Park. They bought the condo in mid 2003, then flipped it later that same year—they closed escrow the first week of 2004, with every t crossed, with every i dotted. 

They went on with their lives: Work, vacations, kids, school, job, carpool—same-old-same-old, just like millions of other ordinary citizens. 

Then one day in March of this year, they get a letter—a pretty frightening letter, actually. 

Read more »

Max & Stacy: Guerrilla Fimmaking In Ireland

Max Keiser and Stacy Herbert were in Ireland recently—and did a little guerrilla filmmaking. I think it’s outstanding—and definitely worth watching.

I told Stacy so, and she wrote back:

[W]e totally did this on our own. Self-financed, shot and edited. I wanted to see if we could do it and we gave ourselves only 24 hours in Dublin as we wanted to see if we could do something akin to war reporting, just parachute into a city and get an impression of the battle lines from the actual people. So, from our hotel, we announced via twitter that we were in town and within half an hour about 15 people had showed up and another 30 within the hour. It was fun making, but I was very nervous waiting for the response . . . !

No need to be nervous—their little film is powerful and memorable, and not because it’s bombastic or over-the-top. On the contrary, their piece is low-key, low-to-the-ground—human.

I wish they’d do more of these.

Here’s part i. After the jump, part ii:



Read more »

What’s Really Worrisome About Treasury Debt: Not Its Rating—Its Interest

So on Monday, Standard & Poor’s cut its ratings outlook for U.S. sovereign debt—and the markets had what can only be described as a tizzy. 

Stocks fell—commodities rose—I noticed things were off when my gold ticker shot up a full percentage point in under sixty seconds. Yikes! (Well, actually, as far as my own portfolio goes, it was more like, Yeay!)

“Not as sexy as a naked chick, I know, I know!”
The Fed Funds Rate, 2001–2011.
(click to enlarge)

Tons of people started scratching their heads, stroking their chins, and pompously wondering What It All Means.

Oh brother. Like Capt. Willard said: The bullshit piles up so fast, you need wings to stay above it. Most of the navel gazing was a waste of time—the lone discussion that I’d recommend was the New York Times’ “Room for Debate”, which more or less summed up smart-money thinking on the S&P announcement. (Paywall, but if you really want to read it, refresh the page, then stop the refresh before the page fully reloads.)

My own thinking is that the whole S&P announcement is meaningless—literally a non-event. 

What really matters is something people are starting to consider, as inflation begins to rise, and which the S&P announcement alludes to: The colossal interest payments on the U.S. fiscal debt. 

First, let’s put away the S&P nonsensical non-event: 

Read more »