Debt and Futures

A couple of guys just won the Nobel for Economics. We still have very high unemployment and these guys don't have a clue how to create jobs. One of them said he would sit on his money for a while. Sitting on money will not create a single job. Spending it will. The problem is two-fold: too much debt and the futures market. Futures are like the gambling aspect of the economy, really meant only for speculators, which means it creates nothing - no products, no services. When losses occur, someone is left holding the bag which then means a debt that goes unpaid and is written off. That takes money out of the economy without giving anything back in return. I'm only guessing, of course. Have a nice day.

Rich but poor

It came out suddenly that one of the richest countries in the world, Dubai, is having money troubles. Everyone has read from time to time that very ambitious and expensive projects have been underway in Dubai for many years. That country is like an exclusive club but on a global level. The news reported that Dubai might default on its debt of approximately 60 billion (it's probably much more.) That sent negative ripples through world money markets. hehehe Remember to live within your means - even very rich people go broke. This topless woman looks like all she has left is her necklace.

Indebted to China

Someone said that China is now the U.S.'s unofficial banker. They hold more U.S. Treasury bills than any other country. People who work at think tanks must be worried about this, though they are not saying anything - at least not in public. What would happen if the Chinese decided to cash in their Tbills? It has been said that when you make a bank your partner, the bank cannot afford to see you go bankrupt. They will therefore not cash all their bills at once. Perhaps they will opt for 100 billion at a time? The Chinese also converted all of their bills to one-year notes - from thirty year notes. I would not pretend to know why they did that. This topless woman does not know either.

DEBT

From a prescient newsletter: By Porter Stansberry: "This is how America ends – with the lie that we all can live at the expense of our neighbor and borrow endlessly. Rather than simply face a downturn in the economy, we plan to borrow trillions of dollars our children and grandchildren will be forced to repay. Rather than let all those people and institutions that took on too much debt (like GM) be liquidated and restructured, we plan to risk a hyperinflation. Rather than insist homeowners who can't afford their mortgages lose their homes, we would jeopardize the credit rating of the country. It is all madness. None of the government's bailout plans will solve any of the problems. The government can only shift the burden of the failures. Instead of bondholders and shareholders being wiped out, taxpayers are put on the hook. These actions will temporarily resuscitate the economy – but cause a permanent decline in the value of the dollar." If the first and second lienholders foreclose on the U.S. Treasury, we can all go wash dishes in China and Russia and Quatar and other foreign places in order to work off the debt to them. No problem.

They own us

From Yahoo! News: Dec. 29 (Bloomberg) – “The global recession is re-exposing fissures in U.S.-China relations that Treasury Secretary Henry Paulson spent more than two years smoothing over. Heightened tensions between China and the U.S. may worsen a contraction in world trade that already threatens to deepen and prolong the economic downturn. The friction comes as President-elect Barack Obama readies a two-year stimulus package worth as much as $850 billion that will require the U.S. to borrow more than ever from China, the largest buyer of Treasury securities.” Tell me something I don’t already know. I said this was the situation two months ago. I think Bloomberg is stealing from my blog!!!! Please. No matter what, the woman at left is optimistic. You can tell by the hemline.