RestonWeb

[Bob Bruhns]

Now the IMF is telling us, too. After a generation of deficit, that is getting much worse now, like two or three times what it was (which also was unacceptable) before the 2008 collapse - maybe it's time to stop living beyond our means? Maybe?

IMF cuts U.S. growth forecast, warns of crisis
Reuters, June 17, 2011, 9:25am EDT
Article

[RestonResident]

If you read Hank Paulsons autobiography (its in the Too Big to Fail movie, but I don't recall it in the book), he was in China during the 2008 olympics. The Chinese told him the Russians approached them about dumping US Bonds on the market, to force a government takeover of fannie mae and freddie mac (and to just cause trouble). The Chinese declined and then told him about it.

They basically said that our large debt made us vulnerable.

BTW, as far as our debt is concerned, the Chinese are not telling the entire story. This may seem counter-intuitive, but its basic international finance.

1. The chinese purposely undervalue their currency to improve exports.
2. This leads to alot of US dollars leaving the country.
3. In order to maintain their peg, they have to return those dollars to the US. if not the peg won't work and we won't have enough dollars to buy their goods.
4. They return the dollars to the US by buying our Treasury bonds.
5. This lowers the rate of our bonds (and in effect lowers the deficit since interest rates are lower).
6. mortgages rates are in large part based on the price of treasury securities (they are always a higher rate than treasury securities)
7. so the low interest is in large part due to our budget deficit.

Counter-intuitive, but first semester international finance. there are alot of books you can read on it. I added specific details to our case, but its true across the board.

Our trade deficit and our budget deficit go hand in. The chinese need us to run a budget deficit in order to peg their currency.

[Chester]

The Treasury and FOMC will never openly discuss how they manipulate the markets. Their approach has always been to deflect criticism toward outside forces.

It's come out in recently released transcripts from the 2002-2003 period that the Fed was manipulating treasury prices well before the open market purchases of the last several years. The Fed was buying and selling Treasury contracts to prop up bond prices and hold down interest rates.

Given that the Fed has been making massive direct purchases of treasuries and other assets in the last several years, one could easily surmise that more subtle or covert means of affecting asset prices have failed. Buying assets in the open is a last ditch effort which leaves the Fed open to public scrutiny, something they've always tried to avoid.

[stix]

It is troublesome that the Federal Reserve is a private banking cartel whose deliberations are largely carried out in secret and whose decisions are unaccountable to either the Executive or Legislative branch of the US government. I do not think there is any dispute that they played a major role leading to the 2008 recession that continues to cripple this nation today.

Unless there is a clear justification for this extra-constitutional unaccountable all-powerful body, it should be dissolved…
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[Bob Bruhns]

This is insane. We have to keep running up our debt like totally irresponsible lunatics, so we don't upset anybody?

U.S. must hike debt limit soon to avoid "shock": IMF
Reuters, June 29, 2011 1:11pm EDT
Article

IMF warns US of debt ‘shock’
Financial Times, June 29, 2011 5:57 pm
Article
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Government debt and deficits are robbing your children, your grandchildren, and your great-grandchildren. http://www.usdebtclock.org/