Does anybody understand debt? Some - but not many. Today's post is less of my normal extended prose and more of an outline. I've been invited to speak at some writing classes here at the college and this is intended to serve as my speaking notes. Background: What have you heard? Krugman in New York … Continue reading Does Anybody Understand Debt?
Just a quickie to bring your attention to this, yesterday's close on the U.S. Government bond market as reported by Google Finance. Note the 10 year bond - less than 2%. Bond Maturity Yield (effective interest rate) change in points(percent) 3 Month 0.01% 0.00 (0.00%) 6 Month 0.04% +0.01 (33.33%) 2 Year 0.19% +0.01 (5.56%) … Continue reading US Government Bond Market & Interest Rate Watch – No Signs of Worry Over Deficits, Inflation, or Default
It's now Monday morning, Aug 8. It's been roughly 60 hours since S&P downgraded the rating on U.S. government bonds. In that 60 hours the media, particularly TV talking head channels, have been breathlessly awaiting what they felt was a certain market panic on Monday. Clearly interest rates would go up they said. They were … Continue reading The Market Shrugs Off Rating Downgrade, Market Is Worried About Real Economy.
Yves Smith at Naked Capitalism (an unusually good source of very in-depth, timely commentary) offers some strong evidence and analysis of how the S&P decision to downgrade the U.S. debt stinks. I've already talked about how it's really irrelevant at the economic level and how it's not likely to change things substantially. I've also written about how … Continue reading The S and P Downgrade Decision Stinks of Politics and Corruption.
Yesterday after the U.S. markets closed, Standard & Poor's downgraded their credit rating on U.S. government bonds. Previously, the U.S. government had enjoyed for over 70 years the highest possible rating: AAA. Now it is "only" going to be AA+. We should note that the other two major bond-ratings agencies, Moody's and Fitch's still rate … Continue reading U.S. Government Debt Downgraded by S&P. What a Farce. And Non-Issue.
A great graphic from The New York Times:
In the comments to my post on the extraordinarily weak 2nd qtr 2011 GDP numbers a reader asks for my thoughts about debt-to-GDP ratio and "how can we afford more stimulus"? Since my response will be a little long and others might be interested, I'll post it here. Reader AZLeader asks: Here are some other GDP … Continue reading But What About National Debt-to-GDP Ratio? Not a Problem, Really
Yesterday I took a stab at describing what the consequences of a government default might be and I added to it here. There's basically three lessons to take away from those questions. One, nobody knows now exactly what happens, especially in financial markets. Two, it all depends on the specifics of a deal or no deal … Continue reading What Happens If Debt Ceiling Is or Isn’t Raised – How It Plays Out (updated)
I've mentioned in many previous posts that government debt is really not like private debt. Instead government bonds are more like another type of currency or money. The key difference between government bonds and paper money is that bonds pay interest and money doesn't. That's about it. But it's a key point because government bonds, … Continue reading More on What Happens If Debt Ceiling Isn’t Raised
The Great Recession of 2007-2009, which has been morphing into a Depression, has been different from most recessions of the post-World War II era. It has been what economists call a "balance-sheet" recession. Normally (at least since World War II), recessions were the result of the central bank (The Fed in the U.S.) raising interest … Continue reading Private Debt vs. Government Debt