Comments on: MUST READ: DID THE NATION OVERDOSE ON DEBT?

By: Evelyn Guzman

Evelyn Guzman — Sat, 14 Nov 2009 13:29:00 +0000

With all that I read from this article, I still cannot get my head around the investing process. I am still stung and concerned that if I bought more stocks, they would be mismanaged to the point they won’t earn money anyway yet despite this the CEOs are rewarded with big bonuses. I say that if a small investor does not get any return from the investment, no CEOs or any of their underlings should get bonuses for a job well done. What job is that if the investor is not getting any return?

Evelyn Guzman
http://www.debtchallenges.com (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.)

By: SpiderTrader

SpiderTrader — Fri, 13 Nov 2009 18:22:31 +0000

Maybe you’re right. But the move in gold appears unsustainable to me given the low inflationary environment and technicals. TPC is right though. I will have to revisit the trade early next week since it appears as though we’re making new lows in the dollar.

By: Anon

Anon — Fri, 13 Nov 2009 18:03:57 +0000

Playing the $ bounce IMHO is suicide unless its a pure short term trade. A trade which u may lose 5 times before winning 1. $ is a secular short due to the long list of issues. Which means real assets inflate regardless of fundies

By: TPC

TPC — Fri, 13 Nov 2009 17:34:32 +0000

Dollar index hitting new lows as we speak. You gonna hang in there with that trade?

By: SpiderTrader

SpiderTrader — Fri, 13 Nov 2009 17:21:51 +0000

Right back where we started. EUR approaching $1.50 again. This can’t last. Foreign countries will only allow the dollar to fall so much.

By: Anon

Anon — Fri, 13 Nov 2009 16:50:52 +0000

Gold bouncing back.

By: DD Tuttle

DD Tuttle — Fri, 13 Nov 2009 16:44:02 +0000

At the moment the real problem is NOT government debt, but private debt. Collectively, Americans have borrowed $42T, which dwarfs the $1.4T deficit, or the $2T the Fed has printed. Indeed, debt deflation has wiped out 20%-30% of the assets backing that $42T, for a loss of $8T – $12T. In fact , government’s borrowing is intended to keep the money supply from falling into a deflationary spiral.

I do not agree that it should be targeted at banks and financial operations. Government spending should be going into the general economy, where it can pay down debt and save jobs. It all ends up in the banks no matter where you spend it; at least have it do some good before it gets there.

The whole argument over inflation or deflation is based on the sizes of total debt: $42T for the private sector, and $12T for the public sector. The bigger number is in the drivers seat right now. It will take something like 20 years to pay down the private debt to a sustainable level. At that point the public debt may be larger than private debt, and might be the thing to worry about. Japan did this. They “transfered” private debt to public debt, so far without spectacular results.

Of course the government has two unfunded liabilities, as the are euphemistically called. Social Security and Medicare. Medicare is simply unfunded, but social security had been running a surplus due to the baby boomers. The government simply spent all that, so it now constitutes an interest free loan of unknown size. These will be on the order of $50T and will be repaid over 30 years or so. As this really take hold government debt will certainly grow to be larger than private debt, Then you can worry about how government spending will harm the economy.

By: DanH

DanH — Fri, 13 Nov 2009 16:35:46 +0000

Excellent analysis. I wonder what their solution is, however? If Wells truly believes we should take the liquidity out of the market it likely means the economy will suffer. It’s almost an Austrian outlook from a major Wall Street bank. Curious indeed.

By: The Finn

The Finn — Fri, 13 Nov 2009 16:31:28 +0000

Agree.I think this Baby Boom generation might be a problem in many countries.

Please don’t show this report to the market, it tends to go up on bad news.

By: SpiderTrader

SpiderTrader — Fri, 13 Nov 2009 15:55:56 +0000

Great data. It’s nice to see some analysts at a big bank worried about government spending.