Debt ? What Debt ?

What a nice surprise: According to commentators from all across the political spectrum, the national debt is "only" 10.5 trillion and not the 14.3 trillion that is currently the maximum allowed. 
So what is congress and what are the rating agencies so worried about ? Government shutdown and default because we cannot borrow more than 14.3 trillion ? According to these specialists we have another 4 trillion to go before this dire outcome is to happen.
"The national debt has jumped to 69% of GDP this year, from 40% in 2008." 
This is what Martin Feldstein wrote in an opinion piece in the Wall Street Journal today and its just an example of similar recent utterances. 
What makes up the 4 trillion Dollar difference ? It's social security obligations, and it's only about 7% of the total estimated liability. It ended up on the US balance sheet because these are prior years surpluses that have been invested with the Treasury. What a fine investment when financial experts of all color can now claim it doesn't really exist ?
This surplus has been accumulated as the baby boomers entered their highest income years but are now beginning to retire and withdraw those same surpluses. Unless the government intends to stop Social Security, that surplus will have to be paid out over the course of the next 10 years and this "non-existing" debt will then be represented by publicly held Notes and Bonds.


Just 3 years ago, on July 24th, 2008, the debt limit was raised from 9.9 trillion to 10.7 trillion to have 800 billion available to bail out the mortgage insurers Fannie Mae and Freddie Mac. More than 4 trillion in additional debt in 3 years. Almost $30,000 for every taxpayer (140 million of them according to this source: http://www.taxfoundation.org/news/show/250.html)


Here's the link to the Feldstein piece :http://online.wsj.com/article/SB10001424052702303657404576363984173620692.html?KEYWORDS=martin+feldstein

Are European Banks Safe For Depositors ?

Since the "financial crisis"* started, I never felt that insured bank depositors were ever at any risk. Now there are reports that Greek citizens are withdrawing huge amounts of Euros from their local banks.
Their fear ? That they wake up one day and hold rapidly devaluing Drachmas instead of Euros.
Similar thinking seems to spread to other parts of the distressed Euro zone:
According to one of todays headlines, Irish residents trimmed their deposits in their banks by 9.1% year over year.

*Financial crisis is a misnomer: It is a bankruptcy that is not allowed to happen. In trying to avoid outright default, governments in the USA and Europe are, unfortunately, making the problem bigger and the eventual default much more painful.
How will the default manifest ? When the governments involved will issue intrinsically worthless paper to pay for their debts.

Is This Complicated ?

Where we are:
Money printing (QE2) to end in June.
Extreme deficit spending by the Federal Government has to end.
Interest rates are going up.
Stocks are trading at close to record P/Es.
Economic activity is slowing around the globe.
Where do you put your money ?
Stocks ? No. Bonds ? No.
Sell everything and wait for QE3 ? Maybe.

Who Is Howard Buffet ?

He is the father of Warren. He also was a 4 term U.S. Congressman. In 1948 he held this speech, titled :
Human Freedom Rests on Gold Redeemable Money:

http://www.fame.org/pdf/buffet3.pdf

Rumors (promptly denied)...

are hitting the news that Greece will leave the Eurozone and re-introduce its own currency. It would also declare bankruptcy.
In response, the Euro declines, US Treasury securities advance and gold initially sold off a few Dollars.
This could not make any less sense. Greece IS bankrupt. There is just no way that they can make their debt service at the interest rates that the market is demanding.
Since everyone but the European Central Bank knows this, what could possibly be the surprise?

Is The Commodity Rally Over ?

After silver crashed from 50 to 35 Dollars an ounce in just 4 days and crude oil dropped $10 per barrel and copper dropped below $4 today, many people again call the prior run-up a bubble and this the crash.
Although its certainly possible that we'll witness a pause for the price increases, like I mentioned a few days ago, I don't believe its anywhere close to being over.
The Dollar rallied strongly today and the Dollar Index gained almost 2%. Yet, was it the Dollar rising, or the Euro dropping ?
The European Central Bank met today and decided not to raise rates and left the impression that another hike will not happen soon. That tanked the Euro as it became clear that they're not much into inflation fighting either.

Funny Headlines From The Dow Jones News Wires :

"Geithner: No Prospect Of Change In Global Monetary System This Decade" (May 4,2011)
The following are all from Federal Reserve Bank of Dallas President Richard Fisher on May 4, 2011:
"Monitoring Underlying Inflation Closely"
"Many Executives Behind US Financial Crisis Are Now Richer"
"Fed's Recession Policies Were Unpopular But Worked"
"Fed Will Change Interest Rates When Time Is Right"
"US Was In Risk Of Something Worse Than Great Recession"

Well, I'm sorry, you're right: It's only funny in the "Newspeak" fashion of Orwell's 1984.