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Anthis
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The US deficit myth

November 4th, 2009, 2:22 pm

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: BullBearQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: BullBearPeople are also happy to buy US debt... They even paid a negative yield on a T-Bill on March... Remember?Yes, and many people eagerly accepted low yields on ARS and look what that got them. There was a massive flight-to-quality in early 2009 and T-bills seemed like the safest and most liquid instrument in the world. In essence, T-bills were the cream of the crap at that time. Whether US debt will retain it's favored spot in the pantheon of instruments remains to be seen.I'm not saying to buy T-bills only. No asset is risk-free!!! There's no such thing as a risk-free asset.I like the CNBC measure a lot!1. They are reporting external debt. External debt is external debt.2. All external debt - public and private - matters.External debt must be a measure of how much debt a country (public and private sector) owes to foreigners.1. Yes, so what? Debt is debt, whether external or internal.2. Huh? I hope you mean to say 'all debt matters'. Otherwise, are you suggesting that the debt held by the country's own citizenry/corporations doesn't matter or matters less than that owed to foreigners?In this external debt figures are accounted the billions of deposits in Cayman and Swiss banks from all over the world? If yes...long live external debt...
 
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BullBear
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The US deficit myth

November 4th, 2009, 2:32 pm

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: BullBearQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: BullBearPeople are also happy to buy US debt... They even paid a negative yield on a T-Bill on March... Remember?Yes, and many people eagerly accepted low yields on ARS and look what that got them. There was a massive flight-to-quality in early 2009 and T-bills seemed like the safest and most liquid instrument in the world. In essence, T-bills were the cream of the crap at that time. Whether US debt will retain it's favored spot in the pantheon of instruments remains to be seen.I'm not saying to buy T-bills only. No asset is risk-free!!! There's no such thing as a risk-free asset.I like the CNBC measure a lot!1. They are reporting external debt. External debt is external debt.2. All external debt - public and private - matters.External debt must be a measure of how much debt a country (public and private sector) owes to foreigners.1. Yes, so what? Debt is debt, whether external or internal.2. Huh? I hope you mean to say 'all debt matters'. Otherwise, are you suggesting that the debt held by the country's own citizenry/corporations doesn't matter or matters less than that owed to foreigners?The table is about external debt! External debt is how much a country owes to foreigners.Domestic debt? Dunno the figures. But it's their money. As long as there's no hyper-inflation or deflation that's fine. What are the figures on other countries? And don't forget how large is the US GDP relative to other countries... And factor in expected growth.Bottom line is all about confidence! The gold crowd wants to ruin confidence and promote panic. Panic/Confidence crisis is the biggest threat to our system (the actual world economic system).
Last edited by BullBear on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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Martinghoul
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The US deficit myth

November 4th, 2009, 2:48 pm

QuoteOriginally posted by: BullBearQuoteOriginally posted by: MartinghoulQuoteOriginally posted by: BullBearQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: BullBearPeople are also happy to buy US debt... They even paid a negative yield on a T-Bill on March... Remember?Yes, and many people eagerly accepted low yields on ARS and look what that got them. There was a massive flight-to-quality in early 2009 and T-bills seemed like the safest and most liquid instrument in the world. In essence, T-bills were the cream of the crap at that time. Whether US debt will retain it's favored spot in the pantheon of instruments remains to be seen.I'm not saying to buy T-bills only. No asset is risk-free!!! There's no such thing as a risk-free asset.I like the CNBC measure a lot!1. They are reporting external debt. External debt is external debt.2. All external debt - public and private - matters.External debt must be a measure of how much debt a country (public and private sector) owes to foreigners.1. Yes, so what? Debt is debt, whether external or internal.2. Huh? I hope you mean to say 'all debt matters'. Otherwise, are you suggesting that the debt held by the country's own citizenry/corporations doesn't matter or matters less than that owed to foreigners?The table is about external debt! External debt is how much a country owes to foreigners.Domestic debt? Dunno the figures. But it's their money. As long as there's no hyper-inflation or deflation that's fine. What are the figures on other countries? And don't forget how high is the US GDP relative to other countries...But that's EXACTLY my point... The table about 'external debt' tells only one side of the story and is misleading. Why do you insist on looking only at the debt that's owed to foreigners? What's so special about it? It's similar to looking at the short side of a futures mkt and saying that there's a large aggregate short position out there. As to the GDP, its size doesn't matter precisely because you're looking at the ratio of debt to GDP.Suppose I give you two hypothetical countries, A and B. Entities (both public and private) in country A owe a total of $10, of which 50% is held by foreigners. On the other hand, entities in country B owe $100, of which only 1% is held by foreigners. Let's say, for simplicity, that their nominal GDP is the same.Does it make you happy that country B is gonna appear lower on the CNBC 'external debt' list than country A? Which country, in your view, is more 'leveraged'? BTW, in response to your original post, EUR is indeed a laggard in the devaluation race to the bottom, simply because it's a lot harder to devalue the EUR.
Last edited by Martinghoul on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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BullBear
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The US deficit myth

November 4th, 2009, 2:54 pm

Domestic debt is funded by savings and household assets.People work and produce wealth. Just increase production and put people working. It's all about quality products, technology, innovation, growth, marketing, exports/imports...What matters is how much wealth you can create. Even if you print some fiat money now to replace the private sector that got disfunctional you burn it later. It's just a transfer from private to public and then public to private.It was a crisis of confidence and panic and they're trying to do it again with commodities, gold and the EUR/USD. Our system needs confidence otherwise it will go bust! The Gov can use taxes to balance things and repay any loss on the public sector due to the crisis.
Last edited by BullBear on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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BullBear
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The US deficit myth

November 4th, 2009, 3:02 pm

us-domestic-debt-growing-slowest-since-1950 Regarding Gold. Can the Central Bankers replace Gold for Portuguese and Italian marble or granite? There are some really rare types of granite and marble here. I think some of them are even more rare than gold. I remember there's one brazilian type of granite that is probably the most rare stone in the world. Tell Central Banks to use it. Why Gold?What will people do with gold on the long haul? Will they eat gold bulions? Maybe they'll wipe their ass later on gold bulions, dunno!
Last edited by BullBear on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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rmax
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The US deficit myth

November 4th, 2009, 3:17 pm

QuoteOriginally posted by: BullBearDomestic debt is funded by savings and household assets.People work and produce wealth. Just increase production and put people working. It's all about quality products, technology, innovation, growth, marketing, exports/imports...I am not an economist, but isn't it about what is in the ground that you can extract and then manufacture as well as the other things? I thought the US did not have enough natural resources to pay-off the debt?
 
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BullBear
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The US deficit myth

November 4th, 2009, 3:26 pm

QuoteOriginally posted by: rmaxQuoteOriginally posted by: BullBearDomestic debt is funded by savings and household assets.People work and produce wealth. Just increase production and put people working. It's all about quality products, technology, innovation, growth, marketing, exports/imports...I am not an economist, but isn't it about what is in the ground that you can extract and then manufacture as well as the other things? I thought the US did not have enough natural resources to pay-off the debt???? Holy *** ... Not at all!What matters are future cash-flows + the actual value already built in!If a country can sell tons of laptops for example it will also pay-off its debt. If you sell textiles, natural resources, fish, machinery, ... it's the same. Its' all about cash-flows and supply/demand.
Last edited by BullBear on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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Martinghoul
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The US deficit myth

November 4th, 2009, 3:27 pm

QuoteOriginally posted by: BullBearDomestic debt is funded by savings and household assets.People work and produce wealth. Just increase production and put people working. It's all about quality products, technology, innovation, growth, marketing, exports/imports...What matters is how much wealth you can create. Even if you print some fiat money now to replace the private sector that got disfunctional you burn it later. It's just a transfer from private to public and then public to private.It was a crisis of confidence and panic and they're trying to do it again with commodities, gold and the EUR/USD. Our system needs confidence otherwise it will go bust! The Gov can use taxes to balance things and repay any loss on the public sector due to the crisis.Hmmm, but if we increase production, get people working, make quality products etc, we'll be able to easily repay all debt, whether external or domestic? What I don't understand is why you think money you have raised from your own citizens represents some sort of nicer, gentler or easier to roll debt?
 
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BullBear
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The US deficit myth

November 4th, 2009, 3:30 pm

martinghoul, it depends on what will the public sector use that money. Actually, in this case the FED was just trying to replace the private function in the economy and later transfer it when it becomes functional. There are assets and there's debt. You're only looking to the Debt side of the Balance sheet. What really matters is to grow your assets faster than you grow your debt under a safety margin that doesn't cause systemic risk. The problem were the Banks and what they did with our money.Lack of Supervision on the Banks/Firms/Individuals and harmful bonuses schemes, corruption, ... these are the problems that are not solved yet.Short-selling and derivatives should also be tackled very soon.
Last edited by BullBear on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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Martinghoul
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The US deficit myth

November 4th, 2009, 3:50 pm

QuoteOriginally posted by: BullBearmartinghoul, it depends on what will the public sector use that money. Actually, in this case the FED was just trying to replace the private function in the economy and later transfer it when it becomes functional. There are assets and there's debt. You're only looking to the Debt side of the Balance sheet. What really matters is to grow your assets faster than you grow your debt under a safety margin that doesn't cause systemic risk. The problem were the Banks and what they did with our money.Lack of Supervision on the Banks/Firms/Individuals and harmful bonuses schemes, corruption, ... these are the problems that are not solved yet.Short-selling and derivatives should also be tackled very soon.Yes, yes, agree with all that... Growth is great, debt is bad, growth will help pay down debt, and we all live happily ever after. I honestly see your point there.I am just curious as to why you (and other people, I might add) are so enamored of this CNBC 'external debt' notion. it really annoys me on a variety of levels, not the least of which is the fact that I live in the UK and own some gilts.
Last edited by Martinghoul on November 3rd, 2009, 11:00 pm, edited 1 time in total.
 
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NicolasQuant
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The US deficit myth

November 4th, 2009, 3:57 pm

Of course the CNBC figures are blatently misleading...Is is frightening that CNBC viewers don't see the point... I am truly astonished that people that give their opinion there may be so ignorant about very basic economic facts and figures and how easily they are misled.
 
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Alkmene
Posts: 301
Joined: January 18th, 2007, 10:19 pm

The US deficit myth

November 4th, 2009, 8:48 pm

QuoteOriginally posted by: NicolasQuantOf course the CNBC figures are blatently misleading...Is is frightening that CNBC viewers don't see the point... I am truly astonished that people that give their opinion there may be so ignorant about very basic economic facts and figures and how easily they are misled.Isn't it a general problem that anyone who needs to "view" news and information rather than "read" the news is clearly not as perceptive and, on average (with small standard deviation), on the ignorant side of things? There is no speed argument for TV on these matters.Alk
 
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sunra
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Joined: October 31st, 2009, 4:11 am

The US deficit myth

November 4th, 2009, 9:40 pm

just have a look at the off-balance sheet liabilities of the US and you'll see this country is more BK than any bank on Wall St...in fact here's a nice breakdown: http://www.usdebtclock.org/
 
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taneururer
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Joined: October 4th, 2005, 4:07 pm

The US deficit myth

November 4th, 2009, 10:02 pm

The question is this: given the debt load of the US, how can we explain the CDS market's spreads?5 CDS spreads:Germany: 20.7USA: 22.9UK: 52.4Japan: 63.5Spain: 72.7China: 82.2Brazil: 132.7Ireland: 144.4Russia: 188.8Three possible answers:1) The market believes that the US is still relatively credit worthy2) The market believes that the US will attempt to inflate itself out of trouble where other countries might actually default3) The market is pricing based on habits and historical factors (in other words, people are stupid)Others?
 
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friesenjung
Posts: 192
Joined: March 29th, 2005, 10:47 am

The US deficit myth

November 4th, 2009, 10:09 pm

a major one in fact4.) about all US debt is issued in USD and the US can simply print new bills if they're running out. Hence they cannot default on their outstanding debt hence a low credit spread is justified. please note that this is no longer the case for Germany, Spain and Ireland as their debt is mainly issued in EUR. (not entirely sure about the other candidates)Actually taking this into account 22.9bp for 5y US risk is VERY wide.
Last edited by friesenjung on November 3rd, 2009, 11:00 pm, edited 1 time in total.
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