Home Forums Hunting & Shooting Hunter's Campfire All out humanitarian effort to Haiti?

Longbob, no apologies necessary here all opinions were what I was looking for.


Phil

I was just watching a documentary on the consequences of a 7.9 quake in the bay area of California a few day's ago. Something apparently just missed the last go around. It would make the Haiti incident and Katrina look minuscule. Loss of the delta would wipe out a good portion of the nations food chain, and most of Southern California's water supply. Not to mention the instantaneous damage and loss of life.

And in answer to another poster, YES I would hope help and aid would quickly arrive from all over the globe!

Phil

It's not really OT, since all of this aid has to paid for somehow and discussion on how that will be done are relevant; but if you want to continue this somewhere else, that's fine by me. I really don't think that we will ever reach agreement though, as we have totally different belief systems when it comes to economics.

There's that hope thing again.

What they are NOW showing on FOX coming out of Haiti is just horrific! They've given up on rescue now and are just moving Earth and ripped up structure. They are saying the smell of death is simply over-bearing. I sent money and supplies last night.

California earthquakes could be devastating, but we will have our real reckoning whenever the Yellowstone caldera (worlds largest known supervolcano) blows again. Happens about every 600,000 years, and is overdue. Lake Yellowstone has recently been lifting and shifting. May not happen in our lifetimes, but when it does, look out. Then we will be overwhelmed. Not only the immediate destruction, but our national agricultural capacity will be trashed.

yep, and if the building codes weren't sufficient, wish we had swarmed ashore earlier, and ensured proper enforcement. but, maybe it's cheaper to clean up after the mess??

This looks like a long one and I've got too many threads to read about guns. Suffice to say that I feel for those people down there and wish them well. I also completely agree with Mike's statement and was thinking the exact same thing when I read about it earlier today. Wtf? Are we giving them China's money or Japan's? Personally, I'm tired of politicians spending money on stuff that we can't afford. You can't give away something you don't have and the last time I looked, we weren't even anywhere near being flush, let alone having a surplus from which we could be charitable. Doesn't make sense.

Mike,

Once again your conclusions are wrong and the open market does not support you. Yes, the Fed does buy treasuries as one of their tools, but they are not buying the bonds, they are buying the bills and notes. They recently started concentrating on the notes which are 2 to 10 year maturities. This doesn't support the low rates for the bonds which extend beyond 10 years all the way to 30 years. We are issuing massive amounts of bonds (I wish we didn't have to) and they are being bought in massive amounts and the foreign buyers are leading the charge. The open market is telling us that these bonds are valuable and will be paid back.

Your comparison of entitlements to federal debt is also wrong. An entitlement can and will be modified unlike debt covenants. Entitlements are NOT subject to open market pressures. In a prior post I purposely pointed out that Social Security was an entitlement and it was to be funded by payroll taxes. Two important points here. One that its very existence is by creation of an entitlement and its funding is involuntary (payroll taxes vs. open market purchases via auction like the treasury market).

An entitlement can and most likely disappear as many suspect Social Security will for many of the younger generation. This is a widely held belief and has zero impact on the credit rating of the United States. It has a moral impact and that is all negative, but again the open market supports my conclusion.

You mention that we have a steep yield curve. And you also state that it is 285 basis points. This is where I think you are just throwing out stuff. It is not a steep yield curve, but a normal yield curve. For several years we have been in a flat to inverted yield curve where short term rates were as high as long term rates. The only normalization to the curve was when the short term rates dropped so low as compared to the 30 year.

Currently, we are at approximately 4.63% for the 30 year and it has been in a fairly tight range of 3 to 5% for a long time. But so has the short end. The curve normalized when the short term dropped from the 4 to 5% down to a current .02% on 1 mo. and .34% on the 1 year. Your comment of 285 basis points (2.85%) represents exactly what in relation to the yield curve?

Your comments about my studies and "bowing down" to some altar are not accurate, not necessary, and do not add to the discussion.

To add to the open market supporting my conclusions about the credit rating of the United States versus a country that is in imminent default as you are suggesting then you should look back to 1998 and Russia's default. The open market was telling us that their debt carried a tremendous risk of default by simply looking at the interest rate on the debt. I believe it was in the 40% range which would put it roughly 10 times our current rate on the 30 year.

I am catching up on my reading and I found this a bit interesting. One of the reports that I read is a Global Risk Report on Sovereign Debt. It briefly lists the riskiest debt by country and the safest debt by country. This report is as of the 4th quarter of 2009.

The United States dropped from number 3 to number 7. This ranking is based on the current credit default swap on the corresponding country's 5 year bond. Basically, it is what it would cost to insure that bond against default. For example if you owned $10,000,000 of 5 year US Treasury bonds, it would cost $3,400 for a CDS contract to insure against it defaulting. This is a record high, but it is still fairly cheap insurance.

To put this in perspective, it would cost $1,560 to insure the 5 year Norway bonds which are considered the safest sovereign debt by the prevailing CDS rates. Switzerland which currently carries a higher credit rating than either Norway or the United States, according to Institutional Investor, would cost $4,570 to insure their 5 year bond.

On the riskiest end of the scale, it would cost $126,500 to insure the bonds from Venezuela. I think I would stay away from those.

The reason why we AREN'T like those 'other' countries is quite obvious, if you take the time to quit having fun, and doing WHATEVER you wanted, whenever you wanted to; get a grip; you were born with a spoon in your mouth; And a bunch of us have paid for it, me included; you people dont know a damn thing about freedom;
What do you think allows you to say what you think? Or do what you do! Obviously not your chicken ass!! you whimps need to get back across the sea; You all suck, and just you wait; You want to live in a socialist/communist state, then get the hell out of the U.S.A.;

Where did that come from?

This last summer while sitting there waiting for old faithful to go off this man sitting next to me who was about 80 years old said "I don't want to alarm you, but sometime in the next 10,000 years this whole area is going to blow - just a heads up".

The reason why we AREN'T like those 'other' countries is quite obvious, if you take the time to quit having fun, and doing WHATEVER you wanted, whenever you wanted to; get a grip; you were born with a spoon in your mouth; And a bunch of us have paid for it, me included; you people dont know a damn thing about freedom;
What do you think allows you to say what you think? Or do what you do! Obviously not your chicken ass!! you whimps need to get back across the sea; You all suck, and just you wait; You want to live in a socialist/communist state, then get the hell out of the U.S.A.;

I hope you're drunk and not just an idiot.

In your opinion my conclusions are wrong. The data shows something else. If you look at the link that I provided, it shows the most recent Treasury International Capital (TIC) flows. Far from tripping all over themselves to buy our long term debt, the data shows on line 21 that there has been a major decrease in foreigners doing so, from a high in '07 of $541 Billion to less than $9 Billion in the most recent auction.

Looks like a real rush to me.

They are however purchasing at the short end, which has much less exposure to devaluation and is more or less a cash equivalent. That is why the yield is mere basis points, as opposed to the higher rate on the long end. The Fed has no need to cover the short end.

The difference in the yields, or the curve, is important. It is important for two reasons; one is because the higher it gets on the long end due to this lack of interest at auction, the higher the carrying costs are, especially on the huge quantities of debt that are trying to be laid off. The second is because even though there is a bid at the short end, the lack of bid at the long end requires the coupon to be increased. This increase in coupon is held down by Fed Primary Dealers stepping in and purchasing the bonds, but it is creeping higher, which will eventually drag the short end higher. Since we need to roll over more than $1 Trillion on the short end, and fund a further $1.2 Trillion in new debt with much of it on that end too, any increase at all puts debt service that much higher. Even 200 basis points could move debt service from number three on the budget to number two in very short order.

You were correct, the 285 basis point figure I put out was incorrect, my bad. I got it from a secondary source. It is more like 374 bp between the 1 year and the 30 year, and 469 bp between the 1 month and the 30 year. These are historically low yields on the low end, which has caused some Money Market funds to "break the buck", requiring the Treasury to extend deposit protection to money market funds for the first time ever. I don't see how this is "normalizing" the curve. Look here for the data:

www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

Further, your assertion that the Fed has no need to "use its tools" to intervene at the long end has been disproven by tracking CUSIP data of 10 and 30 year bonds that have been purchased by Fed PD's and then bought by the Fed two or three weeks later. This is monetization. It is happening.

Another strange anomaly that presents in the TIC data is the miracle that Carribean banking interests are holding over $200 Billion of these bonds. That's more than Germany and Russia. Antigua and the American VI might be economic powerhouses, but to believe that they have the wherewithal to purchase more of our debt than Germany or Russia strains credulity. It is further evidence that the Fed PD's are buying and parking this long term debt because there is no demand. The same applies to the Household section of the Z1 report.

Regarding the entitlements not really being debt, I have to ask what you consider debt? Even though it isn't carried on the books, it is funded in the same manner as any other debt we have. All of the revenues in SS, Medicare, Medicaid, and .gov pensions are either paid out to current recipients through current receipts, or placed in a "lock box". Well, this lock box has been broken into and the funds have been moved to the General Fund for use by Congress to waste in buying votes. "Special" Treasury bonds have been issued to cover it. Even though there was no auction to sell them, they are there. This is known as a Ponzi scheme, and is illegal if your name is Madoff, but not if you're the Federal Government.

To believe that we are going to default on these entitlements is ludicrous. The Treasury and the Fed are going to create enough debt to cover it all, and it will be paid to the penny. Recipients might only be able to buy a cup of soup with their stipend, but it will be paid. Not to do so would cause a rebellion overnight. There will never be a reform or default of these entitlements because of politics, and every time it has been tried, the party who tried it had their a$$ handed to them. I give you Dan Rostenkowski and G.W. Bush as examples of that.

My statement about your studies are based upon your comments, and add to the discussion by showing point of view. You're correct, I don't know where you were schooled, but judging by your commentary on this subject, you seem to have a proclivity for the party line given by the Fed/Treasury, and the Keynesian or Monetarist schools of economic theory. If you're an adherent to the Austrian school, you have a strange way of showing it.

One thing I really don't like is that whenever I hear or see a recording of a Haitian they are angrily demanding that America hurry up and help them. Not an attitude that tends to move me to a whole lot of sympathy.

Not much difference than what happened in the south during Katrina. With family dieing in the streets before aid can get to them, I think anyone would ask all that are planning to assist to hurry up!

One thing that I would suggest and as also happened during Katrina, is not to limit those organizations you donate to by stipulating that those funds you donate are to go only to Haiti!

If you want to donate to these organizations, let them use the funds where and how they can best be used. Could very well be that there will be another disaster in a short time frame, somewhere else... And these organizations will be tied to spending their funds only in Haiti leaving them short on the next go around.


Phil

Mike,

This will be brief because I only have a little time and won't be able to cover all points thoroughly.

The major treasury purchases in 07 were a flight to quality coming from the stock markets to a great degree and pushed yields to their historic lows. Your conclusion on the long end of the yield curve is also wrong because it hasn't moved up significantly, rather it has stayed static and the short end has moved down to create the upward slope. Again, the open market is telling us that the US is not currently in bankruptcy or about to get there. Wasn't that the original challenge that I put forth?

Your conclusion that the low end of the curve is what caused certain money markets to break the buck is factually wrong. They broke the buck primarily because of the failure of Lehman Brothers and the massive amount of Lehman bonds in their fund. Also, money market rates were much higher at the time that they broke the buck. In the 3% range if I remember correctly because it was tossed around that the money market you are referring to settled at 97 cents and it was a near breakeven with interest for the share holders.

So defaulting or modifying entitlements like Social Security is ludicrous? How about the recent history of raising the retirement age for Social Security? How about the talk of means testing Social Security? Or privatizing Social Security? Not so ludicrous it sounds like to me.

All I have time for now. Gotta go.