Tick, Tick, Tick: 130%

Greg sent in an article I won't recap, just tighten.  Basically, while we are all concerned that our Debt to GDP may reach the crisis mark of 90% in a year or two, it is actually 130% now.  Greece is only 124%. This is a brave new world for the U.S. and we are facing draconian events.  High inflation is certain; a deflation is becoming probable.  Either way, life as we deluded ourselves to accept as normal is coming to an end.

This is a tough scenario.  IF we are looking at high inflation, you want silver or Canadian dollars and be out of the USD.  If we are looking at deflation, you want cash in the freezer because prices will move quickly decrease.  I suppose we have to entertain both notions and monitor what is happening.  I suspect metals will go down some 20%, unless Israel bombs Iran, and then take off in the last quarter, as we approach January 1 of the new future.

I thought oil may work as an investment, but as Greg noted, if deflation hits, the demand and price of oil will also deteriorate.

Note:  stock companies will be forcing income into this year, rather than have it taxed at next year's rates.  In addition, older people, who are smart, are reducing their estate now as the estate tax rate next year will be very high.  Now, it is 0%.  (If this concerns you, start giving away your money to your heirs, now, or set up a trust.)  So, there will be news factoids about how we have turned the corner, don't believe it.  Pick up Art Laffer's new book.

The government doesn't want you to have a realistic anticipation, as that will blunt their games, and the media/broker community is filled with hacks.  There appears breathing room for the time being;  on the other hand, the shoe of crisis isn't dropped slowly - it explodes on your foot

Of course, food and ammunition are always a good buy.

Republicans Pushing To Count GSE Debt Toward Statutory Debt Limit May Be Surprised To Find Real Debt-To-GDP Ratio Is 130%, And That Greece Is Amateur Hour

Submitted by Tyler Durden on 02/22/2010 18:49 -0500

• Congressional Budget Office
 
• Debt Ceiling
 
• Department of the Treasury
 
• Fannie Mae
 
• Freddie Mac
 
• Great Depression
 
• Greece
• Gross Domestic Product
 
• Joseph Stiglitz
 
• Proposed Legislation
 
• Sovereign Debt
 
• Sovereign Default
 
• Stress Test
 

A new proposal by House Republicans, lead by Rep. Scott Garrett (R., N.J.), is seeking to address changes to Fannie and Freddie accounting, along the lines of what has been previously proposed by Zero Hedge, and to not only include the GSE's losses as part of the Federal budget, but to also count the debt from the two mortgage zombies toward the nation's total statutory debt limit. As we stated previously, it is only semantics at this point which distinguish the GSE obligations from other Treasury obligations. Yet it is not just us, but the administration's very own Peter Orzsag who was pushing for consolidated GSE accounting two years ago. Yet with GSE debt most recently at $6.3 trillion, or about half of the existing Treasury debt, this would mean total US debt would not only explode by 50% overnight, but the recently  increased debt ceiling would be immediately breached and America would find itself in technical default (where it really is right now for all technical purposes).

Dow Jones has more:

A memo written by Garrett's office, which was released Monday, states that "now that the federal government has explicitly backed the operations of the GSEs, there should no longer be a distinction between their debt ... and the debt issued by the Department of the Treasury."

The proposed legislation highlights the current uncertainty surrounding the two firms, which have been under government control since September 2008. Federal officials were expected to provide some guidance as to their future plans for Fannie Mae and Freddie Mac in the fiscal 2011 budget released earlier this month, but that information wasn't included.

The Office of Management and Budget, which compiles the White House's annual budget request, did acknowledge in the budget the different ways the government currently accounts for the two firms. The Congressional Budget Office accounts for the two firms "on budget," treating them like any other federal agency. OMB, meanwhile, treats them "off budget," considering them to be private companies.

As we observed some time ago, "It would seem a little presumptuous that an amount representing more than half of the total US sovereign debt is conveniently swept under the rug." Luckily, there are people like Garrett to remind Obama and his henchmen that not every person in America is a zombified purchasing cretin with 10 credit cards and a limitless Centurion in the mail, who couldn't care less about America's sovereign default until 3 days after the fact. ... 

Pop quiz: what is the full faith and credit of a bankrupt entity?

And just in case you were confused, and have yet to recognzie the idiocy of the OMB, and the ruling class in general, here is a paper written in 2002, in which authors Joseph Stiglitz (a Nobel winner no less), and Jonathan and Peter Orzsag, whose opinions rotate by 180 degrees more often than a magnetic needle above true north, claim the following OMB-referential piece of unparalleled garbage:

...This implies that if Fannie Mae and Freddie Mac hold sufficient capital to withstand the riskbased capital scenario, they would likely fare well under any conceivable economic environment.

Ah, the OMB, which less than 10 years ago said the probability of a GSE default was close to zero. With such lunatics in charge of making the decision of whether the GSEs should or should not be considered Treasury debt, can we please just fast forward 10 years to the post nuclear war holocaust already. The constant barrage of daily bullshit is really getting tiring.