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3/10/2011 Red flag: Biggest bond fund dumps U.S. Treasuries
Last fall Jason Thomas, writing in National Affairs, explained the danger of our increasing debt: The government borrows in a currency that it prints, and it is difficult to conceive of a situation in which it would be more advantageous for the United States to renounce obligations than to print whatever amount of dollars would be necessary to meet them. The real problem is that bond-market investors are not oblivious to this flexibility. When it appears likely that a country will print money to inflate away unsustainable debt burdens, interest rates rise to incorporate an inflation risk premium -- thus increasing the burden on the government and on private borrowers. The danger, then, is that excessive borrowing will bring investors' hunger for Treasury securities to an end, causing a spike in interest rates that could crush the American economy and send it into a debt spiral we would find very difficult to escape. Treasury securities have continued to sell, as Thomas explained, because of "the weakness of other countries' fiscal positions, and the power of inertia and familiarity." But that can change. Thomas warned: The Treasury market's status as a safe haven is not an immutable feature of economic life: It is a function of institutional credibility that took generations to build, but that would take just a fraction of that time to destroy. Were Treasury securities to lose their status as the global reserve asset of choice to gold, other commodities, or a different currency, the consequences for the American economy would be disastrous. Unlikely as such a scenario might seem at the moment, today's fiscal policies unquestionably increase the probability of its coming to pass. (Washington Post)
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posted: 3/14/11                   0       7
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keywords: Bill Gross, Bloomberg Lp, Erskine Bowles, Federal Reserve, Financial Crisis, Gold, Jason Thomas, National Affairs, Pacific Investment Management, Pimco, Rob Portman, Stimulus Package, US Department Of The Treasury, US Small Business Administration, United States Add New Keyword To Link



9/19/2008 Wall Street: The dark theory
`Pollyanna Creep' theorists blame Washington's economic statistics

According to Williams, all the big measures have had their methodologies revised repeatedly over decades to paint the U.S. economy in the best possible light

and this has gone on regardless of which party controlled the White House. Modifications were always spelled out at the time

with rationales for doing so. Thus it's not as though this has gone on in the dark of night. (CNN)
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posted: 6/5/09                   1       29
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