U.S. could be facing debt 'time bomb' this year

[Pale Blue Dot]

Source: MSNBC

WASHINGTON - With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world's appetite for financing U.S. government spending.

For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world's mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.

But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

While the current market for Treasurys is booming, it's unclear whether demand for debt can be sustained, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends.

Read more: http://www.msnbc.msn.com/id/28476798 /

---

I would replace the words "could be" in the title with the word "is". People still aren't getting that debt is the problem, not the solution, and until people recognize this we are only going to continue to make things worse for ourselves in the long run.

[notesdev]

1. Unrestrained appetites are the problem

It's sickening the way everyone now sees DC as a feeding trough and has come oinking by for some of the slop.

[SpiralHawk]

2. "Smirk snort smirk." - Commander AWOL & Republicon Cronies

"Shock & awe, baby. Smirk."

- Commander AWOL & Republicon Cronies

[proud progressive]

3. hope this does not mean that we will be forced to begin living within our means.

what will we do??? what will we give up? maybe our 88" power-sucking plasma tv? maybe one of the devices we carry with us like security blankets? maybe our gas-guzzling suv? maybe our mcmansions?

DON'T COUNT ON IT!

[DJ13]

4. Dont fall for the right wing propaganda

The MSM is carrying the GOP's water now that we have a Democratic President.

The hardliners in GOP have decided they want to be obstructionists to any spending Obama proposes in trying to end the GOP caused depression.

This is the same tactic that the GOP used against Roosevelt when he was trying to clean up their mess.

[pretzel4gore]

5. let's roundem all up

lol
hangem hi!

[Pale Blue Dot]

6. I'll be curious to see if you'll be calling this right-wing propaganda six months from now.

And since I've been calling this for over a year now (and been right every step of the way) I wonder if you think I'm a right-wing propagandist.

[pa28]

7. Is this really RW propaganda?

Our borrowing needs are between 2-3 trillion this year. There is plenty of evidence out there that foreign investors are uneasy about level of debt and that kind of borrowing is uncharted in territory. To make matters worse the economies of our usual benefactors are contracting as well.

What would happen if our bond rating fell? The latest trend is for the rating agencies to face reality and cut. It could happen to us. How about if we had to issue bonds in foreign currencies to satisfy our creditors?

Like you I'm always on the lookout for RW crap from the media but we should be circumspect about this. It's ugly for real.

[cyclezealot]

8. Yes. but more than a year , some effort must be made to balance the books.

I'd think what's in order. Let Bush's tax cut expire. drastically cut back Iraq spending in a year's time.. Cut the defense department's gold plated projects such as Star Wars, increase the maximum income taxed for Social Security among those making over 140 k. Check out the tax programs of the Congressional Progressive Caucus. That will help to cut the deficit.

On the Federal Budget For the 2008 Fiscal Year
Monday March 12, 2007

http://cpc.lee.house.gov/index.cfm?ContentID=206&Parent...

[Psephos]

11. So the answer to all the problems caused by debt and deficits is to incur more debt and deficits

oooooooo kkkkaaaaaaaaaayyyy

[tclambert]

18. The solution is jobs. Millions of 'em.

If the nation had added as many jobs during the Bush years as it did during the Clinton years, we'd have no problem now. We're just 10 or 11 million jobs short.

[Odin2005]

25. The debt actually isn't really the problem.

Other developed countries have worse debt-problems relative to GDP then we do. and a lot of the deficit problems would disappear anyway if we went back to taxing the rich and corporations at pre-Reagan tax rates.

[Trajan]

12. Like others, I am finding this particular characterization to be weak ...

The horse is already out the barn, and so adding further debt will be of little negative consequence, but with the upside of generating economic activity AT THE BOTTOM of the food chain, where real stimulus occurs ....

Watching the McCoughlin Group last night; John McCoughlin brought up how the movement of jobs overseas may have helped create a temporary boom for global corporations, but in the end; it 'hollowed out' the middle class and dropped demand across the board for goods manufactured ANYWHERE, hurting sales for ALL producers ... He referred to it as the 'End of Globalization' ....

The hardliners are and always have been 'obstructionist' when it comes to helping the middle class, but it is somewhat unfair to insist that this writer is 'carrying their water' .... Yes; there will be debt issues, but this is not going to stop the stimulus program, and neither will the dunderheaded minority GOP .... Even though we dont have 60 senators, there is enough support from moderate GOP members to overcome filibuster threats ...

[CoffeeCat]

9. Is there any chance....any chance at all...

...that the US Treasury won't be able to make good on the Treasury Bills that investors have been buying?

I know it's kind of a crazy question...but it's worth discussing

The article states, "When those loans come due, the Treasury will have to borrow more money to repay them..."

It is a 'given' that the US will be able to borrow the money to repay these loans to US investors, who are
investing in T-Bills as a safe haven?

From whom will the US "borrow" the money? It is absolutely certain that the US will be able to secure loans?

Just asking questions...

[Vincardog]

10. "When those loans come due, the Treasury will have to print more notes. That leads to

inflation. Inflation with a declining income is a terrible thing.Everything costs more except the things you have and your wages. The ideal Republican situation.

[DemReadingDU]

20. Treasury Bills are supposedly considered safe

I have bought some 4-week Treasury Bills as another place to put some cash, in addition to bank CDs, and under the mattress.

I figure when TSHTF, I want my cash in what is considered safe places, easily accessible. But who knows for sure?



edit: spelling

[CoffeeCat]

21. Everything is so uncertain...

I agree. We've done the same thing. Half of our money is now in the "Bank of Sealy Posturpedic."
This is only temporary until, as you said, "TSHTF" and we figure out exactly what we're dealing with.

We moved most of our 401k funds into MM funds. We have a CD that matures in March, and we'll probably
move that into a savings account at a new bank.

Our current bank is rated two stars by Bankrate. That's another problem.

And you're right...we don't know for sure. I'm normally not a pessimistic person, but combine
the uncertainty with the fact that we've got neocon sociopaths running things, and it makes a person
pretty cynical.

We'll know so much more about the economy after the next 6 months pass.

We'd like to take advantage of lower mortgage rates and re-fi to a 15 yr mortgage (and out of the 30 yr
that we have now). However, our payment would be higher, and we're wondering if we want to get locked
into a higher payment with the economy teetering on the brink.

We're teetering---and we're either going to be pulled to safety or we'll free fall down the cliff.

I guess, by this time next year--we'll know which way things went.

[DemReadingDU]

22. Scary times

Things I read, are mind boggling. Hardly anyone alive today, understands what it is like to live in a deflationary time. I've been stocking up on canned goods, toilet paper, personal stuff, etc. I am willing to help my children and grandbabies, but there is no way I can help the whole neighborhood. I worry about angry neighbors, spouse has a gun. Like you, next year we'll know how things went.




Instead of refinancing, we paid additional money towards the principle every month on the mortgage. The loan still gets paid off sooner because the principle balance decreases more quickly.

My favorite blog for financial is The Automatic Earth. Co-editors are ilargi and stoneleigh, GliderGuider has mentioned them too.
http://theautomaticearth.blogspot.com /

[CoffeeCat]

28. I hear ya...

If you're stockpiling...Kmart is doubling coupons up to $1 right now (until this Saturday). I don't know if you cut coupons, but I was able to get hundreds
of dollars worth of stuff at Kmart--at 90 percent off, when they doubled last month. If you're stockpiling toilet paper, a $1 coupon
can be doubled to $2, and that can translate into great savings.

Today's Sunday paper has 5 coupon inserts, each is full of manufacturer coupons. This is almost unprecedented. Most weeks there are two inserts.
I've seen three, but never five. Get these coupon inserts from friends and family and use them at Kmart this week.

Also, in today's Sunday coupon inserts, there is a great coupon for $2.25 off 1 Electrasol dishwashing soap tabs. A box usually lasts
3 weeks or so. The boxes are $3.25, so so that's a great deal at $1 a box.

If you use the $2 off 1 Excedrin coupon at Walgreen's--you end up paying $6 for two Excedrins and you get a $5 coupon from the cash
register, good on your next purchase. So, you end up paying $6 for 2 Excedrin and $5 worth of other groceries (this is how we purchase
bread, milk and eggs for free).

There are six coupons for Lysol cleaning products--wipes, pourable, toilet bowl cleaner, spray. These $1 coupons can be doubled at Kmart
for free/nearly free cleaning products.

There are several coupons for $1 off dog or cat treats. Doubled, and the treats free. I donate these to the animal shelters.

Also, there are coupons for BOGO (buy one get one free) meals at IHOP. Buy one meal and a beverage--the the second meal and beverage free.

There's also a $20 coupon for a OneTouch Ultra Glucose Monitoring System. This coupon makes the monitors free. They are around $19 at
Walmart and Walgreens.

There's a $1 any Johnson's Baby or Johnson's Buddies coupon. At Super Target and Walmart, they have Johnson's Buddies bar soaps for $1. FREE
soap for kids. I use these bars as well. Hey, they're free!

I use these coupon inserts and combine them with sales as they arise--at Kmart, Target, Walgreens and yes--Walmart. I get stuff free every
week.

[DemReadingDU]

29. I hear ya too!

I do use coupons, every little bit helps, and lots of coupons is lots of savings. I saved $1000 at Krogers last year, per my receipts! I wish other stores would keep track of the savings.

[CoffeeCat]

30. We don't have a Kroger here...

...but I hear a lot about their great deals. They double coupons don't they?

I was going to ask you about deflation. You mentioned how awful it could be to live in deflationary times (before I went
off on a coupon tangent). I guess I'm ignorant about deflation, but is the main problem stagnant wages?

I'm more concerned about inflation, that people predict will follow deflation. That's when prices soar necessities become
out of reach financially for many. That's why I'm stockpiling.

My husband and I noticed car prices in the paper today. Prices have dropped like a rock. Our local Dodge dealer has a
promotion...but a Dodge Ram truck and get a free car. If that's not deflation, I don't know what is!

It will be interesting to see how deflation plays out. So far, I'm not seeing much of it in food prices, which is what
I'm most concerned about. Food prices seem to be going up.

I'd be interested to hear more about your thoughts on deflationary times.

[DemReadingDU]

32. Krogers does double coupons, up to 50 cents. But

Occasionally, Krogers has super double coupons, and will double coupons up to $1.00! At our KMarts in SW Ohio, I have never seen them to double coupons. I will have to check my KMart and see if this is done in our area.

I think of inflation as good times, lots of credit and people can buy anything on loan. Deflation is opposite as there is a lack of credit and people find it difficult to get loans to buy much of anything.

Supply and demand can cause fluctuations in prices, not necessarily inflation/deflation.

GliderGuider sometimes posts about deflation here at DU.

Actually, the experts in inflation/deflation are ilargi and stoneleigh at The Automatic Earth, http://theautomaticearth.blogspot.com /
Usually ilargi posts the introduction, but sometimes stoneleigh or another poster has the introduction. After the intro, there are newsy articles, lastly there is a comments section which has additional helpful information.


Let me post some primers that stoneleigh has recently written. At the end of these essays (and newsy articles), check the comments section for additional information

11/18/08, this is about a depression
http://theautomaticearth.blogspot.com/2008/11/debt-ratt...

11/26/08, this is about Ponzi schemes
http://theautomaticearth.blogspot.com/2008/11/debt-ratt...

11/29/08, this is about deflation
http://theautomaticearth.blogspot.com/2008/11/debt-ratt...

11/30/08, these are suggestions preparing for deflation
http://theautomaticearth.blogspot.com/2008/11/debt-ratt...

12/6/08, this is about markets and trends
http://theautomaticearth.blogspot.com/2008/12/debt-ratt...

12/7/08, this is about oil energy
http://theautomaticearth.blogspot.com/2008/12/debt-ratt...

12/20/08, this is about auto bailouts
http://theautomaticearth.blogspot.com/2008/12/debt-ratt...

12/21/08, this is one of ilargi's intros
http://theautomaticearth.blogspot.com/2008/12/debt-ratt...


edit: spelling

[pnwmom]

13. Krugman and all the top economists consulted by Obama agree that massive

government spending -- even though it will add to the deficit -- is exactly what's needed now. It's what got us out of the Depression and it's what we need to do now.

It's the freepers who are "getting" your point.

[Psephos]

17. what actually got us out of the Depression was WWII

and I am not hoping for a similar remedy

[Odin2005]

26. More correctly, it was the government SPENDING associated with WW2.

[FarCenter]

14. We have to raise debt in order to repatriate the dollar spent on foreign oil and other goods

We are running a >$600 billion / year trade deficit.

Foreigners will no longer buy Mortgage Backed Securities and other forms of US dollar debt.

They only want Treasury bonds and bills.

Therefore, the US government has to go into debt and borrow dollars from the foreigners.

Otherwise, the oil imports and goods imports stop and the economy crashes.

[L0oniX]

15. I have the solution. Pull out all of our military bases and stop all wars. Problem solved. Thankyou.

You should really listen to Howard Zinn sometime.

[conspirator]

16. Don't use the word "bomb" or you cannot board this flight nt

[ozymandius]

19. This is the same type ponzi scheme that Madoff concocted.

When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

New investors money will be used to pay off previous investors. No word on how the U.S. gooberment intends to fund increased debt for new spending. Is this not a criminal operation?

[RUMMYisFROSTED]

23. $250B+ in interest payments every year.

Obscene.

[Odin2005]

24. Trying to ballance the budget in a depression is a recipe for disaster.

Hoover tried that and it made things A LOT worse. The only way one can get out of a downturn like this one, or in the 30s, is to spend ones' way out of it, deficits be damned.

[w4rma]

27. Raise taxes on the wealthy. Raise them by a lot. Problem solved. (nt)

[Selatius]

31. I don't support deficit spending unless it comes with progressive taxation.

The current tax code is biased towards the wealthy.