Now that Standard and Poor's has cut its outlook on the U.K.'s AAA
credit rating, can the U.S. be far behind. We're headed down the same primrose path, according to Bill Gross co-chief investment officer of PIMCO, who predicts that the U.S. "will eventually loose its top rating". How did we get to this sorry state of affairs?
Unbridled spending and borrowing - The U.S. is boosting its debt sales to $3.25 trillion for the fiscal years ending Sept 30th pushing the nation's "marketable debt" to an unprecedented $6.36 trillion. The Federal Reserve's custodial holdings of Treasuries for foreign accounts have already risen to $1.9 trillion.
But the past is only prelude to the Obama fiscal future. Further deterioration of the dollar and our credit rating is a virtual certainty as…
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The Democrat Party is in the hands of the Pelosi-Obama extreme left, the Republican Party is in the hands of the Bush-Limbaugh fanatic religious right and the mindless party faithful gleefully sing along, ours is not to reason why, ours is but to do or die. The Congressional Budget Office (CBO) estimates that there will be trillion dollar annual deficits for the next decade if the Pelosi-Obama left prevails, and the response from the right, narrow-minded religious platitudes.
Maybe its time for a third party that represents the rational, pragmatic majority of the country. I believe the founders would approve if we called our new party, The Enlightenment Party.
First let's look at what we can expect from the left:
In 2010 federal outlays will be a breathtaking $3.6 trillion, or 24.1% of…
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The stress tests appear to be boiling down to one critical measurement of bank capital, Tangible Common Equity (TCE). While the assets themselves may be tangible, the intangible result could be a tectonic shift to a politicized banking system. To avoid any confusion it is probably best that I define my terms at the outset:
1. Tangible Common Equity (TCE) equals
book value minus
intangible assets,
goodwill, and
preferred equity. Essentially this is the most conservative measure of bank capital and represents what common shareholders would have left if a bank were liquidated.
2. Tangible Book Value (TBV) equals
book value minus
intangible assets and
goodwill. This measure would include preferred shares held by the government and private investors and gives a broad view of…
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Treasury Secretary Geithner's toxic asset plan appears to be a conundrum wrapped in an enigma. On the surface this pari passu public-private
partnership seems simple enough. The
government puts up $75 to $100 billion of TARP funds matched by an equal investment from five major investors and then the brew is levered six times and voila $700 billion to $1 trillion worth of toxic assets disappear from bank balance sheets.
Financing for these purchases is to come from the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve. The FDIC, which regulates the banks, has an even more important role: It will act as the hammer to pressure banks into participating.
The devil is in the details -- specifically, pricing. Up until now the banks have been required…
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The road to insolvency is paved with
red ink. How can the United States become
insolvent? Easy, just add the Obamanomics deficits, as laid out in the President's ten-year plan, to the existing $11 trillion
national debt and it will not be long before the US is unable to meet its financial obligations. Presently, debt held by the Social Security Trust Fund and other governmental agencies is $4.4 trillion, plus the remainder of the debt (owed to citizens or "foreign" owners) is $6.6 trillion. Approximately 50% of US debt is owed to
foreigners, up from 31% in 2000, and this debt will undoubtedly continue to climb. If China and other foreign creditors lose their appetite for US debt, the result will be catastrophic for the dollar…
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