Budget Deficits | timiacono.com - Part 20

Sovereign Debt by Country

With Congress still stalled on a bill to raise the debt ceiling, President Obama’s job approval rating falling to its lowest level ever, and U.S. stocks having their worst week in a year, here’s something we can still feel good about – our pristine credit rating via Reuters, that, when compared to the rest of the world, still looks pretty good.

Of course, we may not have that AAA rating from Standard & Poor’s for very long, so, we should probably feel good about it now rather than saving it for later.

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From WTFNoWay via this HuffPost item comes another helpful visual aid for understanding the difference between billions and trillions, the old saying “a billion here, a billion there … pretty soon you’re starting to talk about real money” sounding almost quaint today.


Click to enlarge

In the top image, that’s one small stack of $100 bills totaling $10,000 next to a small pile totaling $1 million in  front of ten pallets  that total $1 billion (you might recall that the U.S. shipped many pallets like these to Baghdad during the Iraq War). In case you don’t immediately see them, these three are all reproduced at the lower left of the bottom image.

As a recent convert to a low-carb way of life that has had a profound effect on how I view both the American food industry and the practice of medicine in the U.S., these thoughts expressed by Ambrose Evans-Pritchard in this Telegraph story today on the subject of the ongoing  U.S. budget troubles are really worth reading a couple times. Hopefully, the extended length rant will soon follow.

The great health care cartel is in my view the villain here. It is the root cause of US ruin, and is itself responsible for the epidemic of diabetes, Alzheimers, and several other mass ailments afflicting America. It has systematically failed to keep up with the scientific literature, and refuses to abandon grievous policies when shown to be wrong. Americans need to confront this huge vested interest (nearly a fifth of GDP) before it destroys the country. But that is a rant for another day.

While I don’t know much about the Alzheimers example cited above, I do know something about the obesity/diabetes problem that seems to get worse and worse every day.

In case you didn’t already know, there is an important relationship between cheap, carbohydrate-rich food produced in massive quantities by the U.S. food industry and the nation’s obesity epidemic that, if not reversed, will make today’s health care problems look trivial as all the fat little American kids age.

It seems we’ve stamped out hunger by ensuring that everyone gets enough calories, but, they are the wrong kinds of calories and, unfortunately, there are so many vested interests in the status quo when it comes to nutrition, change will come painfully slow.

Anyone wanting to learn more about this subject is encouraged to start with this story in Men’s Journal – Everything You Knew About Nutrition is Wrong.

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This Can’t Be Good…

Yesterday’s Chart of the Day at Bloomberg depicted dramatic changes now taking place in the cost of insuring short-term U.S. Treasuries due to the debt ceiling stalemate, one year credit default swaps now more expensive than the five year variety for the first time ever.

The bad news is that it’s getting worse. According to this Telegraph report, one-year credit default swaps have risen 8 more basis points to a new record high of 85 basis points, higher than at the peak of the financial crisis a few years ago.

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It’s probably not very difficult for those few central bankers who happen to work in natural resource rich western nations to slam policy makers in the U.S. and Europe for their recent bungling of debt troubles, this MarketWatch report providing the latest comments by Reserve Bank of Australia Governor Glenn Stevens.

Stevens said “in both the U.S. and European cases, the process of allowing things to go right to the brink of a very disruptive event before an agreement is reached on the way forward has been a source of great uncertainty and anxiety around the world … [and] that anxiety has extended to Australia.”

It’s hard to sympathize with Stevens since, without the consumption and debt excesses in the U.S, China would not require near the amount of raw materials they currently import from Australia where, lately, there is renewed concern that the long-delayed bursting of a housing bubble might come sooner rather than later, the first inkling of fear at the central bank apparent with comments like these:

Turning to the Australian economy, Stevens said that Australians should develop some “longer-term perspective” over household income, spending and saving trends.

He said that he wouldn’t disagree with the common perception that consumers are cautious, with consumption growth flat for three years, but suggested that there could be some misconceptions about what’s driving reluctance to spend.

One explanation for this shift is that real asset prices, such as prices for houses, aren’t rising as quickly as they did before 2007, he said.

“They look very much like they are on a much flatter trend,” Stevens said. “If people had been banking on a continuation of the earlier trend, they would be feeling rather disappointed now.”

As far as housing booms go, talk of a “perpetually high plateau” is about as close as you come to “a kiss of death”, especially if price to income ratios are at astronomical levels, as they currently are in some Australian cities.

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