$15.2tn US debt passes 100% of GDP, Greece threatens default
Posted on 04 January 2012 with 3 comments from readers
Markets started the first day of the New Year with a rally with commodities sharply up too. The ArabianMoney pick of the year silver (click here) was up the most at seven per cent on the day.
But the bad news that got little coverage on a good day for official economic statistics was still there like the unwelcome guest at a party.
100% US debt ratio
The US debt to GDP ratio officially past 100 per cent of GDP for the first time at $15.22 trillion. As Zerohedge reported the world’s largest national economy is only $14 billion away from its own debt ceiling, and that is not a large sum when the total debt is double-figure trillions.
At the same time Greece got tough with negotiators over terms of a $170 billion international bailout deal signalling that it wants a 75 per cent haircut for privately held bonds that mature in March, and will default if that cannot be achieved.
Then perhaps the heightened state of tension in the Hormuz Straits is being overlooked. There are fears of a 1970s-style jump in the price of oil if Iran goes ahead with threats to close the straits should European leaders impose an embargo on Iranian oil exports and freeze Iranian central bank assets by the end of this month.
Oil price rises tend to preceed global economic downturns as we saw with $147 oil in July 2008 just before the global economic crisis of that autumn.
In 1973 the price of oil shot up 400 per cent plunging Western economies into a severe recession and 1974 saw one of the worst downturns ever in major stock markets.
New Year fear
You could almost wonder where the financial markets found their New Year cheer yesterday. It can’t last. The accumulation of negative factors by the end of last year was overwhelming and global trade is already in a slowdown.
There is a horrible logic carrying this forward into 2012 with debts only growing bigger and bigger, Greece close to breaking point and plenty of geo-political problems to unsettle the Middle East and the all important oil price.
Perhaps there is always a tendency to see the bright side of life after a holiday break but only a fool would invest money when feeling over-optimistic.
3 Comments posted by readers:
well,Peter, the ECB will either print n bail out the piigs-kick that can…….forcing ben into QE3 as dollar goes up…. at DOW 9400 (if it doesn’t get there on its own on EU fear)
OR they argue over it n piigs start leaving and defaulting……causing the ECB to print n bail out northern tier banks…….n ben to print on DOW 9400 n dollar at $90.
what gold does between now and then is the question.
safe haven or risk asset……..trading as risk currently. hormuz a wild card but would support gold of course.
i think we see 1430$ in next 8 weeks. hope i’m wrong.
Spanish banks are rumored to be seeking IMF and EU bailouts. Source: article in MarketWatch.
I seem to recall predicting that here, over a year ago, while most ‘experts’ were writing that Spaniards had SO much savings, that the banks would be ‘no problem’, ‘won’t happen.’
Not to worry, they will be bailed out, (with some nationalized), as will Italy and all the rest. The Germans and French have no choice. They will deny and threaten, but in the end, they will print. The donor nations will get an unpleasant surprise when they see the final terms from their new masters in Berlin. No more 5 week paid vacations, short work weeks, and retiring at 60. Speaking of which, I got a bonus on my City of New Orleans December deposit. I was actually kind of mad. I thought, ‘I worked there for 25 years, and never got so much as a candy bar for Christmas, and NOW they give me a bonus!’ I searched the web and found some articles about suits the City has against big banks for losing retirement money on supposedly sure thing investments that went sour. It reminded me of the town in Iceland or Norway that got ripped off in the masterwork special, ‘House of Cards’ by David Faber of CNBC. I am still amazed that CNBC actually censored Faber’s other classic, ‘Untold Wealth: The Rise of the Super Rich in America’ by removing it from their web list of specials, while they let ones about subjects like the porn ‘industry’ and pot growing, on their web site list. Although I must admit that looking at Trish Regan makes the pot one worth watching.
Some very rich people, with inside information, will make a fortune on European debt.
It looks like QE3 might be on the way. It is too close for me to call now because of the employment situation. Jobs are being created in the USA, so QE 3 may not happen. The Fed doesn’t even know yet, so I sure can’t.
The Fed seems to be talking about underwater home loans a lot. Will they do something about it?
I’m laughing at the fools on Fox Noise trashing the electric car because they hate Obama. See if they are trashing it next year when gasoline in the USA is over $4 a gallon. Or $7 a gallon, if a civil war starts in Iraq, (which could easily escalate to a major regional war). I was just thinking, if I had an electric car, I would NEVER have to buy ANY gasoline, except for the lawn tractor, 4 gallons a year. I won’t be cutting grass this week, since it got down to 24 degrees F last night. That is -5 degrees C. But the wind has shifted to the south, and it is back up to near 60 F, (20 C) now. A long sleeve shirt afternoon. That is my kind of winter day in the Deep South.
And finally, farewell Eastman Kodak. Who would have thought, 35 years ago that that would happen? Whenever I hear that name, it reminds me of being in California’s Yosemite National Park, way back around 1970, on vacation with my parents. There was a forest fire in the Park, and I happened upon a group of about 10 exhausted, dirty firemen sitting on some rocks. I took their picture with Kodak film. It was a classic because they were a mix of 3 different racial groups. Some were Caucasian guys, some Orientals, and some Hispanics. It was a shot of the quintessential American melting pot. Our greatest strength. Katrina got the slide. But that’s life. Nobody said it was supposed to be easy.
apreciate your stories bill.
i was getting suntaned in the 10,000 islands below marco,is fl.
now i’m back home in n fl feeding the wood burner.
electric cars are fine as long as they don’t cost 40,000$…..some new battery technology will help and is coming nodoubt…i guess we could make electricity w/nat gas seeing as we are the saudi arabia of it.
passive cooled nuclear too(no pumps,batteries or generators to run cooling–the new ones have it….retrofit the old ones)
and maybe we can convince barbara boxer that lizard isn’t important n she’l let us put solar in her desert.
and now that girl-killer kennedy is gone we can put up some windmills on the cape in aal that wind…..that he blocked for years.