Right on track, the wrong track

Famous economist Art Laffer "2011 Budget is perfect plan for catastrophe."

Comments I like by Dr. Martin Weiss (investment guru)

"...Bailouts, previously reserved strictly for unique emergencies, soon became the norm.

Yes, each successive bailout deal was typically larger than the previous. And yes, each was hailed as the “end-all solution” to the crisis.

But in reality, the deals did little more than spread the toxic material up the food chain — from niche players to Wall Street giants … and from Wall Street giants to sovereign governments.

Ultimately, however, as Mike Larson eloquently explained, ALL of the bailouts fail the most basic of smell tests.

Reason: The debts stink up the joint. Investors hear rumors of big blunders. And they feel it in the gut when numbers don’t add up. That’s why they dumped tech stocks in 2000; that’s why they dumped bank stocks in 2008.

The most important pattern of all: Until and unless excess debts are liquidated, the disease cannot be subdued. It will merely return at a different time, in a different form. Next to feel the pain: Sovereign nations!

After nearly three years of escalating government bailouts, it should come as no surprise that the biggest debtors of all — and the biggest warehouses of bad debts — are now sovereign governments..."

Commercial real estate is one of the next time bombs. Duh! But they claim it hits in 2011. What have they been smoking? It starts in about a month. Snap out of it.

Demand for US Treasury debt is failing. Another duh. I have been predicting this for months. It is actually much worse than they make it sound. A lot of that "demand" is our own Fed doing all kinds of shenanigans. Also in the "demand" is foreigners fleeing from Fannie and Freddie garbage by being allowed to swap for treasuries as if the Fannie and Freddie stuff was worth something. Also in the "demand" is the fact that all last year foreign governments were running away from our long term debt and getting the shortest stuff they could. In other words, they are standing by the exit.

Really good article explaining the almost failed Treasury auction

Notice the chart above. The perception that the US may default on its debt is rising, as reflected in the default insurance rates. People are getting worried about sovereign debt in general. This problem could very well come across the Atlantic. This is a confidence problem. Confidence is fragile.

If you keep moving the bad debts around, do they go away? We're looking at the bankruptcy of a number of whole countries based on this, "shuffle the debt around" idea. How long until people realize it's idiotic and lose confidence in the whole idea?

Remember, I predicted this pattern of events. We're right on track. Unfortunately, the track goes right through the gates of hell. My predictions for 2010