Archive for December, 2008
Being Rod Blagojevich
Today, it is widely expected that the Governor of Illinois, “Rod” Blagojevich, will appoint Roland Burris to fill President-Elect Barack Obama’s senate seat. Burris is a long-time figure in Illinois politics, serving as the Comptroller of Illinois as well as the Illinois Attorney General. Burris does not have any obvious ties to Blagojevich and was not considered a person on the “short list” of candidates to fill the Senate vacancy. Nevertheless, should Blagojevich appoint Burris to the seat, he may have the last laugh on both the people of Illinois as well as the US Senate.
Eve of Destruction: Are we headed for a Global Recession?
The Great Depression did not come suddenly to the United States - it took awhile to build up the pressures that lead to the ultimate unraveling of the US economy. But from 1929 to 1933 - the GDP of the United States fell from about 800 billion dollars to 600 billion dollars… which not even adjusting for inflation today, would be equivalent of a fall in GDP of about 3.25 trillion dollars - or about a quarter of the US economy in present terms. I believe that unless something dramatic happens, from 2008-2015, we could see a similar contraction in wealth…
Treasury Bills “crack the floor” and deflation becomes a greater risk.
US Treasuries rose again yesterday, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression. The panic that has gripped Wall Street continues as investors shun almost all investments except US government paper - both domestically and internationally.
Ford decides it doesn’t need a US bailout…
Today, Ford announced it would not be seeking further assistance from the US Government and has begun to back away from looking for a bailout from Congress. GM and Chrysler are in desperate need of government money and may not last until the end of the year without it. But Ford set up $23.5 billion worth of credit in 2006, and both Chief Executive Alan Mulally and Executive Chairman Bill Ford Jr. told reporters and investors on Tuesday they are confident that the borrowing, coupled with restructuring and new product plans, will get them through the recession without relying on the government.
The next “bubble” to burst - US Government debt?
With the recent rush of investors into bonds, the yeilds (the amount of money the bond owner receives from the bond) has been driven close to zero, sparking concerns that govenrment debt could be the next “bubble” to burst when investors leave the market in favor of something else - driving up costs of borrowing for the United States Treasury and potentially having long-term ramifications on US borrowing and the US economy as a whole. The U.S. government is slated to sell over the next two weeks more than $400 billion in Treasury notes and bills to cover its soaring funding needs, and it looks like it will continue to get the money on the cheap… but for how long?
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