A mountain of economic articles are popping up. It looks like the next 3-4 quarters are going to be very eventful, some might say Biblical?
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Is the U.S. the Next Bear Stearns?
The U.S. government is handling its finances just like Bear Stearns, paying for long-term liabilities with short-term funding, says Jason Trennert, chief investment strategist at Strategas Research Partners.
The difference is that the government prints its own currency. “But the private sector has shown that’s not a very good way of running a railroad,” he told WSJ.com video.
About 60 percent of the Treasury’s debt matures within three years. That begs the question of why the government isn’t issuing debt as long-term as it can, Trennert says. After all, some companies are looking at issuing 100-year bonds to lock in these low interest rates.
Trennert sees two possible explanations.
“First, you want the deficit to look as low as possible now, so you keep your interest expenses low,” Trennert said.
“The other reason is more frightening. Marginal buyers of debt, in particular the Chinese, have shown they don’t want to lend long-term. They want the leverage that comes with having Uncle Sam go back to them every week or two.”
That means the deficit could represent a national security issue, Trennert says. “I don’t want to be overly conspiratorial, but certainly you’re conceding some sovereignty when you fund yourself this way.”
To be sure, there are signals that the Obama administration is shifting to longer-term debt, he says. “But the magnitude of the debt is so large that you’ve only just begun.”
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Link to full original article: Is the U.S. the Next Bear Stearns?
myBlessedHope 