Mish's Global Economic Trend Analysis |
- China's Top Auditor Warns of Chinese Local Government Defaults
- Air Conditioning Afghanistan Troops Costs $20 Billion Per Year; Cost of One Soldier is $1 Million a Year; Hotel California
- Congratulations to California: State to Pass Budget, Close $9.6B Deficit, Without Tax Hikes
- "Land of the Predictable": Pimco CEO Warns U.S. Debt Default Might Have "Catastrophic" Effect; Obama's Hypocrisy
China's Top Auditor Warns of Chinese Local Government Defaults Posted: 28 Jun 2011 04:16 PM PDT Lost in the worry over Greek debt defaults, China Daily reports on a default story of more significance. Please consider Local governments run up huge debts, risk defaulting Local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.$1.65 Trillion is a mountain of cash even to the US. How much of that is at risk is the question, but even 10% would be significant. Moreover, it is certain that what cannot be paid back, won't be paid back. As in the US, once assets backing loans crash, so will willingness and ability to pay back the loans. Thus, efforts by some to downplay the odds should fall on deaf ears. Speculation in China is as least as rampant as it was in the US. For example, please consider Ponzi Financing Involving Copper Trade Gone Wild In China. Also consider Wave of Violent Protests, Rioting, Bombings Hits China; Expect More Riots When China's Credit Bubble Pops, Exposing Mountains of Fraud Finally, please consider World's Biggest Property Bubble: China's Ghost Cities Revisited; 64 Million Vacant Properties As long as credit bubbles expand, no one heeds warnings like that issued by China's top auditor. Then when the bubble bursts, everyone cries they were not warned, they were taken advantage of, and they deserve a bailout. One thing's for certain, when China's credit bubble pops, it will rock the world. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Jun 2011 03:06 PM PDT If people realized how much we were wasting in stupid wars that should never have been fought, there might be far more protests. Please consider Among The Costs Of War: $20B A Year In Air Conditioning? The amount the U.S. military spends annually on air conditioning in Iraq and Afghanistan: $20.2 billion, according to a former Pentagon official.Do the Troops Deserve Air Conditioning? Some may be asking if US troops deserve air conditioning? The question may sound reasonable, but it poses a false dichotomy. There are more important considerations. First and foremost, US troops deserve to not be put in harm's way for no reason. The simple fact of the matter is that there is no legitimate reason to be in Afghanistan, in Pakistan, in Iraq, or in 140 other countries at a cost to US taxpayers. Thus, the air conditioning question should never arise in the first place. If other countries want us there, they should foot the bill. If they don't want us there then we should leave. The US could cut its military budget by 50% or more with no detriment to actual defense of the United States. In fact, there would probably be a huge improvement in the defense of the United States. The reason is simple - terrorist problems have arisen because we are meddling in countries where we have no business being in the first place. Iraq vs. Vietnam For an interesting perspective, please consider Iraq War Deaths Exceed Vietnam War Numbers However, it is not fair to just look at US deaths. Wikipedia notes "the Vietnamese communist government in 1995 estimated that 2,000,000 Vietnamese civilians on both sides died in the war." The absurd war in Vietnam did not end until US citizens got fed up with it and demanded change. Unfortunately millions of lives were ruined before change came. Hotel California How much more will people put up with now before they demand change? How long will the US remain in Iraq and Afghanistan? Before answering that last question answer this one: How long has the US been in South Korea and Japan? As with the Hotel California, the US may check out, it just never leaves. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Congratulations to California: State to Pass Budget, Close $9.6B Deficit, Without Tax Hikes Posted: 28 Jun 2011 11:32 AM PDT Congratulations to all California legislators willing to tell governor Jerry Brown where to stuff it. Without needing republican votes, California set to pass budget, close $9.6B deficit California lawmakers and Gov. Jerry Brown are set to achieve something rarely accomplished in California -- getting a budget signed into law by the July 1 start of the fiscal year.Balanced Budget Mirage Bear in mind this so-called "balance budget" is a mirage. Tax revenue is not going to be sustainable. When this plan fails, and it will fail (but only after it passes), Republicans can stand firm again and demand more cuts. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
Posted: 28 Jun 2011 01:29 AM PDT In yet another of the seemingly endless self-serving fear-mongering exercises, Pimco's El-Erian Says U.S. Debt Default Might Have 'Catastrophic' Effect Pacific Investment Management Co. LLC Chief Executive Officer Mohamed El-Erian said a short-term default by the U.S. on its debt might have "catastrophic" legal consequences."Land of the Predictable" I mock the lame fear-mongering excuses of government officials, politicians, and in this case buyers of government and agency debt who do not want to see interest rates rise out of fear of what it would do to the short-term value of their portfolios. Thus it was entirely predictable that Pimco would issue a "Catastrophic" warning. As for who would buy US government debt, that answer is quite easy to explain: China and Japan would as a function of trade-deficit math, and they would add to that total, as would the UK, Canada, and Europe. El-Erian knows just that (as much as anyone knows anything in the land of the unknowable). The biggest irony in El-Erian's statement is Pimco would be a buyer, and so would millions of others if interest rates rose high enough. Finally, interest rates would come crashing back down as soon as an agreement was worked out and there is no doubt an agreement will be reached sooner rather than later. The only thing "unpredictable" is the exact nature of that agreement. Shutdowns Happened Twice Before Please note that US government shutdowns have happened twice before, in 1995 and 1996 under president Clinton. The United States federal government shutdown of 1995 and 1996 was the result of a conflict between Democratic President Clinton and the Republican-controlled Congress over funding for Medicare, education, the environment and public health. It took place after Clinton vetoed the spending bill which Congress sent him. Thereupon, the Federal government of the United States put non-essential government workers on furlough and suspended non-essential services from November 14 through November 19, 1995 and from December 16, 1995 to January 6, 1996. The major players were President Bill Clinton and the Speaker of the U.S. House of Representatives Newt Gingrich.Nothing Catastrophic Happened Amidst all this fear-mongering by president Obama, Pimco, and others, I calmly point out that nothing catastrophic happened last time, and there is no reason to believe anything catastrophic would happen this time. President Obama's Hypocrisy Inquiring minds just may be interested in knowing Obama's track record on debt ceilings when he was Senator Obama. The Obama administration is warning of catastrophic consequences if Congress does not increase the debt ceiling, the legal limit on how much the federal government can borrow, but Barack Obama held a different view on the issue as a senator in 2006.Failure of Leadership I remind the president "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." I urge Congress to disregard the self-serving fear-mongering of president Obama and Pimco CEO El-Erian because we have a debt problem and a failure of leadership to do anything about it. Americans deserve better, and the way to do that is to act responsibly on a deficit-reduction package, now, not 10 years from now. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List |
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