Friday, 26 March 2010 00:00

This Guy is Really Pessimistic. He Must Be Using That Math Thing!

This site (freebuck.com) came up in a Google search this morning, and it was just full of good cheer. Enjoy! In the future (if the guy is reading this), please link back to the blog).

2010 will also be challenging for G7 Sovereigns as they TRY to rollover inconceivable sums of existing debt while borrowing NEW money to pay for the WELFARE states’ spending. Trillions of dollars of borrowing challenges lie directly ahead; let’s look at some illustrations of the rollover requirements for Germany, France, Portugal, Ireland, Italy, Spain and Greece fromwww.newyorktimes.com and Reggie Middleton’s Boom Bust blog

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These are just the rollover requirements for the United States and do not include NEW BORROWING of $1.6 TRILLION. So, a total of OVER $3.5 Trillion is required, providing that the deficits are as projected by the CBO (are they ever accurate?). That’s almost $300 Billion a month, or $10 Billion a day (10,000 million a day). Mind numbing numbers! Inconceivable sums. Now let’s look at European rollovers from Reggie Middleton:

Think of the US issuance and add this to it. Where will the money come from? The printing press in one form or another. That’s just the rollovers; now let’s look at NEW issuance to cover 2010 DEFICITS from www.forbes.com:

This is called INSANITY. Only India, China and the emerging world are growing in REAL terms, the rest of the borrowers are DEADBEAT welfare states with shrinking incomes and economies, when properly adjusted for inflation. How the US and Europe are going to navigate the rest of the year without some MISHAP is inconceivable. That will be the appearance of the “when HOPE to FEAR” moment we are looking for in 2010. This DOES not include BANK and brokerage debt (totaling OVER a trillion dollars) which must roll.

Well, the reason why it seems like China is growing in real terms is because they are blowing a BIG BUBBLE! It is not sustainable, and when it pops it will actually push them back some. See

I actually suggest you read the entire post, for although some of the charts and info are dated (the circumstances have changed somewhat) and other bits of info are anecdotal, it does give a good background of why anyone should be bearish - http://www.freebuck.com/articles/tandros/100326tandros.htm

Last modified on Friday, 26 March 2010 00:00

7 comments

  • Comment Link HAMBONE Tuesday, 30 March 2010 20:58 posted by HAMBONE

    Reggie,
    I think you are "right" in theory but likely to be wrong in practice...because T yields can't be allowed to go up or dollar weaken too much from here. So long as these are supported by a weakening Euro, BB can print and buy (expand balance sheet via QE) to his hearts content. If either gets in trouble, the equity market will be encouraged to drop some of it's gains to get the buyers back into T's and dollars. This should continue to encourage further fed borrowing, exacerbating the situation ever more as the longer T yields are so low, why not keep on loading up on debt. Seems interest rates can not be allowed to go up significantly w/out a collapse of housing, fed gov budgets, among others - so they won't be allowed to (QE to the moon if neccessary to achieve inflation).

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  • Comment Link Rollovers not as bad as new Saturday, 27 March 2010 23:37 posted by Rollovers not as bad as new

    I don't lump rollovers with new issuance. They way I look at rollovers is like a bank CD. They already have your money. Or, the USA already has Japan's money. Japan would have to go out of their way to NOT rollover the treasuries, and to put it into something else (like where?)


    So to talk about "money required"and lump it all together overstates the case. It's bad enough as is, mind you! An odd side effect is that turmoil, FUD, and "flight-to-safety" response actually helps the USA finance itself. Talk about moral hazard.

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  • Comment Link Jack brosnan Saturday, 27 March 2010 03:34 posted by Jack brosnan

    Thats really a nice blog...i really appreciate it...kep it up...
    ********************
    jack brosnan

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  • Comment Link Reggie Middleton Friday, 26 March 2010 18:19 posted by Reggie Middleton

    If I am not mistaken, Refco traded OTC, which meant they didn't have centralized clearing. When you trade over an exchange, the exchange is your counterparty. Now, it is not impossible for an exchange to fail, but it is much less likely than a bank or hedge fund.

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  • Comment Link whatablow Friday, 26 March 2010 18:02 posted by whatablow

    Reggie, I agree with you but if push comes to shove ... just as it did when Refco failed - do I remember right that the counterparties of them also got burned?

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  • Comment Link Reggie Middleton Friday, 26 March 2010 13:02 posted by Reggie Middleton

    Your counterparty, as a retail investor, is the exchange and not the banks. So the banks ability to perform shouldn't be your concern.

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  • Comment Link Mark Hankins Friday, 26 March 2010 12:24 posted by Mark Hankins

    If you're short a lot of stocks and the expected crash materializes, how do you know the financial houses will make good on what you're owed? :o (using the "shocked" emoticon 'cause there isn't a "worried" one).

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