A Brief Blurb on the July FOMC Meeting Minutes

Investors and the press love to read the tea leaves of the FOMC meeting minutes.  Most in the press believe July 31st Federal Reserve Open Market Committee meeting minutes confirm quantitative easing, the $85 billion a month in mortgage backed securities and asset purchases, will be reduced starting in September.  We don't know that answer but we can guess.   From the minutes:

Mint a trillion dollar coin?

I really don't know why the administration doesn't take the "mint the trillion dollar platinum coin" option seriously. It is, as far as I can tell, perfectly legal. - Eschaton

The quote above is in reference to this Firedog Lake post on the Fiscal cliff and the latest Republican Doomsday plan for dealing with the fiscal cliff:

It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the president nothing more – no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.

FireDog Lake responded to this news of the GOP economic bomb with:

if the vote includes just the Senate bill, where does that leave us? On January 1, taxes go up on not just the top marginal rates, but on every income earner, when the Bush tax cuts expire. Two million people immediately lose their unemployment benefits. Medicare reimbursement rates drop 30%. The sequester on defense and discretionary spending goes into place, and while OMB has the ability to lessen the impact there for several weeks, they can’t hold back the tide forever. And the country will hit the debt limit by the end of February or the beginning of March.

Rumor Obama will force Fannie Mae & Freddie Mac to forgive negative equity mortgage debt for underwater mortgages

If you haven't seen it yet, there is a rumor running around that the Obama administration will order Fannie Mae and Freddie Mac to forgive a portion of mortgage debt for home owners in negative equity.

Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.

The move, if it happens, would be a stunning political and economic bombshell less than 100 days before a midterm election in which Democrats are currently expected to suffer massive, if not historic losses. The key date to watch is August 17 when the Treasury Department holds a much-hyped meeting on the future of Fannie and Freddie.

Global Financial Meltdown Redux

If you are wondering what's going on, think no more. The end of the world is upon us. All conspiracy theory aside, we are hitting phase 2 of the global financial crisis. Instead of the banks being insolvent, now nations are. No surprise since governments took on the follies of the Banksters and are now drowning in debt.

The long shadow on deficits hovers over the lack of real economic growth projected for the future.

So, it begins: Moody’s warns US of credit rating fears

From The Financial Times (of London) - Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.

Read more.

Latvia about to implode

Latvia, and several other former Soviet bloc nations have been on life-support for a long time. It looks like the first eastern European domino is about to fall.

(MarketWatch) -- It's never good news when a government bond auction fails. It's particularly bad news when an auction fails for a note maturing in just six months. And it's really bad news when there isn't any bid at all.
Yet that's what happened Wednesday when Latvia tried to sell close to $17 million of paper.
The Baltic country is squabbling with Western -- mostly Swedish -- leaders over spending cuts, and it's a very real possibility that the country may be forced to devalue its euro-pegged currency if emergency global funds don't arrive.

Stiglitz argues for the U.S. to get on the global reserve currency bus

In a new op-ed Joseph Stiglitz argues that due to the national debt (projected to be $9.05 trillion over the next 10 years), America should get on the we need a new reserve currency beyond the dollar bus. Kind of a if you can't beat 'em, join 'em message. (see China and the Dollar for details on the Chinese game of chicken while pushing for a new reserve currency).

Our budget deficit, as well as the Federal Reserve's ballooning lending programs and other financial obligations, will accelerate a process already well underway -- a changing role for the U.S. dollar in the global economy.

China to Fed: No more Treasuries we want land??

 Looks like history could be repeating itself.  Now we've known for some time that the Chinese were getting weary about buying and holding US-Dollar demominated government securities.  They've been pairing back from the longer dated maturity paper to shorter ones.  

Slowly but surely, they want to move away from American debt.  All that money we've been shoveling their way, a byproduct to our trade imbalance, has gone into things showing their diversification plan, from farm lands in Africa to purchasing major steaks in mining firms to buying precious metals and oil.  Now it seems, according to one Li Liangzhong, want to extend into further real estate purchases in the US.  



China! - Keep Buying Our Debt!

What kind of policy is this one? We beg China to buy our debt while corporations offshore outsource manufacturing and our jobs to China?

From voice of America:

The top U.S. diplomat says Washington must incur more debt to China to boost the ailing U.S. economy and stimulate demand for Chinese products. She says it would not be in China's interest if the U.S. is unable to get its economy out of a recession.

China is the largest holder of U.S. Treasury bonds. Clinton says China's continued investment in U.S. Treasuries is a recognition of the interconnection of the U.S. and Chinese economies.

Chinese Foreign Minister Yang Jiechi told Clinton Saturday that both countries should boost economic policy coordination and reject protectionism in trade.