Ring of Fire
By Barry Ritholtz - January 27th, 2010, 11:55AM
Interesting chart from Bill Gross, on the eve of the SOTU address.
You will note that missing from the chart is the $5.5 trillion in mortgages that the Uncle Sam has on their books, having followed Gross’ suggestion that the government make the GSE backing explicit instead of implicit.
Essentially, Gross is complaining that (amongst other factors) the government listened to him . . .
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Source:
The Ring of Fire
Bill Gross
PIMCO, November 2010
http://media.pimco-global.com/pdfs/pdf/IO%20Feb%202010%20WEB.pdf
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January 27th, 2010 at 12:04 pm
This does not look good for the long-term gold bears.
January 27th, 2010 at 12:24 pm
And the US is following the Japanese model…
January 27th, 2010 at 12:26 pm
Gross is actually in the clear – he’s still a crook. Within the ‘burning ring of debt’ are net- energy losers with France being borderline.
France is auto- dependent but produces a large percent of electricity by reactors.
Australia, Norway and Canada are net energy producers/exporters. Denmark, Sweden and Finland are all pursuing large- scale renewables. Poor ol’ USA and Japan (also Greece, Italy, Portugal, Spain, Ireland, and the UK) are large net energy guzzlers subtracting 4 percent or more from GDP. UK was a net exporter up until a few years ago.
Iceland is the outlier, being a net energy producer but lending against insufficient capital in currencies other than its own.
Other net energy hogs set to face the debt- music are China and Japan. China will hyper- inflate to attempt to avoid an energy- centric deflation and Japan will have a currency crisis once domestic savings are exhausted. Probably later this year.
January 27th, 2010 at 12:29 pm
“Essentially, Gross is complaining that the government listened to him . . .”
Yep. Gross got what he wanted. Good and hard.
January 27th, 2010 at 12:43 pm
“You will note that missing from the chart is the 5.5 trillion in mortgages that the Uncle Sam has on their books”
And why should they be included? These mortgages are assets, not liabilities. The figure shows the debt of governments, which is owed to someone else. Regarding the mortgages on the books of the GSEs, USG is the creditor, not the debtor.
rc
January 27th, 2010 at 1:03 pm
Yep, that’s why Summers and Geithner got the job.
Next, we’ll have the Phillip Morris/McDonalds healthcare bill.
Anyone know how much of the 5.5 Ts are defaulting.
January 27th, 2010 at 1:07 pm
Eh, savings and debt balance.
Japan has lots of debt which balances against the massive savings rate.
Gold price in JPY in down 33% since 1980 and gold in jpy is up only 50% since 1990.
Doesnt seem like debt effects currency or gold price for wealthy developed nations.
And because interest service costs are 1-2-3%… its natural for debt levels to be 3-5x higher than 30 years ago (same interest/gdp ratio).
January 27th, 2010 at 1:20 pm
rc has a point — even if the guarantees were made explicit, only the present value of future losses should go into the debt calculation.
January 27th, 2010 at 1:23 pm
RE debt/GDP ratio
Over the next decade US publicly held debt is forecast to more than double to 85 per cent of gross domestic product – the highest rate since the second world war. And that is without including the intragovernment debt in Social Security and Medicare which would push US indebtedness well above 100 per cent of GDP during Mr Obama’s second term ( if he makes it that far )
Oh and here’s some thread music ;)
http://www.youtube.com/watch?v=0lhf9U5Wf3Q
January 27th, 2010 at 2:09 pm
odd i have seen estimates that say Japan’s debt is 250% of GDP. so how is they show up where they do? and if we don’t include assets wouldn’t any business look like they are in even worse shape than any of these governments?
January 27th, 2010 at 2:09 pm
I see we are in with good company, Ireland, the UK, Greece……
January 27th, 2010 at 2:18 pm
Apologies to Johnny Cash…
Ring of Fire
[Debt] Is A Burning Thing
And It Makes A Fiery Ring
Bound By Wild Desire
I Fell Into A Ring Of Fire
CHORUS:
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher
And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher
And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire
The Taste Of [Debt] Is Sweet
When [Greed] Like Ours Meet
I Fell For You Like A Child
Oh, But The Fire Went Wild
CHORUS
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher
And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire
I Fell Into A Burning Ring Of Fire
I Went Down, Down, Down
And The Flames Went Higher
And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire
And It Burns, Burns, Burns
The Ring Of Fire
The Ring Of Fire
January 27th, 2010 at 2:52 pm
Add’l related article at Prieur du Plessis site by Comstock Partners entitled “The Deleveraging Has Begun”:
http://www.investmentpostcards.com/2010/01/27/the-deleveraging-has-begun/
With total U.S. debt (private and public) to GDP around 370% Comstock says:
“Even more incredible is that the present debt level does not include the entitlement and pension obligations that would just about double the total debt from where it is now.”
It includes commentary on other global debt…….a very interesting read and includes 2 graphs: one on total U. S. debt to GDP from 12-31-1922 thru 9-30-2009 and the second on “The Cycle of Deflation”.
January 27th, 2010 at 3:54 pm
@ sharkbait
+1
January 27th, 2010 at 8:59 pm
hey clueless tagyoureit I posted the Ring of Fire link @ above ;)
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