I wonder, if the Chief Investment Officer of the world’s largest bond fund were to go mad, how could you tell?
Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people… What most politicians apparently are working for is to perpetuate their power – first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they’re ever voted out of office, they have a home just down the street – at K Street – with six-figure incomes as a starting wage.
What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced from their representatives – and if that description fits the Democratic Congress now in control – then it applies to Republicans as well – past and present. So you watch Fox, or is it MSNBC? O’Reilly or Olbermann? It doesn’t matter. You’re just being conned into rooting for a team that basically runs the same plays called by lookalike coaches on different sidelines.
Great stuff. From there he moves on to investment talk. He does not like equities — but then, he never likes equities.
More surprising, perhaps, are his comments on interest rates.
Various studies by the IMF, the Fed itself, and one in particular by Thomas Laubach, a former Fed economist, suggest that increases in budget deficits ultimately have interest rate consequences and that those countries with the highest current and projected deficits as a percentage of GDP will suffer the highest increases – perhaps as much as 25 basis points per 1% increase in projected deficits five years forward.
I wonder how these guys fit Japan into their model, where the debt/GDP ratio is about to cross 200 percent, yet the yield on 10-year government debt is 1.36%. (I like to call this “the Hendry conundrum”.)
Germany, in fact, has just passed a constitutional amendment mandating budget balance by 2016. If these trends persist, the simple conclusion is that interest rates will rise on a relative basis in the U.S., U.K., and Japan compared to Germany over the next several years and that the increase could approximate 100 basis points or more.
Gotcha.
What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square.
You wonder sometimes how many of these people have read their history. Pick up virtually any business-oriented historical book — for example (as I am reading now) the masterful Vanderbilt biography by Stiles — and it becomes immediately obvious that there is nothing different about today than 50, 100, 200, or more years ago. Why all the hand wringing? Sure, we could do better, but it’s unlikely we will. At least capitalism more or less, most of the time, basically keeps us stumbling in the right direction, eventually. And that’s all that we should expect from a political system, really.
I wonder how these guys fit Japan into their model, where the debt/GDP ratio is about to cross 200 percent, yet the yield on 10-year government debt is 1.36%. (I like to call this “the Hendry conundrumâ€.)
Indeed, most people don’t bother trying to answer this. Denninger keeps writing about how the “markets will not tolerate this” and so on.
So, who are the main buyers of Japanese debt? Is it other sovereign funds or is it the people of Japan?
BTW, Nemo, it would be helpful if you can provide an option for a commenter to delete his/her comment. That way if we want to edit our comments, we can delete the old one and write another.
You wonder sometimes how many of these people have read their history.
I agree. This kind of stuff is nothing new. Ancient scriptures like the Bible have many such stories. Greed and fear, and the extent to which some people are driven by them, are nothing new.