National Debt hits another record $11 Trillion

I had earlier posted on my blog just as recently as in October 08 about the astonishing rate at which the national debt of US touched 10 Trillion and they had to bring a new digital counter to fit all those digits. Now just in six months.. here's the next one !

Now what does that mean ?
> Over $36,000 in debt for every man, woman and child in US.
> It took the U.S. government 191 years – from 1791 until 1982 – to run up its first trillion dollars in debt.
> By the time George W. Bush was inaugurated in 2001, the National Debt stood at $5.7-trillion. He ran up more debt faster than nearly all of his predecessors combined: just under $4.9-trillion. Also if you want teach your teen kids struggling with algebra on what a real-life example of "exponential" is, this could be your classic one !

> It's projected by Obama adminstration that by the end of September 2012, the Debt will have soared to $16.2-trillion – which amounts to nearly 100% of the projected Gross Domestic Product (GDP) that year.

Wonder what's the big deal ? Debt to whom ? should we be worried ? or who should worry ? Ofcourse, it is.. check it out here for some Debt 101 class ! .

Only interesting are some of the signs if you chose to observe :

> 3/13/2008 "Worried Debtors & Reassurances on Creditworthiness" : China, proably the single largest buyer of U.S. debt in recent times, now starting to get concerned about the safety of the estimated $1 trillion his country has invested in U.S. government debt! Chinese Premier Wen Jiabao said on Friday "We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. Frankly speaking, I do have some worries," he said in response to a question. NYTimes Obama Reassures Countries on U.S. Debt

> Two days later, 3/16/08 : Bloomberg reports "Foreign Demand for Long-Term U.S. Assets Weakens". Quote from the article “There was a stampede by foreign investors to exit their U.S. dollar investments,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Everyone wants to bring their money home. It’s not about return on capital. It’s whether you can get your capital back.”

The decline in foreign holdings was the steepest since August 2007. Foreign investors sold a net 43 billion dollars in long-term US securities in January as the flow of capital turned negative, US Treasury data showed Monday.

Analysts say a loss of confidence in US Treasury securities could cause a dramatic drop in the dollar and force Washington to pay higher interest rates.

Cost of Economy rescue: Adding up the dollars

Any idea how much all the US government bailouts so far cost ?

700 billion ? 1.6 Billion ? 1.4 Trillion ? ..

it's a whopping 3.6 trillion sofar already spent out of an allocated sum of $9.1 trillion..

let's put that as number $ 9100,000,000,000 ....

Unbelievable ? check out how and where it all went here

Old behaviours to New

The current news everywhere highlights that how far the pendulum is swinging in opposite direction, that too in such a short span... whether it's related to Global economies, US ecoonomy, Climate patterns - all seems record breaking !! the levels of losses in billions, worst conditions, gloomy forecasts !.

But all is not bad.. there is a new face to the economy in 2009 as people seem to come back to their senses and grasp the new reality and kick some good old habits goodbye ! Check few below..

> American spending has fallen further in the past six months than it has since 1974. For much of this decade, many Americans lived beyond the means of their regular income, tapping cheap credit and the rising value of their homes for extra cash. For a time, the savings rate fell almost to zero... But now in the final quarter of 2008, the savings rate reached its highest level since 2002. In December 2008, Americans saved 3.6 percent of their income.

> Major lossess & job cuts announced in last couple of weeks

Bloody Monday: 74,000 layoffs announced in one day - Caterpillar, Pfizer, Sprint, HomeDepot, GM, Texas Instruments...

US auto sales plunge to 27 yr lows

Bank Failures Will Cost FDIC $40 Billion

Panasonic set to cut 15,000 jobs - The world's largest maker of plasma TVs
BHP Billiton posts 56.5 pct fall in 6-month profit
Macy's Announces 7,000 Job Cuts
Major layoffs at Microsoft -
Orange County, California employers cut 41,400 jobs in 2008, tied with 1991 for the worst local job loss, the state Employment Development Department Friday.

Unemployment sweeps nation - Where does your state rank? Check it out here

'Atlas Shrugged': From Fiction to Fact in 52 Years

Interesting article from WSJ on how the current economic strategy seems to follow right out of Ayn Rand's classic 1957 novel "Atlas Shrugged". If you are not familiar ... Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.

For the uninitiated, the moral of the story in Novel is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

http://online.wsj.com/article/SB123146363567166677.html

As the author of this article says... Ultimately, "Atlas Shrugged" is a celebration of the entrepreneur, the risk taker and the cultivator of wealth through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book: When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone the poorer.

One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack Obama puts it.

David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand's ideas, explains that "the older the book gets, the more timely its message." He tells me that there are plans to make "Atlas Shrugged" into a major motion picture -- it is the only classic novel of recent decades that was never made into a movie.

"We don't need to make a movie out of the book," Mr. Kelley jokes. "We are living it right now."

Walk in the Rain

My fellow Portlanders & Oregonians will vouch that cloudy days like for example today in PDX won't last forever and it will be eventually be Sunny again. By the way, did you know that Pittsburgh (PA), Rochester (NY), Burlington (VT), Cleveland(OH), Grand Rapids (MI), Hilo(Hawaai) all have less number of sunny days than Portland, OR which gets 68 days of sunshine in a year. So stop bashing Portland as the land of rain !

We in Portland ofcourse enjoy Sun better than anyone else ..well, except the Seattle folks, may be. Why, because we understand the value of it ! and don't take it for granted like those sweaty Californians or Texans ! ! So as you can imagine, no lunch hour discussion or quick chat with another Portlander would be complete without the reference to the current weather and better tomorrow.

Now that teaches few important things to Portlanders .. "hope", that things will be always better tomorrow, even though today might suck !, also to "be realistic" that there are things that are not in your control, and "learn to adapt" - have always a plan for fun rain or shine. Of course, lastly we understand that everything is cyclical !

Now let's put that in to the context of current gloom and doom economy show that we all seem to be dragged into... lot of folks are wondering where does this lead to ? a tragedy or happy ending ? and panicking what to do when the world comes to an end. First thing, take a queue from my fellow Portlanders and relax ! these days of gloom and doom shall too pass, and Sunny days will be here again !

But if you are still not sure .. here's my own rendition of how the current times too follow the classic cyclical nature of markets around the world.

• Increase in consumerism --> Surge in Demand of all products-->
• Booming markets & Rosy outlook by companies --> Stock markets go up ->
• Increased Capital spending -> Employment & Salary growth -> Boom stories !
• Rise in asset prices with no correlation to real value (aka Infaltion)->
• Govt initiatives & tax incentives keep the bubble growing ->
• Banks & lenders go big guns, Credit rules !! -> Asset prices & stock markets rocket higher ->
• Net worth increased -> Party time !!
• Reckless spending - wants vs needs ->
• Significant expansions/initiatives w/no correlation to true demand ->
• Excessive supply in market -> Aggressive marketing tactics & Risky lending pracitces ->
• Increased dependence on debt overall -> Demand slows down & Signs of Losses for Real estate ->
• Sprialing costs and cost of debt -> Tighened lending terms -> Asset values significant drop ->
• Bad debts increase as they couldn't afford it in first place -> Finally some has to pay up !!
• Lenders losses mount & Financial stocks crash -> Liquidity freeze ->
• Stock markets show signs of weakness -> Cautious future outlook by Corporations ->
• Lack of demand for raw materials/energy -> Investors withdraw ->
• Big companies take hit -> Stocks keep going down -> Consumer gets hit & Economy in news ->
• Wide spread panic & Stock markets crash Investors flee -> Government initiatives ->
• All-around spending freeze & Less jobs -> Unemployment rate spikes up -->
• Salaries go down -> Party over !!
• Consumer spending hit --> Cosumer-oriented & value stocks get hit ->
• Recession declared -> Home & asset prices drop further ->
• Net worth drops as Savings & retirement funds lose value ->
• Government dumps new money into circulation ->
• Burnt once, investors forget market ->
• Slow,long recovery while everyone get used to Pain -> Bargain hunters enter !!
• Real estate and asset prices show signs of recovery -> Stock markets flat ->
• Corporations start growth initiatives -> New bubbles (how about renewable energy ?) ->
• Venture capital flows -> New Growth companies ->
• Govt Initiatives to boost economy -> Hmmm.. how about war with Venezuela?
• New capital projects > Stock prices up in growth sectors ->
• Financial companies & Investors initiate buying -> Stock markets signs of growth ->
• Newer markets in Emerging countries open up ->Markets & Growth stories in news ->
• Increased consumer confidence -> Employment rates up ->
• Everyone wants to join the band-wagon -> It's boom time baby ! back to consumerism !!!

Of course it's cyclical and only question is how long will this bad spell last, and how well we all rideout these down days and comeout shining on the sunny side. Ofcourse we have new Uncle Sam in town to bail the average Joe Plumber out !

Only caution is it appears the duration of these cycles of boom and bust in markets seems to be getting shorter and shorter, very similar to the number of sunny days per year in Portland which seems to keep going down over time !!!

I guess there is a long term equivalent of global warming coming to financial markets which ofcourse is not good for all.. but who cares, it's time to enjoy my walk in the rain ...