skwestorange

Time to Forsake Stocks for Bonds? Arnott and Arends Square Off

The Treasury funding needs are so high - read multi-trillion. The Fed has to keep buying the long end to keep the ten-year rates and vis-vis mortgage rates down. Even if one assumes that the long end accounts only for 30% of the trillions coming down the pike over the next year or two, I don't see how the Fed can keep buying.

The U.S. Is Losing the Economic Cold War

Yes, the author has let his wild imagination run wilder and makes a lot of economic predictions without any supporting evidence offered.
That said, let us try laying out a case for the theme that USA is headed for some deep trouble in the next few years.
First, the USA will need financing of the order of 3 to 4 trillions in the next couple of years. That money has to come from borrowing since:
1) our Federal Govt. revenues will shrink due the boomer retirement,
2) long wait for those now unemployed to get jobs and pay taxes,
3) many corporations in general will have so much net operating loss that they won't have any meaningful tax burdens for several years

Fed Govt expenditure will increase multifold because:
1) those roughly 4 millions unemployed now and the million(s) more to be added to the unemployed rolls over the next year will be collecting unemployment for the maximum time allowed,
2) Our interest service cost will increase rapidly due to the current 10 Trillion debt on the book and its rollover most likely at higher interest rates
3) New interest service cost to be added by the 3-4 trillions to fund all the losses and stimulii programs
3) New debt service cost to be added by financing our continued trade deficit though may not be at the heady levels of 65 plus billions a month of the past few years, will never the less be deficit only, pehaps at 30-40 billion a month clip because we don't manufacture many of the things we need for our daily lives
4) Our deficit financing needs will also rise by the expected continually increasing boomer retirements to come and their medicare and medicaid costs and Social Security payments. Recall our SS trust is filled only with IOUs from the Fed Gov that is to be repaid with Tax revenues
Need I go on, I am we all get the picture! Just put the numbers for these things. Then it is easy to see why the USA as we know it cannot ever exist in the future. Our children and and grand children deserve better, but I am not sure anything can done now in this regard. Shame on our generation of prolific consumers who did not know when enough is enough.

The only way economic growth can help is if some miracle hormone is injected into our economy that can produce goods and services the rest of the world needs and can afford. I think this can only happen in our dreams. While I continue to remain optimistic that if not us, the next generation will right this sinking ship, I cannot hide my skepticism.