My USD Play Book
One measure of the increased concern at the ability of the United States to finance its enormous deficits in the future is the rising cost of credit default swaps bought as protection of Treasury debt. These traded near a record high on Tuesday, with benchmark 10-year contracts on Treasuries increased to 42 basis points, or 0.42 percentage points, from around 20 in early September. The contracts have also risen from below two basis points at the start of the credit crisis in July 2007.
While it remains unlikely that the US government will default on its debt, a weaker dollar would ease the burden of payment on existing debt. read more
My playbook for USD. Money currently flooding back to America. When that stops USD falls.
Current misconceptions
- US debt should be compared to a stock index, GDP or GNP.
- All other economies are worse off than US.
- Buffett’s investments in GE and GS were bad.
The more likely truths
- US debt should be compared to US population or possibly GNP.
- Australia’s is among the many economies is in a stronger position than the US.
- 10% income with great potential for capital gain is never a bad investment.
Credit Crisis 2
Health Care Costs
Healthcare costs are growing so fast that they are eating up state and federal budgets, overwhelming people’s ability to afford premiums, and promising to crush families who find they must pay for care on their own. Some 158 million working Americans are at risk, as their total family insurance premiums have risen in round numbers from $6,000 in 1999 to $13,000 in 2008. Of this, the worker contribution is now about $3,400, a hefty sum, but one that obscures the real five-figure expense—which is even greater if one adds on the Medicare payroll tax that can run in the thousands. Overall, healthcare spending has grown numbingly from almost $700 billion in 1985 to almost $2 trillion in 2005, and common sense says that is unsustainable. For reference, the entire federal budget is $3 trillion. read more
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