Comments on: New Citigroup maven Buiter warns of sovereign debt delusion http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html Finance, Economics and Markets Fri, 10 Feb 2012 00:37:00 +0000 hourly 1 By: Plan B Economics http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-58479 Plan B Economics Fri, 12 Feb 2010 04:03:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-58479 World's 10 riskiest government bonds...http://www.planbeconomics.com/2010/02/11/worlds-10-riskiest-govt-bonds/ Seriously though, some of the debt investors need to take a haircut. This is completely unsustainable. World’s 10 riskiest government bonds…http://www.planbeconomics.com/2010/02/11/worlds-10-riskiest-govt-bonds/

Seriously though, some of the debt investors need to take a haircut. This is completely unsustainable.

]]> By: CrisisMaven http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-58470 CrisisMaven Thu, 11 Feb 2010 16:08:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-58470 "From Dubai to Iceland, Ireland, Greece, Hungary, Italy, Portugal, Spain, Japan, France, the UK and the USA, the sovereign debt burdens have been at current levels during peacetime only on the way down from even higher public debt burdens incurred during wars." Right, that's why I argue since a while that the alternative to <a href="http://crisismaven.wordpress.com/2010/02/08/bloom-of-doom-v-we-have-control-of-the-ship-we-have-a-plan/" rel="nofollow">sovereign default</a> might well be war as a face-saver for incompetent politicians ... “From Dubai to Iceland, Ireland, Greece, Hungary, Italy, Portugal, Spain, Japan, France, the UK and the USA, the sovereign debt burdens have been at current levels during peacetime only on the way down from even higher public debt burdens incurred during wars.” Right, that’s why I argue since a while that the alternative to sovereign default might well be war as a face-saver for incompetent politicians …

]]> By: Edward Harrison http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57727 Edward Harrison Thu, 10 Dec 2009 15:36:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57727 You have to believe that the U.S. government will do anything to prop up the banks via accounting rules at this juncture. Unless we see a default, I wonder how this gets treated. I will have more on accounting - perhaps later today. You have to believe that the U.S. government will do anything to prop up the banks via accounting rules at this juncture. Unless we see a default, I wonder how this gets treated. I will have more on accounting – perhaps later today.

]]> By: M.G. in Progress http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57724 M.G. in Progress Thu, 10 Dec 2009 08:45:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57724 Let's see if the Emirates are also a tempest in a tea pot for Citigroup's exposure. Let’s see if the Emirates are also a tempest in a tea pot for Citigroup’s exposure.

]]> By: barryschaeffer http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57695 barryschaeffer Thu, 03 Dec 2009 00:55:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57695 Ed, One of the key factoids that seems to elude just about every commentator is that there is NOT a simple relationship between profligate governments and weak currencies (i.e. BIG WASTEFUL Feds = cheap USD). Although they are clearly related, we need only to look to very recent market action in the Yen when the Dubai debacle hit. In spite of Japanese government Debt/GDP of near 200%, the Yen was king of the Hill. How can we square this reality with the simplistic notion that the USD MUST implode because of Obama's deficits? Barry Ed,

One of the key factoids that seems to elude just about every commentator is that there is NOT a simple relationship between profligate governments and weak currencies (i.e. BIG WASTEFUL Feds = cheap USD). Although they are clearly related, we need only to look to very recent market action in the Yen when the Dubai debacle hit. In spite of Japanese government Debt/GDP of near 200%, the Yen was king of the Hill. How can we square this reality with the simplistic notion that the USD MUST implode because of Obama’s deficits?

Barry

]]> By: Edward Harrison http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57679 Edward Harrison Tue, 01 Dec 2009 00:54:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57679 Barry, I think deficit hawks are correct that there are real trade-offs regarding the huge deficits now being created. I tend to stress the near-term need to increase household sector to increase savings which is why the deficits are necessary. However, policy has been tilted in favor of businesses over households so we haven't seen a huge uptick in household saving yet despite a likely longer-term balance sheet recession. That said, the real risk for the U.S. is currency revulsion, inflation and higher interest rates - although not sovereign default. Given the problems you see in Europe, the concern about devaluation should be muted. And given the deflationary pressures the same is true for inflation. In my opinion, that gives the U.S. more leeway than Buiter believes they have. The bond vigilantes don't have anywhere to go. So that puts me more in Bill Gross and David Rosenberg's camp regarding continued low treasury rates. Barry, I think deficit hawks are correct that there are real trade-offs regarding the huge deficits now being created. I tend to stress the near-term need to increase household sector to increase savings which is why the deficits are necessary. However, policy has been tilted in favor of businesses over households so we haven’t seen a huge uptick in household saving yet despite a likely longer-term balance sheet recession.

That said, the real risk for the U.S. is currency revulsion, inflation and higher interest rates – although not sovereign default. Given the problems you see in Europe, the concern about devaluation should be muted. And given the deflationary pressures the same is true for inflation. In my opinion, that gives the U.S. more leeway than Buiter believes they have. The bond vigilantes don’t have anywhere to go. So that puts me more in Bill Gross and David Rosenberg’s camp regarding continued low treasury rates.

]]> By: barryschaeffer http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57678 barryschaeffer Mon, 30 Nov 2009 23:29:00 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-57678 Ed, I know that you are familiar with Richard Koo’s analysis of balance sheet recessions, and how to deal with them. It seems to my untrained eyes that Paul Krugman is promoting Koo’s fiscal stimulus medicine, and it seems that Bruce Krasting takes issue with Krugman, effectively arguing that the bond vigilantes will revolt if we approach government debt/GDP of 100%. One of the arguments that you have made is that (with the collapse of the shadow banking system and other market action) demand for loans is collapsing. Koo (and I think Krugman) seems to recommend that the government provide the loan demand to create fiscal stimulus and break the vicious cycle of deflation. Krasting and George Will say that the bond markets will rebel if we try this. http://www.zerohedge.com/article/best-buy-krugman-and-carry-trade Questions: Who do you think has the more compelling argument here? How can we know going forward? Do we just look at 10 yr Treasury yields? Assuming that the Fed doesn’t raise the fed funds rate “for an extended period”, do you think that the markets are likely to demand much higher yields on 10 yr treasuries any time soon? I wonder about this, given the recent article in FT “Is Sovereign Debt the new Sub Prime?”. Barry Ed,

I know that you are familiar with Richard Koo’s analysis of balance sheet recessions, and how to deal with them.

It seems to my untrained eyes that Paul Krugman is promoting Koo’s fiscal stimulus medicine, and it seems that Bruce Krasting takes issue with Krugman, effectively arguing that the bond vigilantes will revolt if we approach government debt/GDP of 100%.

One of the arguments that you have made is that (with the collapse of the shadow banking system and other market action) demand for loans is collapsing. Koo (and I think Krugman) seems to recommend that the government provide the loan demand to create fiscal stimulus and break the vicious cycle of deflation. Krasting and George Will say that the bond markets will rebel if we try this.

http://www.zerohedge.com/article/best-buy-krugman-and-carry-trade

Questions:

Who do you think has the more compelling argument here? How can we know going forward? Do we just look at 10 yr Treasury yields?

Assuming that the Fed doesn’t raise the fed funds rate “for an extended period”, do you think that the markets are likely to demand much higher yields on 10 yr treasuries any time soon? I wonder about this, given the recent article in FT “Is Sovereign Debt the new Sub Prime?”.

Barry

]]> By: Monday links: depression mode Abnormal Returns http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-7260 Monday links: depression mode Abnormal Returns Mon, 30 Nov 2009 18:13:18 +0000 http://www.creditwritedowns.com/2009/11/new-citigroup-maven-buiter-warns-of-sovereign-debt-delusion.html#comment-7260 [...] new chief economist of Citigroup (C) thinks it is too big.  (Clusterstock also Credit Writedowns, Real Time [...] [...] new chief economist of Citigroup (C) thinks it is too big.  (Clusterstock also Credit Writedowns, Real Time [...]

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