Karl Denninger: Fiscal Category 5 Hurricane Warning

[Alhena]

If this is even a little accurate, we are f'ed.

http://market-ticker.org/archives/622-Fiscal-Cat-5-Hurricane-Warning.html

[BeHereNow]

1. Oh my...

Buy non-perishables now.
This is going to get ugly.

BHN

[natrat]

2. recd

[marions ghost]

3. OK dire in tone & long... interpreters needed

for us laypersons, what does it mean (in 3 sentences or less)?

Pardon my ignorance but who is Karl Denninger & why is he credible?

[Alhena]

5. Basically he's saying that Bernanke's comments indicate that the Fed will print money

to buy the treasury bonds that we will have to issue for the trillion or so we're about to spend on bailouts. He says that this will devalue the debt that countries like China and Saudi Arabia hold. The nightmare scenario for the US dollar has always been that countries like China will stop buying out debt or sell the bonds they hold, crashing the dollar, causing huge inflation, etc. Denninger says that Bernanke's actions should force these foreign nations to put their foot down and demand that we stop dealing with our debt in such an irresponsible manner (i.e. printing money).

He's also saying that the Fed has been propping up the financial markets by guaranteeing certain classifications of debt, but this just causes the private marketplace for other kinds of debt to dry up because who wants to buy unprotected debt from some private entity if you can get debt backed by the government? Even the government can't prop up all the credit there is out there.

So basically, Denninger is saying that Bernanke is trying to prop up the system with smoke and mirrors instead of taking our pain like we need to and that people are finally wising up to the fact that it won't work. I think the fact that the DOW was down 700 points at one point today supports the notion that we've got a very serious situation.

[marions ghost]

9. thank you so much

now that's the way I can take in info about economics. I need the big picture and I bet a lot of other people reading here do too.

I can see the Dow is see-sawing and a lot of people feel understandably seasick. Stop the tilt-a-whirl, I wanna get off.

So what's the chance that the foreign nations will put their foot down?

[Dogtown]

4. Karl doesn't like Obama:

"that's before Obama wins (and he will) and promises another $1 trillion worth of new spending without a nickel's worth of ability to fund it."

If Karl is that misinformed, his premise is likely tainted.

Thanks anyway!

[Alhena]

6. It's not personal- certain fiscal chickens are coming home to roost that no one can prevent

we are screwed no matter who is in the White House. The difference in my view is that Obama will make sure that the rich take their fair share of the pain this time. But there will be a whole lot of pain to go around- that can't be avoided when a nation's primary export is debt. Our national economy is based upon an unsustainable model of us relying upon other nations buying our debt in spite of the fact that it's increasingly clear that we won't deal with that debt in any kind of responsible way.

[Dogtown]

7. I can agree with that

I'm not an expert on economics, but I don't think anyone can see through the murk on this one.
Not dissing your post, BTW. Just wanted to point out that your source has some bias; in principle, he may be correct. I can't imagine that dire hardship is not in our immediate future.

[Alhena]

8. Few people are smart enough to truly understand this stuff, and I'm not one of them, but my

BS detector is pretty good on this kind of thing, and what Denninger is saying makes a whole lot of sense to me.

Then again, maybe China is so dependent upon our economy that they will just bend over and take it as we print money and devalue all the US treasury bonds they hold. We shall see.

Long term, I am extremely confident that there will be a crash of the dollar. Printing money is the only option left when there's no political will for massive tax increases or spending cuts. It's just not clear if the crash will happen in the near term or not.