Wall Street gyrating; volatility high; US shutdown averted with more debt; US wholesale trade healthy; Canadian jobless rise; China inflation cools; HNA bailed out; UST 10yr 2.84%; oil and gold down; NZ$1 = 73.3 USc; TWI-5 = 74.2

Here's our summary of key events overnight that affect New Zealand, with news the stock market correction is getting toward 'blood-in-the-streets' territory.

Firstly, the equity market rout has not abated yet. The S&P500 was down another -1.5% today and taking the drop since Monday to a massive -8.1%. This comes after Shanghai dropped -4% yesterday for a -10.2% collapse over the week. The NZX50 got off lightly with a weekly drop of -2.3% with the local FBU issues a good part of that. But in the past half hour, Wall Street has rushed to finish the week with a small gain on the day.

The volatility index hit over 40 an hour or so ago and its highest since 2011, although it has just dipped since (now 39.3) with three market-trading hours to go. Remember, the VIX was at 13.5 at the start of the month.

A US Government shutdown has been averted with a new two year deal that will keep the Federal Government funded. But the compromises involved are toxic. As signed into law by Trump, the huge corporate tax cuts and large defense and social spending increases will be paid for by massive debt increases that amount to an extra +US$800 bln in 2018 and yet another +US$1.2 tln in 2019. That will take the public-debt-to-GDP ratio from about -77% now on track for -109% in ten years. From here on out they look to have locked in extra debt at the rate of more than $1 tln/year (an extra -5.5% of GDP per year). Cripes. When she blows, no amount of fiscal responsibility in New Zealand will protect us. (And also remember, Donald Trump has form, presiding over his own enterprises that were forced into bankruptcy.)

US wholesale trade data out overnight was surprisingly strong for December. While growth (+1.2%) wasn't as high as in November (+1.9%), it handily beat estimates. Inventory-to-sales ratios fell again, a healthy sign.

We should also note that 2018 has started out with record orders for heavy trucks in the US.  In January, trucking companies ordered the most new big rigs in nearly 12 years, as they rushed to take advantage of one of the hottest freight markets in recent memory.

North of the border, Canada has reported disappointing employment numbers. The number of jobs actually fell which has surprised observers who expected a small rise (it was driven by a very large fall in part-time work, greatly offsetting a good rise in full-time work), and their unemployment rate rose to 5.9% which was also unexpected.

China reported lower consumer inflation in January, at 1.5% as analysts expected. Industrial inflation slipped to a 14 month low of 4.3%.

It's finally happened for HNA - they have got their Chinese Government bailout. SOE Citic Bank has 'loaned' them US$3.2 bln to pay off debts from other lenders. No word yet on shareholding or control changes, but in the usual Chinese (crony capitalist) way, there are unlikely to be any.

The UST 10yr yield is slipping, now down to 2.84% as bond prices gyrate. That is a net yield fall of -1 bps since this time yesterday but just an hour ago it was -5 bps. The Chinese 10yr is at 3.90% (-1 bp) and the New Zealand equivalent is at 2.97% (-2 bps).

Local swap rates ended the week pretty much where they started.

But not only is the VIX flashing warning signs, credit default swap markets are as well for bonds. Corporate CDS spreads have taken a sharp jump, especially in the US. And the premium Australasian bonds attract over US bonds is now the lowest ever - in fact on one index, it is a discount.

Gold markets aren't closed yet but the price of gold is down to US$1,313 in New York, down another -US$5 from this time yesterday.

Oil prices are very sharply lower with the US benchmark now just under US$59, another -US$2.50 drop and the Brent benchmark over US$62.50/bbl. Remember, about a week ago, these prices were threatening US$70.

The Kiwi dollar is rising today - rather, the greenback is falling (and genereally, the US dollar hasn't been this low since 2014) - and the Kiwi is now at just under 73.3 USc. On the cross rates we are at 93 AUc and 59.3 euro cents. That puts the TWI-5 at 74.2 and highest in just over a week.

Bitcoin is at US$8,611, a +5.7% gain from this time yesterday.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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At the stroke of a pen, Trump has destined his fellow Americans to a long term future of austerity. It has to be paid back. Is he hoping to use inflation (devaluing dollar) to somehow deflate the value of America's debt? He assumes the world will be willing to lend hand over fist without questioning the risk. One can only imagine the negative global fallout that could unleash should still lofty equity markets crash, interrupting global growth and labour markets.

Nixon set the path Trump is only finishing the job.

That's not how this works, it's TRUMPS fault, hes the one that ticked up 20 trillion dollars. He's also at fault for climate change, the stock market (if it crashes), bitcoin (if it crashes) also for world hunger too.

This path, and the outcome, was locked in the day Nixon took the world off the gold standard. A mathematical certainty you could say. With no restraint in place, unfettered money creation will always happen. Mind you a gold standard just makes the process go slower.

Explain how gold standard prevented The Great Depression ?
You can’t print money by the hundreds of billions per year if you’re tied to having a store of gold in the vaults to back up papers value so you’re right on one count.
Remember we live in a world where paper money has been made virtually redundant also.

Perhaps shadow banking should be considered, or the 1920's equivalent. But also note I said it just happens more slowly with gold because the underlying problem is interest.

You call that an observation ?

May I ask a naive but serious question: we always assume that debt has to be paid back, does it? and why?
(btw I'm NOT saying debt is good)


Great question.
Lend me $100k.
You'll then see why it needs to be paid back.

No problem, I'll lend you 100k you pay me 10% interest pa and you don't have to pay it back. So my question stands, why do we assume debt has to be paid back

It depends. Does the USA have to pay back its debts? No. All the debt that the US holds is denominated in US dollars. The US holds the monopoly on "printing" US dollars. It does not need China, UK, Germany or any other country to "loan" them money for their debt.

If your household debt was denominated in "Yvil dollars" then you too could wipe your debts out with the stroke of a key.

What choice would China or any other country have if the US gave them the middle finger? No choice but to moan and maybe try and move away from the US dollar dependancy. Good luck with that.

Any other country has to pay back their debt if it's not denominated in their own currency. NZ included.

Might is right.

Conveniently this explanation ignores the effects of inflation.
You may be able to always nominally pay back debts, for sure. Funny how no one really does that though, eh.

If the USA decided to mint a $20tril coin and pay it's debts that way, that would be the end of borrowing in US dollars.
Big military/might or not... If you don't have a way to fund it, it's worthless.

Conveniently this explanation ignores the effects of inflation.

What "effects" of inflation would the US "suffer"?

If the USA decided to mint a $20tril coin and pay it's debts that way, that would be the end of borrowing in US dollars.

No it wouldn't. Let me guess...Corrupt China would step in and provided the world's new reserve currency? Maybe Rusty Russia. yeah sure Pax Russia...lol.

Big military/might or not... If you don't have a way to fund it, it's worthless

Wrong. So long as your citizens produce and require your currency to pay their tax...you can fund your military forever.

What "effects" of inflation would the US "suffer"?

Ahh, are you joking?
Good luck trying to fund your $1tril deficit with treasury bonds if you are just going to print money to cover it.
I know there are a lot of dumb people out there. But there ain't enough dumb people to buy bonds today that are going to have a negative yield tomorrow when you start hyper inflating the monetary system.

If you think this is a good idea though, I extend my same offer that I did to Yvil.
Lend me $100k. We'll agree terms at -0.01%, shall we?

Start your journey here:


There you go. I just saved you from a lifetime of economic ignorance.

In 5 years or so you may thank me.

So where does Mosler write that the USA can remove all it's debt without economic consequence by inflating the hell out of it's monetary system?
Link me that article, please.

Ok, lets start here:


It doesn't say exactly what you're looking for but don't worry. We need to start you with baby steps.

Think of yourself as in a cave and I'm going to pull you out of it...

Get back to me for your next link...


Let's start with a Huffington Post article.
Great basis.

I'm sure anyone doing a PhD by publication right now will be so happy that the Huffington Post is considered to be of the standard of a peer reviewed journal.

I tried to keep it at a level suitable for your understanding and political leanings. I couldn't find any appropriate rap videos or infographics. Sorry about that.

Sorry but that says more about your own intellectual abilities and political disposition, than mine.

Have you read the article yet?

Nah. Whenever I click on the link it brings up a page of scrambled gibberish.

... what ! .. ... it brings you back here ?

Yep, every time.
Straight back to OnwardsUpwards' comments.
Strange, huh.

Start your journey here:


There you go. I just saved you from a lifetime of economic ignorance.

Look I know MMT and Mosler and think it does some job of explaining what money is and how it works. However, many of the "disciples" use condescending language like you've just expressed. Mosler is not a guru who holds the secrets to everything nor is any other neo-Keynesian. The idea that any country with a fiat currency is somehow immune to the negative implications of debt and money printing is not empirical nor is it a law of nature.

Zinbabwe gave it a go, printing Z$21 trillion apparently.

And didn't that end up a screaming success....

I think Germany and Argentina also gave it a pretty good go, too.
Venezuela, also.

Perfect examples of why it is a great idea to inflate the hell out of your currency.

Germany's (Post WW1) debts were denominated in foreign currencies. Same with Argentina. Not difficult to understand.

We also have this amazing thing called a Fisher relationship in economics.
Not difficult to understand.

Lol. A poorly executed segue.

A segue?
How so?

Aren't we talking about inflation and real interest rates?

Zimbabwe's debts were denominated in US dollars and other countries currencies.

Without ruining a Saturday afternoon with too many readings, it would seem that as the world’s reserve currency, as long as they never formally devalue and never miss a payment, the US can basically run the printing presses until they break – with apparently minimal consequences.
Taken to the extreme, I would have thought something would eventually collapse under the sheer weight of this premise?

Yeah, pretty much. The destination at the "end of the extreme" would be war. Perfectly normal cycle.

I'm with Onwards Upwards on this one. Mosler makes some good points about modern money. If you are the issuer of the world's reserve currency you can get away with a lot of abuse. The US currency is only worth 5% of what it was 100 years ago. No reason why you can't just keep adding noughts and continuing to inflate its value away. Unless everyone starts using something else you can get away with it. When everyone starts using something else you just put up the interest rates in the US which causes a shortage of USD to repay debts. Each time this happens we have a debt crisis somewhere, each one gets a different name, the Latin American Crisis, the Tequila Crisis, the Asian Currency Crisis, etc, etc. It is just a classic banker's ramp on a world scale, but it serves to keep the USD as global reserve currency.

Complete understanding comes from understanding the link to resources, or the consumption of resources. Savings represent future consumption, if accuing interest then a greater consumption in the future than you might enjoy today. Debt is the opposite side of the trade. You give away future consumption for the enjoyment of bringing forward consumption to today. It is always the interest that is the problem, not the debt itself.

I wouldn’t be surprised if the moron started war with Nth Korea merely as a distraction
The US has just chosen to boost its military spending at expense of increasing its debt

...entirely possible. I suggest that if Trump starts a war with North Korea, soon afterwards China walks into Taiwan. If Trump came to Taiwan's aid, the risk of further escalating any North Korea conflict to involve China would be very real. I can see China taking full advantage of this to further its presence and enforcing its message over the disputed waters in the South China sea.

Wasn't there an agreement to come to Ukraine's aid if and when Russia decided to invade it?

Nothing was done.

A sure signal to Taiwan that they won't receive any help either, I'd think.

Revolving credit and payday loans, neither of which I imagine the lenders are in much of a hurry to have paid off.

Sounds odd to me but US commentators i heard speaking last night said the sharemarket was going down because there was a fear that the economy was recovering too quickly.
I would have thought the complete opposite with the economy recovering that the sharemarket would be glowing.So where does that put the NZX.?


It all comes down to debt. Debt is eating tomorrows lunch today.

When the GFC struck is was due to debt so the people who run our centalised command and control economy solved the debt crisis with more debt. They either printed money or lowered interest to zero to encourage borrowing.

In America it was used to pump up house prices sell more cars, or for the stock market, companies bought back their shares. On the other side if you had cash it's rate of return in a bank was zero so that moved into the sharemarket or other more risky options. You will find a lot of American state pension funds which worked on a long term interest rate of 8% moved their money into other more risky investments.

The other thing with free money is the oil supply, fracking is energy intensive and expensive but cheap money greased the system.

This zero interest rate and money printing worked fine as long as the modeled inflation didn't move but now it is moving so the central banks other mandate is to control inflation and their tool is the interest rate.

So if the economy picks up and god forbid workers get pay rises this starts to move the inflation model and the central banks need to raise interest rates so where does that leave all those with debt?

This little drop was people moving towards the exit to capitalize on the sharemarket bubble or trying to get out at the top.

Thats why they tell people the fundamentals are good even though deep down every one knows the debt berg is right there.

If everyone runs for the exit they all die.

As for NZ in your head put up interest rates 2 % and see what people would do.

QE seemed like a good idea but it was left on for too long, and now we have triple the debt than was around before the GFC.
at what point will things break we will see this year i think with both the FED and BOE raising rates

zerohedge just posted this article with a recent graph of central bank asset expansion. Central bank asset purchases are still growing. if you aggregate ECB, FED, PBOC, BoJ, BOE &SNB (look carefully at the graph) they're expanding their asset base at a rate of about 1.8 % of global GDP / year. Thats measured from 2009 until now. No signs of stopping. Don't listen to what they say watch what they do.


Phew...fascinating and scary time. Seems to be deliberately stacked against the average person who has to work for a living.

Great post.

It is a bit hard to find how the US spends its money since there budget process is very different to ours. The easiest I could find is this: https://www.nationalpriorities.org/budget-basics/federal-budget-101/spen... which is for the fiscal year 2015. The Whitehouse also a lot of dense data here: https://www.whitehouse.gov/omb/historical-tables/ The US spends a lot of money - 60% on Social Security and Medicare, less than 20% on defence. It should be also remembered that this is just Federal spending and the States also spend a lot too.

DC’s link does state “Our estimates are extremely rough, as the full details of the budget deal have not been reported yet.” Or in other words - a guess.

I don't quite know why Canada has such a prominence in these reports.


So HNA gets free money how are NZ companies supposed to compete in the long run with state subsidised companies?

Fonterra, for example, needs to borrow on the open market but all the Chinese state owned or state backed dairy companies that are getting into NZ get their money the same as HNA.

With any free trade agreement the first thing that needs to be looked at is money, it's creation and cost. How can we have free trade when the money itself is created in ways that are unfair.

Fonterra, for example, needs to borrow on the open market but all the Chinese state owned or state backed dairy companies that are getting into NZ get their money the same as HNA.


This paper examines the economics of proposed Ruataniwha Dam. The paper finds:

1. For private investors to get a commercial return implies a water price that is uneconomic to farmers. If this is the case, the dam requires a substantial subsidy.

2. If the intention is to facilitate high intensity dairy units, then simply subsidising maize silage or palm kernel exfoliator (PKE) is a simpler and more flexible option.

3. If the Dam was to proceed, it should do so as a farmer-owned and underwritten venture – as this would align commercial risk and reward underpinned by a tangible bottom-line. Read more

Council writes off $14m investment in failed Ruataniwha dam project

Sigh...outrageous, really.

But the preceding point also seems valid. How many purchases of assets in various countries are via state-corporate entities and fall into geopolitical expansionism rather than pure business purchases, I wonder.

So HNA gets free money how are NZ companies supposed to compete in the long run with state subsidised companies?

Better ask Jackson.

A federal tax break for film, television, and theater productions that expired a little over a year ago has been revived by the budget deal signed into law by President Donald Trump Friday.

The tax break, created back in 2004, was originally scheduled to expire after just a few years. Under pressure from Hollywood, however, Congress renewed the tax break time and again. But with the election of President Trump and Republicans in control of both the House and Senate, the break was finally allowed to expire in 2017.

Except now it is back in a particularly strange and zombie-like way. The new budget law reinstates the tax break but only retrospectively, extending the tax-break to film, television, and theater productions made last year. As a result, the subsidy can no longer accomplish its professed goal of promoting film production and creating jobs–it can only act as a handout to productions already made or significantly underway.

There was no need to extend the break for future years because the tax overhaul passed by Congress last year allowed for the immediate expensing of 100% of the costs of domestic film, television, and theatrical productions produced after September 27, 2017–and removes the $15 million upper limit altogether. That left a gap, however, in the trail of subsidies for films produced after the old tax break expired at the end of 2016 and before the new tax break kicked in. Read more

My understanding is that Fletcher Building Australia enjoyed an immediate tax right off on proposed high rise construction in and around the late 70's, which acted as an offset to NZ tax liabilities.

And on the good news front Tuvalu isn’t sinking after all. If only hand wringing doom mongers collected the data before their doom predictions their would be a lot less worry in the world.
“Results highlight a net increase in land area in Tuvalu of 73.5 ha (2.9%), despite sea-level rise, and land area increase in eight of nine atolls. Island change has lacked uniformity with 74% increasing and 27% decreasing in size. Results challenge perceptions of island loss, showing islands are dynamic features that will persist as sites for habitation over the next century, presenting alternate opportunities for adaptation that embrace the heterogeneity of island types and their dynamics.”

Sea level rise is exponential and if we humans keep spouting carbon dioxide into our atmosphere, then rising seas will eventually overcome these very low lying atolls. Furthermore science IS collecting the data for very good reason. As to doom and gloom attitudes; try telling that to those that have damaged or lost homes or businesses to rising seas and ever increasing weather volatility.

Exponential sea level rise - Yeah Right. Sea levels rise during an inter glacial. Get some perspective.

"Between 1900 and 1950 relative sea level rose at an average rate of 4.2±0.1mm/yr. During the latter half of the 20th century the reconstructed rate of relative sea-level rise was 0.7±0.6mm/yr. Our study is consistent with a similar pattern of relative sea-level change recently reconstructed for southern New Zealand."

"Nine long and nearly continuous sea level records were chosen from around the world to explore rates of change in sea level for 1904–2003. These records were found to capture the variability found in a larger number of stations over the last half century studied previously. Extending the sea level record back over the entire century suggests that the high variability in the rates of sea level change observed over the past 20 years were not particularly unusual. The rate of sea level change was found to be larger in the early part of last century (2.03 ± 0.35 mm/yr 1904–1953), in comparison with the latter part (1.45 ± 0.34 mm/yr 1954–2003)."

Interesting data. Couldn't get all the links working but the post glacial sea level graph seems to show 30 metres over about 1000 years - say 3 metres a century. I find it quite possible that current global warming may produce similar or worse figures - so my children in their 20's and considering buying in Auckland may find many properties that look fine today are un-insurable by the time they retire.

Been interested in Global climate change for 50 years. Sea level hasn't changed much so far but they are just beginning to measure warming in the deep ocean and that it the true driver of the Earth's climate not the comparatively insignificant thermal capacity of the atmosphere.

Best book on it is Jim Flynn's 'No Place to Hide' - a joy to read(and only 85 pages) even if you disagree with every answer he sure asks the right questions and leaves out the waffle.

I second your book endorsement.

Jim Flynn?! He predicts the temp in NZ will rise by 4 degrees by the end of the century. It had better get a wriggle on - Southern Hemisphere temps have only risen 0.06 degrees in the satellite era. Only 3.94 degrees to go!

"The last time the Southern Hemisphere was this cool (+0.06 deg. C) was July, 2015 (+0.04 deg. C).

The linear temperature trend of the global average lower tropospheric temperature anomalies from January 1979 through January 2018 remains at +0.13 C/decade."


Using a tiny La Nina blip in a record that covers decades is dishonest. I suggest you try arguing with Nasa. https://climate.nasa.gov/vital-signs/global-temperature/

Couldn't find any exponential sea level rise then?

"The linear temperature trend of the global average lower tropospheric temperature anomalies from January 1979 through January 2018 remains at +0.13 C/decade." Some blip. How are we going to get to 4 degrees in 80 years at that rate - especially with the Southern Hemisphere dragging the chain? A rate slower than pre WW2 warming rate which had a fraction of the industrial/CO2 footprint.

I suggest readers have a look at the lower left column covering the last few years and compare those figures with earlier ones. Draw your own conclusions.
Here is a fascinating TED talk for those that do not wish to be bogged down in statistics better suited for computer algorithms. Again draw your own conclusions.

Judging by your link the verb is 'suspects' not 'predicts'. I sure hope you conservative prediction is right for the sake of my grandchildren. However read the book (only an afternoon at most) he gives you plenty of space to disagree as much as you like. The references seem good.

No mine isn't a prediction. I just posted the satellite record - you do the math. I'll take the satellite record over some left wing flake social scientist. Our grandkids will be sweet - temps and sea levels may not be accelerating but tech innovation certainly is. Have a read of Jim Mellon's latest book for a taste of what has been achieved in the last five years while the hand wringers were dithering.

Well I prefer to use reputable sites not dodgy ones like yours, https://www.nsstc.uah.edu/climate/2018/jan2018/jan2018GTR.pdf
Here are facts from NOAA (a highly respected site) and couched in language that even a right wing apology for a flake might understand.
And the increase in sea levels ARE growing upon themselves such that I am confident they will increasingly continue to do so. Indeed, so confident am I that I trust you live long so you will see how much you are wrong.

You just show your ignorance here Didge. I linked you directly to the UAH satellite dataset. The longest running global temperature dataset. Good enough for the IPCC but not good enough for Didge?

For those that missed my reply above I suggest that readers have a closer look at the last few years of the lower left column and compare it with previous measurements.
Statistics such as these tell us more about future monetary policies than all the talkfest herein.

Incidentally, for some unknown reason in a thread about rising seas. "Profile" provided a link to satellite measurements of our world's atmosphere to support his dubious claim. And he calls me a left wing flake.

Great that you now don't think the UAH dataset is "dodgy". The "left wing flake social scientist" was in reference to the Jim Flynn book referenced by another commenter above - not your good self. Though it was a bit flaky that you couldn't come up with any exponential sea level rise examples to support your dubious claims.

Before we get any runaway sea level rise it will show up first in the atmosphere. The UAH dataset clearly shows nothing unusual is happening. Amazing after 34 years the Southern Hemisphere is only 0.06 degrees warmer and the decadal warming rate is only 0.13 degrees. Ho Hum inter glacial warming - nothing exponential about it.

You can bet the avowed capitalists wont be keen on user-pays to raise up Tamaki Drive in coming years.

Au contraire, user pays would make the commute quicker so I imagine those that continue to drive would welcome it.

Yes, but false claims about islands being swamped by rising seas (when in fact it has more to do with the islands sinking or rising) do nothing for the creditability of the very real concerns that we do have.

It is a fact that land is being impacted by rising seas. To choose one particularly unusual example to try to discredit an enormous volume of international research is to be blunt stupid. Furthermore to lable those trying to inform those that might be affected by what IS happening as doom and gloomers is at the least irresponsible. There most certainly are islands in our South West Pacific that have already experienced land losses exacerbated by increased weather damage. "In 2012, residents of Vunidogoloa became the first to begin relocating due to the impact of rising tides, eroding agricultural lands and intensifying floods."
Here Solomon Archipelago reefs have been sunk.
Also try telling residents of Kaiaua on the Firth of Thames that rising seas are no threat. Their future has become dire unless they get a seawall. I wonder how many of them were encouraged to ignore the warnings of science by the strident voices of climate change deniers.

China reported lower consumer inflation in January, at 1.5% as analysts expected. Industrial inflation slipped to a 14 month low of 4.3%.

Goldman Does It Again: Crude Crashes 11% After "Most Bullish In A Decade" Call

The more 2017 passed into history, the more it became clear that commodities were, to borrow a phrase from the Winter Olympics, a little over their skis. China’s consumer prices haven’t budged one bit, remaining substantially below the government’s explicit 3% definition of price stability. Overall, there has been no economic account that would confirm any sort of broadly based acceleration, either.

This despite a massive monetary program designed in RMB to offset continuous, chronic “dollar” erosion. If inflation is a monetary phenomenon, and it is, then China’s inflation trends tell us a lot about the failure of “globally synchronized growth” to be anything more than the latest recovery fantasy (the third since 2009; the fourth if you count, as I do, the middle of 2008, too). Read more

... why is it that when the DOW Jones Index goes down sharply there's all these hysterical headlines like " blood in the streets " ... " carnage " ... or " bloodbath " ...

But when it jumps ... as it did today , a 338 points rise ... there's silence ... the quiet sound of a tumbleweed blowing across a dusty deserted street ....

... there's " blood in the bull's veins " guys : Buy , buy .... bye !

Markets going up probably simply meets public expectations – there is presumed calm and order – no need for drum beating.

Markets going down flies in the face of expectation – calm and order are challenged – loud drum beating to commence.

The Democrats have lost all creditability by agreeing to this massive and unsustainable increase in debt. They have in effect agreed to a massive transfer of wealth to the already very wealthy and the expense of future generations. The sensible thing to do would have been to not agree, force the Republicans to face the consequences of their tax bill and live up to the same fiscal responsibly standards that they tried to hold Obama to
Nofax's comment above that 60% of their expenditure goes to social welfare surprises me. If that is correct, then the spirit of part of what trump is saying is true, they do need to fire up their own industry and employment. Whether his actions will do this are another matter.

Many low paid workers in the US are on food stamps to survive. Between the tax cuts (which are funded by debt), infrastructure spending (funded by debt) and they haven't cut expenses they are just digging a bigger hole faster. If they wanted exports to pick up they need to decrease the value of the USD. All I see for the US is a lot more trouble.

With the Fed unloading debt into the market and the US Government doing the same with infrastructure spending there are going to be a lot of bonds in circulation. Who exactly is going to be buying these bonds at low rates when portfolios are already being dumped into the market?

I've even heard interbank lending in the US has dropped off a lot this year. Buckle up because we aren't really at the stage of blood in the streets.

Special treat: Fund bet the wrong way on the volatility trade this week and lost 82% of it's value.

I've even heard interbank lending in the US has dropped off a lot this year. Buckle up because we aren't really at the stage of blood in the streets.

I believe you are right. At best banks are extending unsecured loans to a few credit worthy customers, but generally on a collaterlised basis. And yet Eurodollar futures contracts open interest is at record levels. Somebody must be seriously hedging OTC interest rate swaps with synthetic futures FRA stacks.

Looks like it is almost time in the US to claim infrastructure is a national security issue and use some of the defence budget to start repairing major sections. They could even pump money into autonomous vehicle development and long range electric vehicles. Whereas in NZ we actually use the defence force for natural emergencies and in places to aid civil defence. If only we could accommodate more engineering apprenticeships without the high physical requirements and had more projects the forces could take on instead of holidays in Britain all expenses paid, and expensive residential properties now worth 1mil+ each on larger sections.

The current monetary system is fiction, watched a program the other day, did you know that only 3% of USD is actually printed money ? the rest is just numbers on computers. Forget about gold, they cannot even print the cash to back up the numbers.

Thanks for the many 32! replies to my question "why does debt have to be repaid". I have not studied economics or finance, but I could not see 1 good reason, in layman's terms, why bebt has to be repaid?