The country must wrest control of Congress from the Dems as well. We cannot afford the economic havoc that they have and will continue to inflict upon the economy.

“There is a tremendous appetite, on the other hand, for risk-free and near-risk-free credit….”

It seems like you’d always have people lined up to get risk-free credit.

but you also oversimplify the problem. The enormous debt the US presently has is starting to accelerate.
Investors are more wont to take a risk based upon capital availability.
Well the baby boomers have come of retirement age and that multi trillion dollar debt the federal government owes the Social Security System has come due to name one massive strain on the capital markets.
The inaction of the government to get their financial house in order has placed us on a precipice.
It is the central issue I believe in this campaign who will increase the debt and who will not. Eliminating earmarks is definitely a nice start but in the overall scheme of things that is a drop in the bucket.
The Dems idea that you can tax your way out of a financial crises is scary beyond belief. The GOP believing that we can cut taxes with the debt from social security coming due is another looney idea.
It is time for some very hard, difficult, and terrible solutions. Solutions that will hurt. Solutions that will cause pain. If we don’t then everyone in the US will come to realize that there is no such thing as a chicken in every pot. Hell there won’t be any pots they will all have been pawned by that time.

For the record,

I am NOT that bond investor hack.

Does nothing for me but screw up my vanity searches

Bill

I think that this kind of pseudo-recession is one of the FEW acceptable times for the govenment to spend money. Now is the time to undertake building projects such as repairing the nation’s roads, sewers, bridges, etc, in order to give people jobs. Levees in New Orleans anyone? Conveniently, there are a large number of construction personnel sitting on their hands at the moment. Get them up and working and spending money on the market.

Defense spending too, although probably fewer engineers are finding themselves in line for unemployment. But opening up more projects for Lockheed and Boeing will stimulate them to hire more supporting and technical staff as well.

Now, this kind of thing would be possible if the Democrats didn’t spoil the budget continuously. During times of economic boom the government should trim and trim and trim to get as small as possible and pay down the defecit. During recessions I think it’s alright for the federal defecit to grow as the government gives back a stimulus – in the form of checks as our current president has very successfully done, or in the form of civil and defense contracts and projects that can be saved for times like these.

Oh Bush, 6 years of Republican control of congress then 2 years of Republicans being obstructionists gives us.

Of course we are getting a financial upheavel with the debt that has been forced upon us by this administrations mismangement.

It would seem to me that the opposite of Inflation, which is usually not a good thing, would be a good thing.

This is something that’s never even been attempted to be explained to me.

All good things come from growth.

The consumer makes up 71% of GDP. We need to help the consumer. The only real thing that government can do to help the consumer is cut taxes. Unfortunately, it is not as popular a political issue as it used to be because we have set up this squirrelly system where well over 50% of the people effectively pay no income taxes. Despite that, the Congress should pass an immediate and long term across the board tax cut.

The second part of the equation is spending. We have governments at every level in this country that are drunk on taxes. We need deep and sustained cuts in government spending. We have had to tighten our belts and they should have to do the same.

Lower taxes. Cut spending. Return to economic prosperity.

Blanket response to several comments upthread: deflation by definition is the destruction of asset values. Debt (or credit, its balance-sheet mirror image) is an asset. It’s what drives increases in economic activity, which is what drives job growth, which is makes people feel like the country is moving in the right direction.

Even a mild deflation has the same effect as an interest-rate increase, because in real terms, that’s precisely what it is. The private sector undertakes fewer business projects because the real rate of return doesn’t compensate you for the risk. That tends to throw people out of work.

The danger of a systemic deflation arises from the plain, irrefutable fact that assets backed by mortgages have become overvalued. This is as real and as inescapable as the air in an overinflated balloon. There are only three ways to deal with it, all of them painful:

Either the balloon pops. Or you let the air out slooooowly. Or you contrive to keep the air in the balloon permanently (and do nothing else with the resources it takes to do that).

The reason that this (Republican-controlled) government is madly trying to find a way to keep the air in the balloon, is because the last time we had a serious deflation, the unemployment rate went to 25%.

Regarding fiscal surpluses: these are deflationary in effect. You don’t want to see that happen either.

You have been around long enough to temper anything Bill Gross says. I would opine that since he has been accumulating large positions, especially in MBS, his initial bet was he will eventually profit from others misfortune on the rebound. Problem is, it’s now gut check time and I suspect Gross is a bit nervous there might be a downside not anticipated.

Therefore, Bill’s opine about our government propping up his downside mark-to-market has some parochial motivation. I suspect he is worried about a tsunami on his own portfolio; granted, given his large position it has to be considered. But rhetorically, what will he do; dump it back on the market at a loss? Doubt it and I’ll take the game of chicken for $500, Monty. Too bad some in the market think he’s a sage and will follow him over the cliff.

Nonetheless, this is how the free market works when you take a risk. I have been in this business a long time and frankly have grown tired of all the whiners looking for us to bail out their ridiculous bets. Do you truly believe the answer to finding bottom is more FRB bailouts? I certainly don’t, but realize some of our colleagues in the market think taxpayers can be played the fool.

Let’s find stable valuation vis-à-vis better methodologies and actual events occurring in the underlying assets. Not some daily opine, traders whim and self-absorbed, over leveraged clowns like Gross.