I have CNBC on my tv in my office from where I trade everyday … I tend to 1/2 listen to what the talking heads say except when they break some news. This morning I was again reminded of why I do this … Steve Liesman is an economics reporter not an economist. He made that point very clear this morning when the talking heads were debating the merits of the S&P warning of the US treasury being put on a downgrade watch.
Liesman who is in the back pocket of the US Fed and their virtual talking puppet for running ideas up the proverbial flagpost stated (I am paraphrasing) … the US Treasury issues the debt and also prints the US currency, so there will never be a time when they can't repay their debt. In essence, Steve is arguing that the US Treasury just has to turn on the printing press to pay their bills.
Is Steve really that stupid? Of course you can print all the money you want Steve …. just don't expect the rest of the World to accept it when you try to go and pay for anything you need to import.
Keeping it simple Steve, since I live in Canada, I would suggest that Canadian Companies that export 200 million barrels of oil to the US every year be paid in Canadian $ not US $. Ten years ago today the Cdn/US fx rate was $1.56 Cdn for every $1 US …. today it is $0.964 Cdn for every $1 US.
Keep your printing press working Steve, it cost you 40% more to buy that oil from us today not taking into account the rise in energy prices. Probably even the Russian Lada auto you previously drove in your native USSR where you cut your economist reporter''s teeth probably costs more today in US$. I forgot …. you drive a 700 series BMW …. oh wait that was made in Germany. Face it Steve you're fucked.
Keep whistling past the grave yard Congress …. $14 trillion at a weighted cost of capital of 6% creates $840 Billion in annual interest costs. That is $2710 per person in the US (based on 310 million). You can reduce this amount by the % of government revenue that individuals pay in personal income taxes directly but then you also have to reduce it by the amount of individuals that pay no taxes. All in all, the fat lady is getting warmed up even if Liesman and his Fed buddies don't want us to believe it.
