SAR #9361/Weekender

Nothing is free. You pay now or you pay later.

Sign In, Please:   According to data provided by the US Treasury, of the $1.8 trillion in debt the US floated this year, nearly 40% was bought by something called the 'Household Sector'. Who is this 'Household Sector'? That's what is left after you count the foreign governments and international buyers. After the Fed's purchases are counted. After Wall Street – the banks, hedge funds, money markets, corporations, pension funds, insurance companies and most of the piggy banks are counted. Who is left? No one.  Is it a paper entry to make the books balance?

The Fire This Time:   Yes, there is no question that global warming is happening, and will continue for quite some time in human terms - 1,000 years or so. But in the long run – say 5 or 10 thousand years - the ice ages will return.

Christmas Card:   Arnold's Christmas letter to Santa threatened to eliminate California's main welfare program if Uncle Sam didn't put an $8 billion bailout of the state's budget under the tree. If that doesn't do the trick he's going to hold his breath until he turns blue.

Travel Plan:   On Alaska's North Slope there's a new travel plan. You stay home and every year the ocean is 45 feet closer to you. 

Social Contract:   In most of the world the power elite remains in power by manipulating the law. Only when that fails do they resort to force to keep the myth alive. When the masses begin to doubt the lies, the ruling class will have a serious problem. Moody's thinks that "social and political cohesiveness is being tested.” Everything from central banking, to the war on terror, to peak oil and even the legitimacy of the democratic state is being questioned.

Chow Time:   The Fed stuffed its balance sheet with a trillion dollars worth of mortgage-backed securities. The dollars created to buy them kept the banks afloat. As the economy comes around, the Fed will have to sell the MBS to suck those dollars out of the market before they become inflationary. But the market will know the Fed must sell the MBS and most expect the market will extract a price for taking them off the Fed's hands. That price, that discount, represents the slice of the trillion dollar pie that will stay in the economy, inflating prices. Not yet. Not for a while. But eventually. Save room for desert.

Remotely Interesting:   The southern hemisphere's atmospheric methane has increased by 0.7% over the last two years and has now doubled the highest level found in the 800,000 years before 1700 and industrialization.  You should care, because the southern hemisphere is connected to the northern hemisphere, where your and your children probably live.

The Nano:   Gambling on the stock exchange has become so automated and frenetic that in order to make things “fair” NASDAQ insists that every brokerage will have to use the same length network cable to connect to the exchange's servers. High frequency automated trading is fast and efficient. It is not investing.

Ante Up:   Ten-year T-bill rates are creeping up, which suggests that mortgage rates will rise during the coming year. Moody's estimate is 6% or so by the end of 2010. Not everyone agrees, because raising T-bill rates encourages banks to keep their cash (your TARP cash) in Treasuries rather than risk it on something as ephemeral as mortgage payments by an unemployed populace.

Make Work:   At least 25 states are out of money to fund unemployment checks and have, so far, borrowed $24 billion from Washington to close the gap. Another 15 will join them within a year or two as long term unemployment benefits get extended to cope with long term unemployment. And employment won’t be coming back any time soon because the source of recovery – small business expansion – simply isn't happening.