No deal


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No deal. Key quote:

If Democrats are not going to do even minor surgery on Medicare and Medicaid and Republicans are not going to raise taxes, there is no hope of big budget deal to cut a deficit now running at 11 percent of gross domestic product.

And that raises another question. How long can the Federal Reserve continue financing these deficits? China, choking on U.S. debt, is reportedly beginning to divest itself of U.S. bonds. Japan will need to sell U.S. bonds to get hard currency to repair the damage from the earthquake and tsunami. And the Fed is about to end its QE2 monthly purchases of $100 billion in U.S. bonds. Where is the Fed going to borrow the $125 billion a month to finance this year’s deficit of $1.65 trillion, and another of comparable size in 2012? Bill Gross’ Pimco, the world’s largest bond fund, has sold all his U.S. bonds and begun to short U.S. debt. Pimco is betting that the value of U.S. Treasury bonds will begin to fall.

We may be about to enter a maelstrom.

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3 comments

  • LINO

    More evidence of a coming maelstrom:

    Zsa Zsa Gabor’s husband trying for a baby

  • Paul Lake

    I enjoy listening to you on the Space Show.

    I think we are going to have to raise taxes on the higher income tax brackets as well as moderate government spending. The wealthy and the working classes alike are looking at an overall lower standard of living as we get over the debt hangover incurred over the last 40 years.

    I do want to defend Social Security and Medicare. These programs have made it possible to grow old with dignity even if one is not rich.

  • LINO

    Only Donald Trump has the courage to state we should take the oil from the Iraqi oilfields to compensate us for their liberation.

    This is more controversial than cutting any entitlement programs.

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