By Howard Hill

The Pundit Watchlist

January 6, 2013 4:17 pm Category: Memo Pad 22 Comments A+ / A-
The Pundit Watchlist

Over the next couple of months, the American public can expect an ever-louder din of opinions as we approach the next bogus political standoff — the debt ceiling hostage crisis.

Bogus? I’m not saying it isn’t a crisis when elected public servants threaten to sabotage our country and the world economy. It certainly is. That’s why it was such a shock when a routine (and silly) bookkeeping matter suddenly became a pressure point in 2011 after years and years of “clean” increases to the debt limit.

But what other country spends money and then pretends it’s optional whether to pay the bills for what they’ve already spent? That’s what makes planning to instigate a crisis over the debt ceiling so bogus.

Perhaps an even more bogus activity in coming weeks will be the unending flow of opinions from the chattering class about the likelihood of default. When is the last time you saw a pundit pay any penalty for offering entirely wrong predictions?

Rather than pay heed to uninformed people with nothing at stake, wouldn’t you rather hear what people who could win or lose billions of dollars might think? Their opinions matter to me. Moreover, you can watch their opinions change over time (and so can the pundits).

In the market, we set up watchlists so we can check them frequently when we care about the outcome. So here it is, pundits — a watchlist you can use to see what people who have real money riding on the outcome think of the possibility of default for the U.S. and a couple of dozen other countries. Just scroll to the bottom of the list to see how U.S. debt is viewed.

When the price of CDS (default insurance) goes up, the big money is betting the odds of default is going up.

Not to get too far down into the weeds, but you do have to know one other thing about this form of credit insurance. The insurance increases or decreases in value according to the expected loss after the default, as well. We call the price of bonds after a default the “salvage value.” The amount paid out is the face amount of the bond less the salvage value. In that way, CDS is a lot like car insurance. When your car is totaled, you have to give the insurance company the vehicle to get the check. During the early years of CDS, the buyers of credit insurance had to deliver the bonds to get the payoff. That worked until Dana Corp. (the auto parts maker) went bankrupt, and much to everyone’s surprise, there was more credit insurance outstanding than there were bonds.

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The Pundit Watchlist Reviewed by on . Over the next couple of months, the American public can expect an ever-louder din of opinions as we approach the next bogus political standoff -- the debt ceili Over the next couple of months, the American public can expect an ever-louder din of opinions as we approach the next bogus political standoff -- the debt ceili Rating:

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Comments

  • nobsartist

    I wonder when they will have time to bring up the subject of jobs.

    I guess right after they beat abortion to death.

  • atc333

    The GOP approach to our economy is to maintain the current status quo, approaching our economic situation as though it is the “new normal”, and simply maintain jobs, and the current distribution of wealth as it is now, which unfortunately is as skewed towards the top 2%, and top 10%, as it was right before the Great Depression years ago.

    The GOP has no solutions as how to put this nation back to work, to create jobs, to invest in people, resolving our massive costs of delivering health care, which is twice as much as other Western nations pay for the same services, reducing the costs of education, much less even recognizing that minimum wage buying power is now less than 75% of what it was years ago, or even attempting to do something about it.

    There was a great degree of truth in Romney’s 47% comment, as it does reflect the GOP attitude towards changing the situations of those Americans who find themselves struggling to survive as part of those living in, below, or just above poverty levels of income.

    For the GOP, the only issue is cutting the size of government, cutting taxes, and cutting the deficits. It is not putting first things first, creating jobs, increasing revenues through ending waste, fraud, tax loopholes, and subsidies to companies which do not need them, passing and funding job creation programs as the job creators have proven they don’t, and only then, once America is put back to work, get to work paying down the deficit, which will be much easier with the additional tax revenues of millions of rehired workers.

    • empiremed

      We cannot just keep spendind and borrowing, spending and borrowing.
      What is a dept ceiling for anyway?

    • joeham1

      It’s funny to read your rant about the Republicans. When people like you wake up and start really listening to what going on you will relize that we have a democratic party that demonizes the republicans and peole like you say yeah the republicans suck!

      In the mean time even when the democrats had a super majority they didn’t try to fix anything! They passed a health care bill that the CBO even said will add over a trillion to the already out of control deficit. They did nothing about unemployement and mad poverty go up 6% in the last 4 years.

      The fical cliff deal is proof of the agenda. The President campaigned hard on a “Balanced Approach” Gave over 100 speeches on the subject. The final deal increases taxes 660 billion and increases the deficit 4 trillion.

      In the month of december 2012 alone the deficit spending was 240 Billion!

      Who are you going to blame now?

      • Sand_Cat

        Sorry, but it’s the Republicans who are demonizing the Republicans. All the Democrats have done is point out how they’re doing it.

        • joeham1

          Don’t let your cat type anymore it made no sense!

      • atc333

        Some how you forgot the massive economic dive the nation was in, as you claim how Obama and the Democrats did nothing to fix it.
        Most economists acknowledge that the spending the GOP is complaining about did convert the pending “Bush II Second Great Depression” into a very long recession. That my friend is doing something. They repeatedly tried to do something about unemployment, but the GOP was more interested in keeping the nation suffering, and blocking all of Obama’s job creation legislation for the past 3 years, repeating their mantra, “no new spending without cuts elsewhere,: all in the very vain hopes that by doing so, the nation would vote them back in power. Bottom line, it was GOP first, Nation and people last.

        As far as who to blame, it is still Bush, and the Right Wing GOP, which learned nothing from the past election, other than the fact their gerrymandering of Congressional districts with dog bone shapes worked really well for them, considering they had 33 million less votes for their total candidates, than the Democrats, yet still somehow control the House.

        Bush snatched economic meltdown from the jaws of prosperity with the very same failed economic theories Boehner and the GOP/Tea Party Congress are still trying to force down the Nations throat, now with a new Debt Ceiling debate. He started with prosperity, and a pretty much balanced budget, projected to begin paying down the federal Debt, and managed to drive the National debt up another 5 Trillion Dollars.

        Here is what the GOP has done for America:

        ” Size of gross debt Federal account debt

        Before Reagan $1 trillion $250 billion

        Ronald Reagan $2.9 trillion $677 billion

        George H.W. Bush $4 trillion $1 trillion

        Bill Clinton $5.6 trillion $2.2 trillion

        George W. Bush $10.6 trillion $4.3 trillion

        Barack Obama $16.4 trillion $4.9 trillion

        While raw numbers are interesting, the more telling statistic is when debt is expressed as a percentage of the overall economy (gross domestic product). We’ve rounded the numbers to keep it simple.

        Size of gross debt Federal account debt

        Before Reagan 33 percent 7 percent

        Ronald Reagan 53 percent 12.5 percent

        George H.W. Bush 64 percent 16 percent

        Bill Clinton 56.5 percent 24 percent

        George W. Bush 77 percent 30 percent

        Barack Obama 105 percent 31 percent ”

        (Check out the Fact Checker on the Washington Post site, from which this was pasted)

        But for the economic meltdown, complements of Bush and the GOP, Obama’s spending would have been a much lower percentage of GNP.

        Think about it.

        • joeham1

          LOL…You guys can’t stop. If we use your theory. The democrats ran the house and senate from 2006 to 2010. If we use your own theory: Bush tried to do something but the dems ran the congress and blocked everything he tried! Therefore they are to blame for the meltdown! Let’s be real!

          The republicans and democrats are resposible for the meltdown! If we can all realize that, then maybe we can vote people in that will fix things!

          Obama didn’t repeatedly try to do something about Jobs. They had a super majority! Obamas first 2 years in Office! If they really cared about jobs would have done something!

          Obama’s Jobs bill was another 447 billion stimulas plan! some tax hikes and tax cuts… look it up! You guys skew the facts and only talk about things that take the blame off people you like!

          Not one is better than another. Our Current President’s spending or his unwillingness to cut spending needs to be stopped!

  • http://www.facebook.com/dominick.vila.1 Dominick Vila

    The bottom line is this: we cannot afford to deault. Doing so would literally ruin our credit rating, our ability to borrow, and our ability to trade with other nations.
    Yes, the debt ceiling is too high and efforts must be made to end deficit spending, borrowing, and accumulation of debt, but that is not going to be done overnight or during a couple of weeks of debate over the debt issue.
    It is going to take a lot of courage for our politicians to admit that major sacrifices are needed, at all levels of our society, to reduce the debt to a manageable level. Knowing how they are, that is not about to happen. What we are going to get next month is a lot of politicial posturing, meaningless speeches, call for fiscal restraint…and no substance.
    The debt ceiling was raised 18 times in the Reagan era, 6 times when W was in office, and this is the second time it is raised since Obama’s inauguration. Why? Because we refuse to pay for what we need and benefit from. As a result, the only option is to end programs of critical importance to our national security and well being. That is the price we must pay for refusing to pay for what we get. With some exceptions, it is not that we are spending too much, it is that we are too irresponsible to understand the need to pay for what we get.

    • sigrid28

      If only we could go from complaining mode to prioritizing mode. First, allow the debt the House has authorized to be paid. Then, cut spending we can all agree on. (two weeks max) Then increase jobs and gradually increase the minimum wage until it becomes a living wage (employers hiding profits overseas should have to cough that up). Then fix the income tax system, so corporations and wealthy individuals pay their fair share.

      Get those things out of the way, and we might find new ways to bring in revenue:

      Tax the dickens out of gun and ammo purchases, create expensive permit and registration fees, and hire lots of IT worker to keep track of individual firearms and ammo supplies AND THEIR OWNERS. Let the insurers and lawyers make a little money off the burgeoning gun business by requiring liability insurance for firearm ownership and use.

      Let’s let legislators put money in the kitty every time they resort to the Hastert rule or filibuster, the way judges fine lawyers for contempt of court.

      • joeham1

        Are you a communist?

    • http://www.facebook.com/people/Robert-J-Casaletto/100000349849595 Robert J Casaletto

      What other way could the country of Texas take over the country of The United States of America. You don’t have to have 20/20 to see the moves being made here. The Texas Wealthy Yankees are trying to further their takeover of the financial governing of not only the US but to join a pact run by the wealth of the world. I don’t know if the Chinese Billionaire should have said what he said but wow was it a mouth full. He stated in fact that government is changing to be governed by corporations and politics is moving aside. Now with the Neoclowns seeing this with their friendly past and future politician lobbyists they would already have much time and grade invested in becoming part of said army of maggots.

  • Jim Lou

    The Fiscal Cliff was just the opening act. The next act is the debt. That should be a bruiser and could lead to havoc in the credit market and thus to the US economy.

    The GOP/Tea Party don’t really care. They just want to show they are in charge.

  • Lovefacts

    I honestly believe most TP’ers and Republicans don’t understand this is about covering money already spent that they authorized. From listening to them, it seems they think the govt is asking for the debit ceiling to be raised to spend “more” money.

    But why am I surprised. The House Republicans seem to think it is the Senate’s job to submit budget and spending bills. Obviously, none of them have read the body of the Constitution where it states that the House controls all bills dealing with the budget, taxes, duties, imposts, excises, and to pay the debts. Whereas, the Senate’s job is to “Advise and Consent;” this means they have the power to approve appointments, treaties, give the President advice, and declare war.

    I wish Republicans understood more about the Constitution than the Second Admendment. Maybe we should have an Admendment that requires all those who are running for the House and Senate–even for re-election–to take a test on the Constitution and pass with 90 prior to their name being placed on the ballot.

    • joeham1

      Lovefacts you obviously don’t pay a lot of attention to what’s going on. The House has passed a budget each of the past 4 years. The Senate hasn’t touched them. The Senate won’t debate them or take them up for consideration. Your anger or frustration is mis-guided. The President sent a Budget to the Senate last year and it was voted down 97-0.

      Hate the tea party and republcians but having no budget the last 4 years is the democrats fault totally! LOOK IT UP!!!!

      • Sand_Cat

        Yeah, we could have had a “budget” that starves the poor and middle class and further enriches those at the top.

        I think Lovefacts was referring to a real budget put forward by real people who understand the world and actually care about the country and its people, not a recipe for enslavement of the masses put forward by a bunch of insane zealots.

        • joeham1

          Sand cat you are a radical left wing nut. Please refrain from typing things that make no sense. This the second time!

          The only budget your almighty Obama has put forth was defeated 97-0. He got no votes from his own party!!! Since then the democrats havn’t submitted a budget! But of course because you are so one sided it’s probably Ok with you!

          Your an idiot if you think the republicans really want to starve the poor and middle class. You are a fool if you believe Obama about the evil rich! His Best friends are the rich Hollywood people, Richard Trumka the rich Union Boss, and The CEO of GE.

          You have become a puppet for the The worst president we have ever had!

          Under Obama poverty is up 6%. In 4 years when it’s up another 6% who will YOU blame?

          • http://www.facebook.com/warren.nicholson.77 Warren Nicholson

            YOU are a neocon lier.

          • joeham1

            Warren again you type and say nothing! What did I lie about? be specific

  • http://profile.yahoo.com/C22AJV5GXSF4QE3YJY5IGBTULU TSB

    Where did this “debt ceiling” come from? Who devised it? What good is it? It’s always raised. Doesn’t that make it as useless as our legislation process? Do the States, the Big Cities, the local counties and townships, the individual families have a “debt ceiling” that a group of nincompoops must vote to raise?

  • http://www.facebook.com/people/Robert-J-Casaletto/100000349849595 Robert J Casaletto

    All is bull crap. Bottom line. The wealth of the world is trying to dominate and govern. Politicians will be lower Execs. Put all the bull aside. This is the thought you must hold onto to fight the proper fight. The 98% are in danger. The spirit of our country is being tested. So far the biggest test has been somewhat positive. Our Supreme Court is on their side. Congress is on their side. The GWB/Cheney White Out House used to be on their side which allowed much of the foundation to be poured. It is time for a Republican’s words to be put out there again. Mr Neoclown,”Take down these walls”. Guns are many and Militias are preparing along with the caves these terrorist rich people have accumulated. Be aware America. Be very AWARE!!!

  • greghilbert

    The author of this article is one of the wealthy financial elites who profiteers mightily from a system that (coming and going) transfers wealth from the many to the few. Regarding default risks, he asks “Rather than pay heed to uninformed people with nothing at stake, wouldn’t you rather hear what people who could win or lose billions of dollars might think?”. My answer is “No, I don’t want to know what people who could win or lose billions of dollars might think.” In fact, I want those wealthy and wannabe gamblers strictly regulated and severely taxed, and their casinos destroyed. In fact, I want at least half of the mega-wealth of the top 0.1% or 0.5% redistributed to the bottom 90%.

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