Links 7/15/11

Milky Way pictures: Alex Cherney’s photos of galaxy seen with naked eye Daily Mail (hat tip reader Bruno)

The Great American Carbon Bomb Bill Kibben, TomDispatch

Crude solution MacroBusiness

Italy money supply plunge flashes red warning signals Ambrose Evans-Pritchard, Telegraph

Stress-Test Magic Makes Greece’s Bust Disappear Jonathan Weil, Bloomberg

Murdoch admits to ‘minor mistakes’ Financial Times. If this is a minor mistake, I shudder to think what a major one looks like.

Murdochs Now Say They Will Appear Before Parliament New York Times

How Angry Moms Toppled the ‘World’ Daily Beast

Goodbye to the harlot’s prerogative Philip Stephens, Financial Times

Ex-Prime Minister accuses News International of using spyware H Security (hat tip reader Colin)

The debt ceiling ratings downgrade Ed Harrison

Wisconsin: Walker Vulnerable to Recall, with 59% Disapproval Rating Dave Dayen, FireDogLake

“Republican Candidate” Extends Lead vs. Obama to 47% to 39% Gallup

Bank Delays May Push 1 Million U.S. Foreclosure Filings to 2012 Bloomberg. The lack of candor is troubling. The “delays” are due primarily, if not entirely, to banks’ recognizing for certain (many? most? all?) securitized mortgages post 2004 they have trouble establishing standing.

US homeownership rate could fall further Housing Wire

Should We Blame Bank Examiners For Slow Job Growth? Simon Johnson, Baseline Scenario

On Early Retirement Helaine Olen

Antidote du jour:

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  1. Max424

    Italy’s per-capita GDP growth rate:

    1950s — 5.4%
    1960s — 5.1%
    1970s — 3.1%
    1980s — 2.2%
    1990s — 1.4%
    2000s — 0.6%

    Does it look from these numbers like Italy is going to reinvigorate their exponential growth model anytime soon?

    Italy is withering on the vine, and it will soon, shrivel and succumb, if it doesn’t wise up and immediately put its most brilliant and patriotic economists to work on a Sovereign Model for Smart — and Steady — Contraction.

    Because smart — and steady — contraction is your last hope, Italy. Peak Oil is not going bypass you to go kill somebody else. No sir. You will not be spared. If you remain growth obsessed, Peak Oil will roll over you as easily as a steamroller rolls over a Disney cartoon character.*

    Italy, I love ya, I love your history and your culture and your women, but you are not special. If you don’t get a grip; first, the banks will feast on you, as Peak Oil creates some fine sovereign dining for bankers, then, Peak Oil will bury you.

    *It might roll over you no matter what you do, but why not go down swinging (even a soccer obsessed nation like you has no clue what that means).

    1. Diego Méndez


      you may want to apply the same stats and arguments to the US or other Western countries. You may be surprised how coherent they’ll be.

      1. Sock Puppet

        Is there an economist anywhere who is working on how to run social security, pensions, mortgages, etc in a no or negative growth economy?

        1. Cedric Regula

          That’s not one of the choices they are trained to deal with.

          They all took the Peter Drucker School of Management – Grow or Die.

          1. Valissa

            “I begin with the assumption that economists have their uses. I know many of you will disagree with this, but as economists themselves say, ‘we can relax the assumption later’.” (author unknown )

        2. ambrit

          Dear Sockie;
          If we consider these economic trends to be artifacts of the immense segregation of wealth promoted ‘with vigour’ since 1980 or so, the answer seems obvious. For one, confiscatory inheritance taxes, and a return to 1950’s tax rates. “If it was good enough for grandad…”

          1. Sock Puppet

            What if the wealth disparity is a symptom not a cause? The economic equivalent of first class hogging the lifeboats on the titanic? Trying to maintain their standard of living by grabbing a larger share of a shrinking pie? What if no growth is the new normal? How do you run the economy?

          2. ambrit

            My Dear Mr Puppet;
            True enough, once we’ve defined what ‘growth’ means. I’m not being obtuse here, (I hope,) but I refer to the Technocrats definition of progress as the increase in energy available to the average human being. All these washers and dryers and computers run on electricity, not counting the energy used in their production. To maintain the present standard of living in aggregate, we have to supply the power to run all these gadgets. Living in the Deep South, the first thing that comes to mind is air conditioning. When young I lived in non air conditioned houses, most people then did. The change in the quality of personal life is astounding. The ready availability of this and other life enhancing things is a primary driver of the implicit social contract today. Start going backward with this and we will see major social ‘dislocations.’ Think of it as the New Dark Ages. The deception at the heart of the Less is More movement is that the energy supply cannot be retooled for a Green future, and not lower the average standard of living. Quite the opposite is the case. The big oil companies aren’t getting into various ‘green’ energy supply schemes out of panic or stupidity. They see the writing on the wall and are preparing for the inevitable cross over to the Green energy future. Once the best of the green schemes are scaled up to industrial levels, we’re quite liable to see a new Renaissance.

  2. Jim Haygood

    No link to the Reinhardt/Rogoff article at Bloomberg? It’s an important follow-up to their book:

    Would Marshall Auerback call this Tea Party rhetoric on their part? Read it and weep —

    Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare (see attached chart 2 for U.S. public debt since 1790).

    Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?

    1. Valissa

      History is so inconvenient sometimes ;)

      If liberty means anything at all, it means the right to tell people what they do not want to hear. –George Orwell

      “Everyone believes in the atrocities of the enemy and disbelieves in those of his own side, without ever bothering to examine the evidence.” –George Orwell

      “The conventional view serves to protect us from the painful job of thinking.”
      “The enemy of the conventional wisdom is not ideas but the march of events.”
      John Kenneth Galbraith

    2. ambrit

      Mr Haygood;
      It could also be seen as the result of politicians unwillingness to enforce rational transfers of wealth from the high end of our economy to the low end. Not just “Welfare Cadillacs” (which would at least maintain an American Automobile manufacturer,) but employment keyed to the improvement of the nation, not its finances. Money is fungible, dams, roads, and schools are not. When the debt is used to finance ‘real’ improvements, it is bearable and worthy of real sacrifice. Therin lies the problem. We need real political leadership now, not opportunism.

    3. Yves Smith Post author

      The Reinhart/Rogoff 90% figure is junk science. Correlation is not causation.

      It mixes apples and oranges (gold standard and gold standard equivalent with fiat currency regimes).

      It also ignores causality. In many cases. low growth/financial crises led debt levels to blow out, not vice versa. And post financial crisis recoveries ALWAYS are weak and protracted.

  3. fresno dan

    On Early Retirement Helaine Olen

    At age 62, one has a life expectancy of 18 years more or less to live

    The break even point ot social security is about 80.
    (its in the 5th paragraph)

    The person who knows how long your going to live is yourself (if your honest – if your relatives are all dead before 70, I would highly advise taking early retirement)
    I agree with the author – take it when you need it. But I think it is unfortunate that she appers to buy into the AARP idea that taking it later gets you more money. Most people don’t make it to 80. Most 62 year olds don’t make it to 80.
    A cynic might think that people are advised to hold off so that less money is paid out.

    1. Jim Haygood

      Social Security critic Peter Ferrara takes this point even farther. Rich people (on average) live longer than poor people. So Social Security has a regressive effect on the working poor, who don’t live long enough to break even on retirement benefits.

      On the other hand, Social Security has some internal redistribution features concealed in its labyrinthine benefit formulae, such that low-wage contributors get slightly more benefits per dollar of FICA tax than high wage earners.

      Given the daunting complexity and opaqueness of the Soc Sec benefit scheme, it’s almost impossible to determine how these opposing tendencies balance out. I would nevertheless assume that despite some redistributionist features, the poor are getting a raw deal. Isn’t that always the case?

      1. Cedric Regula

        The benefit maxes out at something like $1500/month per person – so we’re not talking the average government pension of 60%-80% of peak career pay!

  4. CM

    The Milky Way story gets my vote for the dumbest statement of the month:

    “Alex Cherney’s photographs show planets, shooting stars, and even the Milky Way – features that are rarely seen from the polluted skies of the Northern hemisphere”

    Really? Anybody can see planets from near-daylight, shooting stars are obvious if you just look up (it helps to wait until after midnight no matter where you live), and the glorious summer Milky Way is easy to see from where I write this… and I live in a U.S. city of nearly a million people.

    I wonder what planet that journalist was on, because it sure wasn’t the planet earth.

    Nice pictures, though…

    1. Rex


      In 1996 I spent some time looking at comet Hyakutake with just my eyes. I live in the Silicon Valley end of SF Bay area. From my house the comet was a pretty impressive stripe in the sky.

      10 miles north, where I worked, I went out in the parking lot one night and couldn’t even find it. The area seemed pretty dark, but too much light blanked out all but the moon and a few planets or bright stars. No doubt, air quality played a part.

      One night I drove about 15-20 miles south of where I live and there the comet was spectacular, filling much of the sky.

      Most people who live near cities are blown away if they go to a light free area where the band of the milky way is obvious in the sky.

    1. disgruntled observer

      Apologies to journalists (specifically those involved in the original article). I misread the blog entry.

      Disturbing nonetheless!

  5. Ming

    Comment on ‘Murdochs Now Say They Will Appear Before Parliament New York times’

    This will be another bread circus… Like the big Royal Wedding, but except this is a very ugly incident. If we really want results, they need to go after the ‘ground troops’ and their lieutenants of NOTW and the paid off policemen,, so that the citizens of England can hear the actual dirty truth, and not some ‘spin’ from the masters of the spin doctors.

    The devil is in the details; he does his best work there.

    1. Valissa

      In the latest installment of “As the World Turns”…

      It took a while but Rebekah Brooks finally resigned today.

      Murdoch aide Brooks quits as head of UK newspapers

      Rebekah Brooks resigned as chief executive of News International on Friday, yielding to political and investor pressure over a phone hacking scandal that has shaken Rupert Murdoch’s media empire on both sides of the Atlantic.

      The 43-year-old Brooks, a former editor of the scandal-hit News of the World and of flagship daily tabloid The Sun, was a close confidante of Murdoch, who described her as his first priority when he flew in to London this week to manage the crisis at News Corp’s British newspaper unit.

    2. KFritz

      It’s just possible that an appearance before Parliament won’t be an American Congressional-style lovefest. If Murdoch is equating the two bodies and he’s wrong…trouble, very possibly big trouble.

      Don’t know enough even to place a bet, but I’d sure enjoy being a spectator if it does go wrong for Rupe.

  6. dearieme

    When the equivalent of Social Security was introduced in Britain back before WWI, you drew your pension at 70 – and now the pension age is heading back up towards 70. Still, I enjoyed her malapropism “… run the gamut”.

    1. Valissa

      Catchy title, but your excellent blog post has me wondering how your blood pressure is doing.

      Some antidotes…

      “Vote: the instrument and symbol of a freeman’s power to make a fool of himself and a wreck of his country.” —Ambrose Bierce, The Devil’s Dictionary

      “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.” —Groucho Marx

      “Politics, noun. A strife of interests masquerading as a contest of principles. The conduct of public affairs for private advantage.” —Ambrose Bierce, The Devil’s Dictionary

  7. Philip Pilkington

    I know NC hasn’t been dealing with the phone-hacking and Rupert Murdoch’s fall from grace, but I think readers would love this clip of Steve Coogan (of Alan Partridge fame) really bludgeoning a News of the World hack. If you’ve worked in, or had any dealings with, the media it will give you buckets of joy:

    Oh, and on the hack that’s being attacked (see I can do tabloid headlines to — aren’t I clever), PopBitch had this rumour yesterday:

    >> Hack haiku <<
    Saying it with words

    Former News of the World hack Paul
    McMullan took a bit of a kicking from
    Steve Coogan on Newsnight last Friday.
    It turns out that McMullan might be a
    more sensitive soul than he looks.
    For years after leaving NOTW, when he
    was drunk he would email poetry to
    Rebekah Brooks, hoping she might start
    liking him enough to bring him back
    to the paper.

    1. Philip Pilkington

      Oh, just saw there was a load of links… how embarrassing.

      Anyway: “Yeah, and Hitler was nice to dogs” — could that be the quote of the year?

      1. ambrit

        Mr Pilkington;
        And a vegetarian too. I wonder what really happened to the Mitford girl?

  8. that's gottaa leave a mark

    “This has pulled back a curtain, if you will, and exposed a very dark side of tabloid journalism. …. How much further does this thing go? Do you think this is a standard practice for tabloid newspaper and scandal magazines here in the US?”

    The Corruption Perception Index was developed by Transparency International. The creators say that the perception of the amount of corruption in a nation, while not quite the same as the actual amount of corruption in a nation, is important stuff nonetheless.

    “The Corruption Perceptions Index has drawn increasing criticism in the decade since its launch, leading to calls for the index to be abandoned. This criticism has been directed at the quality of the Index itself, and the lack of actionable insights created from a simple country ranking. Because corruption is willfully hidden, it is impossible to measure directly; instead proxies for corruption are used. The CPI uses an eclectic mix of third-party surveys to sample public perceptions of corruption through a variety of questions, ranging from “Do you trust the government?” to “Is corruption a big problem in your country?”

    The use of third-party survey data is a source of criticism. The data can vary widely in methodology and completeness from country to country. The methodology of the Index itself changes from year to year, thus making even basic better-or-worse comparisons difficult. Media outlets, meanwhile, frequently use the raw numbers as a yardstick for government performance, without clarifying what the numbers mean.”

    The News of the World is proving that the actual amount of corruption is farther reaching and has greater impact than the index suggests.

  9. KnotRP

    The Department for Headline Corrections Department issued the following corrections:

    Murdoch admits to ‘minor mistakes’, predominately having his underlings getting caught breaking little-people laws…he apologizes…for them being caught….and he promises to correct this by throwing his underling under the bus and pinky promising that his next underling…..will not get caught^H^H^H^H^H…be seen to be breaking little-people laws…^H^H^H^H^H^H^Hwill donate some money to a charity for saving skid row puppies.

    “Flaming Bag Of Dog Shit on the Doorstep” Extends Lead vs. Obama to 47% to 39%

  10. Valissa

    Ambrose Evans-Pritchard on the…

    Return of the Gold Standard as world order unravels

    In the Star Trek universe there are the well known Ferengi Rules of Acquisition. There are also the lesser known Rules of Acquisition, which work for gold as well as latinum or any other commodity.

    The Five Stages of Acquisition
    1.Infatuation: An unreasoning love or attraction … “I want it.”
    2.Justification: Moral excuse used to explain … “I must have it!”
    3.Appropriation: To take to one’s self in exclusion of others … “IT’S MINE AT LAST!”
    4.Obsession: A compulsive or irrational preoccupation … “Precious!”
    5.Resale: The action of selling something previously bought … “Make me an offer.”

    1. Philip Pilkington

      “As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.”

      Looks like Mr. Evans-Pritchard cannot tell the difference between ‘stability’ and a ‘speculative bubble’.

      He also seems to have a hard time understanding what a ‘gold standard’ is. A gold standard exists when countries peg their currency to a fixed value of gold. NOT when a bunch of idiots watching Glenn Beck and reading Zero Hedge inflate a massive speculative bubble in the commodities markets, forcing governments to jump on the bandwagon and stock up on reserves.

      1. Valissa

        I found the article an interesting blend of romance and reality, and Amrbose was clearly enjoying his won wordsmithing. Ahhhh the ancient allure of gold… and all that.

        However, the piece finishes up on this more practical note:

        A new Gold Standard would probably be based on a variant of the ‘Bancor’ proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China’s central bank chief Zhou Xiaochuan two years ago as a way of curbing the “credit-based” excess.

        1. Valissa

          crap, more dyslexic typing… meant to say “Ambrose was clearly enjoying his own wordsmithing”

        2. MyLessThanPrimeBeef

          China probably prefers gold over silver.

          The last time they were on the Silver Standard, the Westerners had to sell slaves in the New World in exchange for Mexican silver so that they could buy silk, tea and porcelain from China.

          When the British East India Company ran short of silver, they decided to pay the Chinese with opium.

          Unfornately, they would have the same problem with gold.

          I guess the lesson is, be careful whom you do business with.

      2. Cedric Regula

        Where the problem comes in is when they have to buy the gold from a gold miner or someone that has it (assuming they don’t do the usual thing and just appropriate it from safe deposit boxes, other countries, etc).

        That’s when the gold price matters, then it is set by supply and demand, without the speculative excesses, but usually they say no one but they can buy it, just to make sure.

        Then as a gold backed currency, international payments can be settled in either gold or currency, just to make sure you better have the reserves on hand. Again they usually don’t give that option to the little peoples.

        And to make matters worse we hit world Peak Gold in 2003, so monetary deflation is baked in the cake.

        Some central banks – China, India, and Russia I’ve heard – are quite willingly stocking up on gold. And it’s because they are losing confidence in major fiat currencies and their sovereign{this is an important word} bonds {aka debt-money}.

        But in the mean time the US will be polishing the gold in Ft. Knox to keep it from corroding green, in the hopes someday we can return to the world of MMT.

          1. Cedric Regula

            You could mint it into a coin, but it would be like getting jewelry from a really, really, cheap boyfriend.

            Dumb too. We need copper for windmills and electric cars.

        1. Philip Pilkington

          “Some central banks – China, India, and Russia I’ve heard – are quite willingly stocking up on gold. And it’s because they are losing confidence in major fiat currencies and their sovereign{this is an important word} bonds {aka debt-money}.”

          Is it really because they’re losing confidence in the major currencies and bonds?

          I don’t think so. And I also think they’re going to take major losses on all that gold they buying right now. Remember 1980?

          Well, you ain’t seen nothing yet. When this crashes out an awful lot of government fingers are going to get burned.

          1. Cedric Regula

            If the Fed ever raises it’s target rate, they will lose money on gold. Yes, I remember the 80s. Volker taught me how that worked when he wiped out my gold mine stock.

            Next we have to wonder if we do a replay of 1980-2000. I don’t think so, but unfortunately I didn’t buy any gold when it was cheap.

          2. Valissa

            A few years ago my husband asked me if I thought we should diversify a bit into gold. As a student of mythology I firmly said NO. It’s too tricky to try and stay ahead of the bubble when you are not a regular trader (we are very pedestrian 401K folks for the most part).

      3. MyLessThanPrimeBeef

        Like casting a protest vote, one buys gold as ‘protest money.’

        Comparing to ‘Out of Thin Air’ standard, gold standard shines. One can even use it for self-defense when commerce grinds to a hold, using it for clubbing an attacker or fashioning a golden bullet out of one’s gold reserve. Maybe even a golden cauldron to cook one’s cattle.

    1. Cedric Regula

      That just means they stayed the same for one month.

      We still don’t know for sure what happens August 2. Could be a bad month or maybe the world just hasn’t figured out what else to do yet. Tho the BRICs are working on it, and the CME just announced you can buy RMB futures in Chicago. Usually China would somehow have to support that, and that implies a major speed up in the long range plan of letting the RMB become a free currency.

      1. Philip Pilkington

        I think its far more simple than that, dude.

        Peeps in the US have very low purchasing power after the bubble crashed out, what they do have they’re deleveraging with and unemployment is up — in short aggregate demand is lagging.

        It’s pretty simple really and pretty noncontroversial. Lack of aggregate demand leads to loss of output and low inflation.

    2. Valissa

      The average person in the US experiences inflation despite official statements to the contrary. They have a wacky formula for defining it IMO. Food prices here have been going up, up, up for the past few years. Packaging has gotten smaller and more expensive simultaneously. Also many services have increased in price (like my pet sitter). The little people continue to experience inflation in their daily lives while the big players get to define it away.

      1. MyLessThanPrimeBeef

        I think tuitions are more expensive.

        Health insurance.

        Paying more traffic tickets.

        Gas more expensive.

        Netflix too.

        Cheaper shoes that need to be replaced more frequently.

        Cheaper burgers but it seems you have to eat more often (why is that?)

        I see inflation everywhere

        1. Cedric Regula

          Cheaper burgers but it seems you have to eat more often (why is that?)

          It’s the soybean meal they put in them. It’s like eating Chinese food. Or maybe Japanese food.

          But the whole, I mean, entire grain complex went up too.

          But there is a lot of stuff that’s not inflation, like healthcare. Then they makeup how much a house might rent for and that is 40% of the CPI right there. So you can see how hard it is to move the needle.

          Then if Chinese stuff gets better, they can say it’s because quality improved and lower the price back down again for the CPI calculation. That’s called hedonics, and only economists know how to do it.

          1. Cedric Regula

            Oh, yeah. My Netflix just went from $9 to $15/month in one year. But that’s still a small number.

          2. MyLessThanPrimeBeef

            I could probably look up hedonics and explain it to you in a few days, but I have no energy these days.

            I used to eat prime beef, but I had an inflation problem. They told me my inflation would disappear if I just eat chicken. So I did. But my inflation persisted, then they told me to eat dog food. Now, my inflation is gone.

          3. Cedric Regula

            Of course, but I must point out a technical point.

            What you are describing is called “economic substitution”, and that is neither hedonics nor inflation.

            This is an important point to understand, if you are serious about understanding economics.

          4. MyLessThanPrimeBeef

            Sorry, Cedric, I sort of got off the tangent to talk about the substitution effect.

            On the other hand, I think they try to say inflation is somehow checked as people substitute beef with chicken.

          5. Cedric Regula

            There is probably a study proving that. I’m just not aware of it. So much to learn – so little time.

          6. Valissa

            Hedonics, eh?

            1. the branch of psychology concerned with the study of pleasant and unpleasant sensations
            2. (in philosophy) the study of pleasure, esp in its relation to duty

            Definition: Hedonic means of or relating to utility. (Literally, pleasure-related.) A hedonic econometric model is one where the independent variables are related to quality; e.g. the quality of a product that one might buy or the quality of a job one might take.

            A hedonic model of wages might correspond to the idea that there are compensating differentials — that workers would get higher wages for jobs that were more unpleasant.

            Economists love to complexify! Given how serious economists it’s no surprise that they would try and ruin the definition of hedonics for the rest of us. I’m not falling for it, hedonism rocks!

          7. ambrit

            Mz Valissa;
            That ‘hedonics’ definition of wage setting tied to ‘pleasurability’ of the job is pure bunk. Just ask anyone out on a jobsite if they think they’re being paid a wage comparable to that of the idiot in the architects office who shows three service conduits fitting in a chase big enough for two? Anti-hedonics is a much more accurate description of the world of work.

  11. Foppe

    I’ve put a bigger version here for people who want to pass it around in all its horrifying glory, but it’s also worth spelling things out, because it might not be immediately obvious.

    The big-picture thing to remember when looking at this chart is something which I’ve said many times before — that it wasn’t an excess of greed and speculation which led to the financial crisis, but rather an excess of overcaution, with an attendant surge in demand for triple-A-rated bonds. On a micro level, triple-A securities are safer than any other securities. But on a macro level, they’re much more dangerous, precisely because they’re considered risk-free. They breed complacency and regulatory arbitrage, and they are a key ingredient in the cause of all big crises, which is leverage.

    At the left-hand side of the chart we see that global issuance of triple-A bonds was more or less nonexistent back in the early 90s. All those Treasury bonds, all those agency securities from Fannie and Freddie, all that Japanese debt — add it all up, and it still comes to essentially zero by the standards of what seems normal today. Check out the left-hand y-axis: it goes up in $1 trillion increments. And we’re not talking stock, here, we’re talking flows: this chart is issuance per year.

    (It’s pretty easy to see, looking at this chart, how a company like Pimco can find itself with over $1 trillion in assets under management: that’s now just a small fraction of the bonds issued each year.)

    Now zoom back, and look at the chart as a whole: it’s going up and to the right, which says two things. Firstly, the amount of debt in the world is soaring. That’s a bad thing, because debt is much more systemically dangerous than equity. And secondly, the amount of triple-A debt in the world is soaring as well. Which is a worse thing, because triple-A debt is much more systemically dangerous than most other debt.

    Then look at the green line. Triple-A debt wasn’t a huge part of the bond market back in the early 90s, but for the past decade it has invariably accounted for somewhere between 50% and 60% of total global fixed income issuance. That’s possibly the most horrifying bit of all: it simply defies credulity for anybody to be asked to believe that more than half the bonds issued in any given year are essentially free of any credit risk.

    Finally, look at the way that the maroon bars — structured products, basically — have given way to a scarily large purple bar at the far right of the chart. That’s sovereign debt, and it tells you all you need to know about where the next crisis is likely to come from.

    In a nutshell, triple-A debt is dangerous; there’s far too much of it; its growth seems out of control; and the triple-A problem has now become a sovereign-debt problem, in a world where sovereign-debt crises are the most damaging crises of all.

    All that said, there are two things worth bearing in mind which make the chart slightly less horrific. The first is that for reasons I don’t understand, the chart ends in 2009, a crisis year when sovereigns pulled out all the stops in their attempt to prevent a global Depression. We’re more than halfway into 2011 at this point, there’s no good reason why the chart couldn’t include 2010 as well. And that might show 2009 as being a bit of an aberration. Does anybody have the numbers for total triple-A bond issuance in 2010, and how much of that was sovereign?

    1. Foppe

      And here’s a direct link to the pretty picture

      This is why I love FT Alphaville in general and Tracy Alloway in particular: she’ll dutifully read 14 pages into something entitled “The Basel Committee on Banking Supervision Joint Forum Report on Asset Securitisation Incentives” before coming across this chart and immediately realizing just how important it is.

    2. Cedric Regula

      Ya. Scary picture, realizing it is flows. Course that would include 3 month T-bills, so I’m not sure how they do the data there.

      I would think the scary part is much of it was probably over rated at AAA, then when you get the downgrade, it gets even more expensive to roll.

      Plus add in interest rate risk, currency risk…..

  12. Valissa

    Some young adults think debt is ‘cool’

    Inevitable social trend? Or a sign that propaganda works… or both?

    Also, in local news, please excuse local pride… HURRAY… GQ named Boston first in their list of the 40 Worst-Dressed Cities in America!

    GQ hates on Boston, pleated khakis, and leggings

    (comments are good too)

  13. Externality

    Obama: cut Social Security and Medicare, not defense spending.

    In fact, the only quibble Obama expressed this morning with the Simpson-Bowles plan is that they cut too much from defense spending. ”Shared sacrifice” means it’s okay for senior citizens to be plunged into poverty, but we apparently draw the line at Lockheed Martin and Raytheon.

    President Obama supports raising the retirement age to 67 according to the Huffington Post, which as Jon Walker points out effectively voucherizes the program for people ages 65-66. That’s exactly what Paul Ryan wanted to do. Obama is publicly supporting means testing, which threatens to turn these programs into welfare programs — one of the ways that the GOP has been trying to get a foothold into Social Security and Medicare, with the hope of destroying them, for decades.

    1. hermanas

      @social security vrs. enemy(?) threat debate
      How about a debate on the preferability of slow starvation on the street to the sight of a muzzle flash ending?

  14. Sundog

    Nice work here, longish but worth a read.

    In all the media attention surrounding Perry’s flirtation with a run for the presidency, the governor’s budding relationship with the leaders of the New Apostolic Reformation movement has largely escaped notice. But perhaps not for long. Perry has given self-proclaimed prophets and apostles leading roles in The Response, a much-publicized Christians-only prayer rally that Perry is organizing at Houston’s Reliant Stadium on Aug. 6.

    Forrest Wilder, “Rick Perry’s Army of God”

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