Analysis pegs US debt service at $800B by 2020

Global Demand for U.S. Financial Assets Slowed in October, Treasury Says – Global demand for U.S. stocks, bonds and other financial assets slowed in October from a month earlier, the Treasury Department reported, as the pace of economic recovery weighed on demand.  Net buying of long-term equities, notes and bonds totaled $27.6 billion during the month compared with net buying of $77.2 billion in September, according to statistics issued today in Washington. Including short-term securities such as stock swaps, foreigners purchased a net $7.5 billion compared with net buying of $80.1 billion the previous month.  The U.S. economic recovery from the deepest recession since the 1930s has lagged behind growth in emerging markets, weighed down by an unemployment rate close to 10 percent and record home foreclosures.

Update on Iraqi Oil Production – Time for an update on the progress, or rather lack of it, in Iraqi oil production.  Recall that following decades of neglect, sanctions, and war damage, the Iraqi oil ministry under Hussein al-Shahristani is trying to massively expand production, supposedly to 12mbd within 7 years (though probably Dr al-Shahristani is the only person on the planet who thinks that target will be hit in full).  The graph above shows the latest data from four different sources, together with an average index.  The data are current as of September to November depending on source.  As you can see, there was a small drop in early 2010, and then it’s been roughly flat since then.This interesting UPI story gives some field level detail on what’s going on with the new projects, most of which are only just getting started:


Update on Saudi Oil Production – While I’m updating my OPEC spreadsheet, it seems like a good idea to look at Saudi Arabian oil production.  This will be an interesting thing to watch in coming months.  The flow of US economic news has been turning a little more positive recently, and global oil production is increasing again.  In that environment, I would expect oil prices to increase (albeit probably fitfully), and then it becomes a very interesting question at what price Saudi Arabia will restore the production they cut at the onset of the great recession. Looking at the graph above, three out of four data sources claim Saudi production has already started to increase (specifically, the IEA, OPEC, and the EIA, the latter particularly strongly so).  The increase only amounts to a few hundred kbd, and the Saudi’s themselves (via their self reports to JODI), do not say they are increasing production.  Still, I’m inclined to wonder if the beginning of a slow trend to increasing Saudi production has begun.  The highest value of production Saudi Arabia has been able to demonstrate in recent years is 9.5mbd (based on the average index – black line – above).  They are about 1.3mbd below that today. On the other hand, rig counts have continued to drift down through most of 2010, suggesting that Saudi Aramco doesn’t currently anticipate their capacity coming under pressure:

The 99ers — Our National Shame – The historic tax cut compromise ensures that those forces tearing American society apart will become even more entrenched. Among these trends, one that doesn’t get much attention is a key new industry here in the United States: we are "manufacturing" poor people like there’s no tomorrow. And for these newly poor citizens, the so-called 99ers whose unemployment benefits have expired or will soon, there may not be a tomorrow. Obama’s "compromise" does not extend "Tier 5" benefits, which means those who have exhausted their 99 weeks of unemployment insurance are screwed.. Calculated Risk recently posted a chart you should take a look at. He also quoted a 99er in Oregon who’s about to lose his benefits. "This is just as scary as people lobbing mortars over your head at 2 o’clock in the morning."   —James Mitchell, a 64-year-old Vietnam veteran who lost his job in early 2009 and is about to exhaust his unemployment benefits.And like all poor people, the 99ers will soon be forgotten. But at least no one can claim that America doesn’t "manufacture" things anymore. Poor people are our biggest product.

More and More Senior Citizens Filing For Bankruptcy – Some people were feeling like the golden years were being tainted because many senior citizens were declaring bankruptcy in retirement.   Those, 65 and older, became the fastest-growing group facing severe debt problems.  69-year-old Suzanne Ballard, of La Quinta, said finding money to support herself in the economy is really tough.  "I see the end of the money coming.  It’s just like you can’t get ahead.  Your hole digs a little deeper all the time," Ballard said.   While Ballard did not resort to bankruptcy, some of her friends did. "It’s destroyed them.  They lost everything they had.  They had no credit," Ballard said.   A University of Michigan Law School study found that those 65 and older were the fastest-growing group filing for bankruptcy

Florida’s Budget Hole Now at Least $3.5 Billion – Florida’s budget shortfall hit at least $3.5 billion Tuesday as analysts dialed-back the state’s revenue forecast, saying sluggish tax collections and a still-faltering economy are complicating the balancing act facing Gov.-elect Rick Scott and legislators. This year’s collections shrunk by $585.7 million, while next year’s forecast was trimmed by $612.2 million, with sales-tax and corporate income tax declines leading the retreat. Reserves are available to patch this year’s reduction, although once they do, the state’s rainy day fund will dwindle to a meager $249 million at mid-budget year.

Analysis pegs US debt service at $800B by 2020 – Interest payments on the U.S. debt could balloon to $800 billion a year, or 3.4 percent of the economy, by 2020 under current spending and tax laws, a congressional budget analysis released Tuesday said. The report by the non-partisan Congressional Budget Office said that U.S. debt held by investors, which stands at $9.3 trillion, will exceed $16 trillion by the end of the decade under current law. Rising interest rates means federal spending to service the debt will increase to at least $800 billion by the end of the decade from $197 billion, about 1.4 percent of gross domestic product, in 2010. Debt and interest costs will rise even higher if Bush-era tax cuts and current levels of spending continue unchallenged, the CBO warned. “If, for example, the tax reductions enacted earlier in the decade were continued, the alternative minimum tax was indexed for inflation and future annual appropriations remained the same share of GDP that they were in 2010, debt held by the public would total nearly 100 percent of GDP by 2020,” the CBO said. “Interest costs would be correspondingly higher.”

Video of Unrest on Rome’s Streets After Berlusconi Wins Vote –  Updated | 3:43 p.m. Following a narrow vote of confidence in Italy’s Prime Minister Silvio Berlusconi from the Italian Parliament on Tuesday, protesters on Rome’s streets — demonstrating against austerity measures and a variety of government failings — clashed with police and set cars on fire in several parts of the city. Dramatic images and video of the anger on the streets was posted online by witnesses to the unrest. We are piecing together an idea of where these events took place, based on some caption information and a limited knowledge of Roman geography — readers with a good understanding of Rome’s streets are invited to weigh in on where these events took place in the comment thread below. (Thanks to those who have already done so.) “Hooded protesters set up flaming barricades as police baton-charged demonstrators in several parts of the capital’s historic center. Cars and council vehicles were set alight, and officers fired teargas at protesters, The Guardian’s Rome correspondent John Hooper reported. “By mid-afternoon,” he added, “two thick columns of smoke rose from the remnants of a barricade at the entrance to the historic Piazza del Popolo.”

Greek Strikers Halt Flights, Buses as Bailout Bites – Greek unions grounded flights, kept ferries docked at ports and shut down public services today to protest wage cuts as the government sticks to conditions of an international bailout. Protesters clashed with police in Athens.  Air-traffic controllers walked off the job, canceling all flights to and from Athens International Airport. Public transport workers, whose salaries were cut 10 percent under a bill approved early today in parliament, worked on and off between 9 a.m. and 5 p.m. to carry protesters to rallies.  “In terms of our salaries, we are going back at least 20 years,” said Stamatis Klapsis, 52, who has worked as a stationmaster at a suburban bus depot in the capital Athens for 31 years. “They are taking us back to the Middle Ages.”

Unemployed and Uncounted (RT Video)The 9.8% unemployment rate in the United States may be closer to 20%, or 30 million Americans without a job. Those measured are those who had a job before, are actively looking for work and are immediately available for work. Despite Washington DC having a somewhat healthy economy, so many residents here are left behind without a job, an income or any hope that things will get better.

Mexico asks IMF to boost credit line to over $70 billion (Reuters) – Mexico asked the International Monetary Fund to extend a credit line to Latin America’s No. 2 economy to more than $70 billion on Tuesday as a safety net in case of more global financial market turmoil. President Felipe Calderon said Mexico had asked the International Monetary Fund to boost the country’s current credit line with the IMF from $48 billion to around $72 billion. "This is a financial insurance policy that will fully protect the economy from any external turbulence," Calderon said after meeting with IMF Managing Director Dominique Strauss-Kahn."This is a credit line of a precautionary nature that, just like in past instances, Mexico does not plan to use," Calderon added.

Spain’s Lenders May Need Additional $120 Billion in Capital, Moody’s Says – Spanish banks that helped spur the country’s property boom with mortgages and loans to developers may need as much as 90 billion euros ($120 billion) in capital, Moody’s Investors Service said.  That estimate is based on a scenario in which lenders would need a Tier 1 capital ratio, a measure of their financial strength, of as much as 12 percent to tap funding, Moody’s said in a statement. Spanish banks declined today, led by Banco Santander SA, the country’s biggest.  “Given the situation after Ireland where the banks will have to be recapitalized to a much higher capital level, to a core Tier 1 ratio of 12 percent, we ran stress tests to see what that would mean in the context of Spain, if Spanish banks had to be recapitalized to a higher level in order to retain market confidence,”

France to revise current global monetary system – While serving as the chairman country of the G20, France wants to revise the current global monetary system and encourage countries to diversify the portfolio of reserve currencies, said Christine Lagarde, Minister of Economic Affairs, Finances and Industry of France. The control over financial flows in the process of diversification should be granted to the International Monetary Fund. According to Reuters, Lagarde believes that the world powers should abandon the outdated ideas of forty years ago and stop treating the dollar as the major reserve currency. A balanced portfolio of reserve currencies, by contrast, would reduce the imbalance and help restore the countries’ economy, said Lagarde. According to Lagarde the IMF should control financial flows because, in her words, unilateral actions are fraught with risks. However, so far countries are doing it on their own. In particular, the Ukrainian government has recently announced its intention to expand the country’s foreign exchange reserves adding the Russian ruble. The Russian ruble is a part of the currency reserves of Belarus which is Russia’s active trade partner. At the same time, Russia’s currency basket consists only of the euro and the dollar.

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