New US home sales for June came in at an annualized rate of 384,000, which is well above the 352,000 that were widely expected. The latest figures mark the highest sales rate since November, which totaled 390,00. The previous month's data was revised modestly higher to 346,000.
Though the latest rate of new home sales show higher demand for housing, the higher rate of new home sales can complicate the movement of existing home sales and keep inventory up. That could prolong the overall recovery process for US housing.
Monday, July 27, 2009
Sunday, July 26, 2009
Indices may revisit June highs soon...
Courtesy business-standard.com...
Better-than-expected first quarter numbers, steady foreign institutional inflows coupled with positive global cues helped the Indian stock markets post smart gains for the second consecutive week. The Sensex, which gained over 1,200 points in the preceding week, ended the week with a gain of over 600 points.
The Sensex began the week with a bang, up 446 points on Monday. The index, thereafter, consolidated and finally ended with a gain of 634 points at 15,379. In the process, the index moved in a range of 632 points, hit a high of 15,419 and a low of 14,787.
Among the index stocks, DLF and Tata Motors zoomed over 18 per cent to Rs 333 and Rs 316, respectively. Maruti, Jaiprakash Associates, Tata Steel, Hindalco, TCS and Sterlite gained 11-16 per cent.
The Sensex is now well-poised to target its June high of 15,600. Above which, the index may spurt to 15,825, and further up to 16,800 in the next few weeks. On the downside, the index is likely to find support around 15,135-14,990 levels, a break below which could see the index slide to 14,500.
The NSE Nifty moved in a range of 201 points, from a low of 4,378, the index rallied to a high of 4,579, and finally settled with a gain of 194 points at 4,569. The index is moving towards its June high of 4,693 too, above which it may rise to 4,950. On the downside, the index may find support at 4,490-4,445.
The Nifty is currently moving above its all three averages — short-term, mid-term and long-term. However, the mid-term (45 days) average is currently above the short-term (15 days) daily moving average, which at times signifies consolidation or range-bound movement.
Better-than-expected first quarter numbers, steady foreign institutional inflows coupled with positive global cues helped the Indian stock markets post smart gains for the second consecutive week. The Sensex, which gained over 1,200 points in the preceding week, ended the week with a gain of over 600 points.
The Sensex began the week with a bang, up 446 points on Monday. The index, thereafter, consolidated and finally ended with a gain of 634 points at 15,379. In the process, the index moved in a range of 632 points, hit a high of 15,419 and a low of 14,787.
Among the index stocks, DLF and Tata Motors zoomed over 18 per cent to Rs 333 and Rs 316, respectively. Maruti, Jaiprakash Associates, Tata Steel, Hindalco, TCS and Sterlite gained 11-16 per cent.
The Sensex is now well-poised to target its June high of 15,600. Above which, the index may spurt to 15,825, and further up to 16,800 in the next few weeks. On the downside, the index is likely to find support around 15,135-14,990 levels, a break below which could see the index slide to 14,500.
The NSE Nifty moved in a range of 201 points, from a low of 4,378, the index rallied to a high of 4,579, and finally settled with a gain of 194 points at 4,569. The index is moving towards its June high of 4,693 too, above which it may rise to 4,950. On the downside, the index may find support at 4,490-4,445.
The Nifty is currently moving above its all three averages — short-term, mid-term and long-term. However, the mid-term (45 days) average is currently above the short-term (15 days) daily moving average, which at times signifies consolidation or range-bound movement.
S. Korea Economy Snaps Out of Stupor
South Korea's economy roared back to life in the second quarter, its best quarterly performance in more than five years, raising hopes the recovery is sustainable.
Saturday, July 25, 2009
US Market Update
US Markets Weekly Recap - Week ending 24-Jul-09
The US stock markets logged another impressive week as investors cheered better-than-expected earnings reports, with the S&P 500 surging 4.1%, marking an 11% gain since July 10.
The best performing sectors were materials (+8.1%), energy (+5.6%) and utilities (+5.6%).
The week got off to a positive bias on report from The Wall Street Journal that CIT Group (CIT) had reached an agreement with its bondholders to secure $3 billion in rescue financing, which was later confirmed by the struggling lender. Whether CIT will be able to avoid bankruptcy remains to be seen, although this will give the lender some time to explore its options.
With only a handful of economic releases, the main focus this week was the large amount of earnings reports -- 142 S&P 500 companies reported their quarterly results, including 12 Dow components.
Earnings for the most recent quarter largely came out ahead of expectations, with 111 beats, 10 in-line and 21 misses. But the earnings beats were largely due to cost cutting measures, not upside surprises on the top line. Specifically, 72 companies posted revenue that failed to live up to expectations, and 102 reported year-over-year declines in revenue.
For instance, Microsoft met analyst EPS estimates in its fiscal fourth quarter at $0.36, but the software giant's revenue decline of 17% y/y to $13.1 bln was well short of the $14.4 bln consensus. Shares of MSFT fell 4.0% for the week.
The US stock markets logged another impressive week as investors cheered better-than-expected earnings reports, with the S&P 500 surging 4.1%, marking an 11% gain since July 10.
The best performing sectors were materials (+8.1%), energy (+5.6%) and utilities (+5.6%).
The week got off to a positive bias on report from The Wall Street Journal that CIT Group (CIT) had reached an agreement with its bondholders to secure $3 billion in rescue financing, which was later confirmed by the struggling lender. Whether CIT will be able to avoid bankruptcy remains to be seen, although this will give the lender some time to explore its options.
With only a handful of economic releases, the main focus this week was the large amount of earnings reports -- 142 S&P 500 companies reported their quarterly results, including 12 Dow components.
Earnings for the most recent quarter largely came out ahead of expectations, with 111 beats, 10 in-line and 21 misses. But the earnings beats were largely due to cost cutting measures, not upside surprises on the top line. Specifically, 72 companies posted revenue that failed to live up to expectations, and 102 reported year-over-year declines in revenue.
For instance, Microsoft met analyst EPS estimates in its fiscal fourth quarter at $0.36, but the software giant's revenue decline of 17% y/y to $13.1 bln was well short of the $14.4 bln consensus. Shares of MSFT fell 4.0% for the week.
US Markets...
Tech stocks were under pressure for the entire session yesterday and caused the Nasdaq to log its first loss in more than two weeks, but a supportive bid in the broader market emerged to help the Dow and S&P 500 reverse early losses and finish with a modest gains.
Thursday, July 23, 2009
News...
Japan's export fall less severe as recession eases
Japan's exports in June fell by the smallest margin in six months, adding to evidence that global demand is recovering as the recession loosens its grip.
Other news...
# Porsche CEO steps down, making way for VW merger
# Credit Suisse reports 29 percent rise in 2Q profit
# Hyundai Motor Q2 net profit rises 48 percent
# Roche says half-year profit down 29 percent
Japan's exports in June fell by the smallest margin in six months, adding to evidence that global demand is recovering as the recession loosens its grip.
Other news...
# Porsche CEO steps down, making way for VW merger
# Credit Suisse reports 29 percent rise in 2Q profit
# Hyundai Motor Q2 net profit rises 48 percent
# Roche says half-year profit down 29 percent
Sunday, July 19, 2009
Market trends...
US Earnings Uptick Lifts American (And World) Investor Confidence
The first wave of US quarterly corporate earnings reports arrived stronger than expected, soothing investor fears of another economic crisis and helping push the Dow Jones Industrial Average to its strongest weekly gain since March.
The Dow ended the week up 7.3% at 8743.94, taking just five days to recover almost all the 7.4% decline of the previous four weeks, as investors took heart from blowout earnings by Goldman Sachs Group Inc. and positive comments from J.P. Morgan Chase & Co. and Intel Corp.
Sensex Ends up 3.5%; Gains Over 9% In The Immediate Past Week
Positive trade in global markets and heavy institutional buying - mainly by foreign investors - pushed Indian shares higher on Friday, enabling the Sensex to end the week with a 9.2% gain.
The first wave of US quarterly corporate earnings reports arrived stronger than expected, soothing investor fears of another economic crisis and helping push the Dow Jones Industrial Average to its strongest weekly gain since March.
The Dow ended the week up 7.3% at 8743.94, taking just five days to recover almost all the 7.4% decline of the previous four weeks, as investors took heart from blowout earnings by Goldman Sachs Group Inc. and positive comments from J.P. Morgan Chase & Co. and Intel Corp.
Sensex Ends up 3.5%; Gains Over 9% In The Immediate Past Week
Positive trade in global markets and heavy institutional buying - mainly by foreign investors - pushed Indian shares higher on Friday, enabling the Sensex to end the week with a 9.2% gain.
Monday, July 13, 2009
Goldman Sachs upgrade gives world markets a boost
European and U.S. stock markets rose today after a well-respected banking analyst stoked hopes that this week's earnings from some of the U.S.'s leading banks may well surprise to the upside.
The FTSE 100 index of leading British shares was up 65.36 points, or 1.6 percent, at 4,192.53 while Germany's DAX jumped 102.12 points, or 2.2 percent, to 4,678.43. The CAC-40 in France was up 37.23 points, or 1.3 percent, to 3,020.33.
And on Wall Street, the Dow Jones industrial average was up 48.44 points, or 0.6 percent, at 8,194.96 soon after the open while the broader Standard & Poor's 500 index rose 5.33 points, or 0.6 percent, at 884.46.
Europe had been trading only modestly higher while Wall Street futures had been pointing to a lower opening. That changed after Meredith Whitney told CNBC Television that she had upgraded her recommendation on U.S. investment bank Goldman Sachs Group Inc. to "buy" and raised her price target to $186 a share -- a day before it reports its second-quarter earnings. Whitney, who has been viewed as bearish on the sector, also said Bank of America Corp. could be good value.
In early trading, Goldman Sachs was up 2.9 percent at $145.98 while Bank of America rose 3.9 percent to $12.34.
The comments came as investors were fully focused on the U.S. second quarter reporting season, which really kicks into gear this week with a raft of companies reporting.
Whitney's upgrade "has given markets a shot in the arm," said Richard Hunter, equities strategist at Hargreaves Lansdown stockbrokers in London.
Most of the attention this will be on the U.S. banks, which arguably were the catalyst to the first synchronized global economic downturn since the Second World War. Goldman Sachs is the first major U.S. financial institution to report on Tuesday, followed by JPMorgan Chase & Co., Bank of American Corp. and Citigroup Inc. later in the week.
The FTSE 100 index of leading British shares was up 65.36 points, or 1.6 percent, at 4,192.53 while Germany's DAX jumped 102.12 points, or 2.2 percent, to 4,678.43. The CAC-40 in France was up 37.23 points, or 1.3 percent, to 3,020.33.
And on Wall Street, the Dow Jones industrial average was up 48.44 points, or 0.6 percent, at 8,194.96 soon after the open while the broader Standard & Poor's 500 index rose 5.33 points, or 0.6 percent, at 884.46.
Europe had been trading only modestly higher while Wall Street futures had been pointing to a lower opening. That changed after Meredith Whitney told CNBC Television that she had upgraded her recommendation on U.S. investment bank Goldman Sachs Group Inc. to "buy" and raised her price target to $186 a share -- a day before it reports its second-quarter earnings. Whitney, who has been viewed as bearish on the sector, also said Bank of America Corp. could be good value.
In early trading, Goldman Sachs was up 2.9 percent at $145.98 while Bank of America rose 3.9 percent to $12.34.
The comments came as investors were fully focused on the U.S. second quarter reporting season, which really kicks into gear this week with a raft of companies reporting.
Whitney's upgrade "has given markets a shot in the arm," said Richard Hunter, equities strategist at Hargreaves Lansdown stockbrokers in London.
Most of the attention this will be on the U.S. banks, which arguably were the catalyst to the first synchronized global economic downturn since the Second World War. Goldman Sachs is the first major U.S. financial institution to report on Tuesday, followed by JPMorgan Chase & Co., Bank of American Corp. and Citigroup Inc. later in the week.
Saturday, July 11, 2009
US Stocks Mixed With Shaw Group Slipping, Yahoo Gaining
US Stocks finished mixed on Friday as profit reports trickled in, with Shaw Group sliding after an earnings miss, Yahoo gaining on an analyst upgrade, and Exxon Mobil continuing its recent decline.
The Dow Jones Industrial Average fell 36.65, or 0.45%, to 8146.52. For the week, the index lost 1.62%, declining for the fourth week in a row. The Standard & Poor's 500 lost 3.55, or 0.40%, to 879.13. For the week, the index lost 1.93%, also down four weeks in a row. The Nasdaq gained 3.48, or 0.20%, to 1756.03. For the week, it lost 2.25%, falling for the second straight week.
Friday's economic data showed that consumer confidence dropped in the middle of July.
"No one expects the second-quarter [earnings] to be good," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. Earnings reports so far show that companies are still using cost cuts to prop up their profits and are yet to see sales rebound, he said.
Commodity stocks came under pressure during the week and extended some of those losses Friday. Crude stocks tumbled Friday as crude-oil prices continued to slide. Exxon fell 85 cents, or 1.3%, to 65.12, and lost 4.9% for the week.
Shaw Group fell 2.47, or 9.4%, to 23.69. The engineering and construction company's fiscal third-quarter earnings dropped, partly due to costs related to two fossil contracts.
Investors' focus turned to earnings this week as Alcoa reported results, marking the official start of the earnings season. The aluminum company reported a quarterly loss midweek but topped Wall Street's expectations. Its stock fell 5.3% for the week.
Elsewhere, CME Group fell during the week following news the U.S. Commodity Futures Trading Commission is planning to propose sweeping trading limits on oil, natural gas and possibly other commodities. For the week, the stock lost 12.7%.
Yahoo (Nasdaq) gained 38 cents, or 2.6%, to 14.93. Thomas Weisel upgraded Yahoo to market weight from underweight, saying it believes the company's outlook "is determined more by the operational changes made within the management ranks and less on a potential exogenous event with Microsoft."
American depositary shares of Infosys Technologies (Nasdaq) gained 1.46, or 4.2%, to 35.95. The Indian technology company Friday met some market expectations and beat some other market expectations and posted a rise in its fiscal first-quarter profit.
The Dow Jones Industrial Average fell 36.65, or 0.45%, to 8146.52. For the week, the index lost 1.62%, declining for the fourth week in a row. The Standard & Poor's 500 lost 3.55, or 0.40%, to 879.13. For the week, the index lost 1.93%, also down four weeks in a row. The Nasdaq gained 3.48, or 0.20%, to 1756.03. For the week, it lost 2.25%, falling for the second straight week.
Friday's economic data showed that consumer confidence dropped in the middle of July.
"No one expects the second-quarter [earnings] to be good," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. Earnings reports so far show that companies are still using cost cuts to prop up their profits and are yet to see sales rebound, he said.
Commodity stocks came under pressure during the week and extended some of those losses Friday. Crude stocks tumbled Friday as crude-oil prices continued to slide. Exxon fell 85 cents, or 1.3%, to 65.12, and lost 4.9% for the week.
Shaw Group fell 2.47, or 9.4%, to 23.69. The engineering and construction company's fiscal third-quarter earnings dropped, partly due to costs related to two fossil contracts.
Investors' focus turned to earnings this week as Alcoa reported results, marking the official start of the earnings season. The aluminum company reported a quarterly loss midweek but topped Wall Street's expectations. Its stock fell 5.3% for the week.
Elsewhere, CME Group fell during the week following news the U.S. Commodity Futures Trading Commission is planning to propose sweeping trading limits on oil, natural gas and possibly other commodities. For the week, the stock lost 12.7%.
Yahoo (Nasdaq) gained 38 cents, or 2.6%, to 14.93. Thomas Weisel upgraded Yahoo to market weight from underweight, saying it believes the company's outlook "is determined more by the operational changes made within the management ranks and less on a potential exogenous event with Microsoft."
American depositary shares of Infosys Technologies (Nasdaq) gained 1.46, or 4.2%, to 35.95. The Indian technology company Friday met some market expectations and beat some other market expectations and posted a rise in its fiscal first-quarter profit.
Friday, July 10, 2009
Infosys shines, Sensex whines
The Sensex today opened 105 points higher at 13,803 on the back of smart gains after Infosys came out with its Q1 numbers which were largely in line with the market expectations.
The index hovered around the break-even point for the major part of the day. The better-than-expected index of industrial production (IIP) numbers which rose to 2.7% in May lifted the sentiment for a brief while. As a result the Sensex spurted to a high of 13,897.
However, sudden selling in the late trades mainly in index heavyweight Reliance saw the index nose-dive to a low of 13,418, down 478 points from the day's high.
The Sensex finally ended at 13,504, down 253 points.
The BSE Oil & Gas index tumbled 3% to 8,533. The Power, Capital Goods, Realty and PSU indexes declined 2-2.5% each. While IT index advanced 2% to 3,196.
Reliance and HDFC accounted for nearlt half of the losses.While the former accounted for 80 points loss on the Sensex, the latter shaved off another 38 points.
The market breadth was fairly negative - out of 2,638 shares traded, 1,785 declined and 772 shares advanced on the BSE.
INDEX SHAKERS...
Reliance Infrastructure tumbled 6.5% to Rs 1,029, and Jaiprakash Associates slumped over 5.5% to Rs 186.
Sun Pharma slipped over 4% to Rs 1,121.
Reliance Communications dropped 5.5% to Rs 242, and Bharti Airtel was down 2% at Rs 782.
Reliance shed 4% at Rs 1,778. The stock clocked volumes of 1.12 million shares on the BSE today.
SBI declined 3.5% to Rs 1,544 and HDFC Bank decreased 2% to Rs 1,369. ICICI Bank was down 1% at Rs 629.
...AND THE MOVERS
Wipro advanced around 3.5% to Rs 384. Infosys added around 3% to Rs 1,726 after the company posted a 17.2% increase in net profit to Rs 1,527 crore for the first quarter of current fiscal as compared to Rs 1,302 crore for the quarter ended June 30, 2008. TCS gained 1.5% at Rs 394.
Sterlite moved up 3% to Rs 575.
VOLUME & VALUE TOPPERS
Educomp Solutions topped the value chart on the BSE with a turnover of Rs 266.77 crore. It was followed by Reliance (Rs 205.89 crore), Reliance Capital (Rs 201.77 crore), Suzlon (Rs 183.69 crore) and Unitech (Rs 165.10 crore).
Unitech led the volume chart with trades of 23.27 million shares. It was followed by Cals Refineries (22.73 million), Suzlon (21.08 million), Mahindra Satyam (20.03 million) and Reliance Natural Resources (10.11 million) shares on the BSE.
The index hovered around the break-even point for the major part of the day. The better-than-expected index of industrial production (IIP) numbers which rose to 2.7% in May lifted the sentiment for a brief while. As a result the Sensex spurted to a high of 13,897.
However, sudden selling in the late trades mainly in index heavyweight Reliance saw the index nose-dive to a low of 13,418, down 478 points from the day's high.
The Sensex finally ended at 13,504, down 253 points.
The BSE Oil & Gas index tumbled 3% to 8,533. The Power, Capital Goods, Realty and PSU indexes declined 2-2.5% each. While IT index advanced 2% to 3,196.
Reliance and HDFC accounted for nearlt half of the losses.While the former accounted for 80 points loss on the Sensex, the latter shaved off another 38 points.
The market breadth was fairly negative - out of 2,638 shares traded, 1,785 declined and 772 shares advanced on the BSE.
INDEX SHAKERS...
Reliance Infrastructure tumbled 6.5% to Rs 1,029, and Jaiprakash Associates slumped over 5.5% to Rs 186.
Sun Pharma slipped over 4% to Rs 1,121.
Reliance Communications dropped 5.5% to Rs 242, and Bharti Airtel was down 2% at Rs 782.
Reliance shed 4% at Rs 1,778. The stock clocked volumes of 1.12 million shares on the BSE today.
SBI declined 3.5% to Rs 1,544 and HDFC Bank decreased 2% to Rs 1,369. ICICI Bank was down 1% at Rs 629.
...AND THE MOVERS
Wipro advanced around 3.5% to Rs 384. Infosys added around 3% to Rs 1,726 after the company posted a 17.2% increase in net profit to Rs 1,527 crore for the first quarter of current fiscal as compared to Rs 1,302 crore for the quarter ended June 30, 2008. TCS gained 1.5% at Rs 394.
Sterlite moved up 3% to Rs 575.
VOLUME & VALUE TOPPERS
Educomp Solutions topped the value chart on the BSE with a turnover of Rs 266.77 crore. It was followed by Reliance (Rs 205.89 crore), Reliance Capital (Rs 201.77 crore), Suzlon (Rs 183.69 crore) and Unitech (Rs 165.10 crore).
Unitech led the volume chart with trades of 23.27 million shares. It was followed by Cals Refineries (22.73 million), Suzlon (21.08 million), Mahindra Satyam (20.03 million) and Reliance Natural Resources (10.11 million) shares on the BSE.
Saturday, July 4, 2009
MOUNTAIN OF DEBT: Rising US government debt may be next (world) crisis
MOUNTAIN OF DEBT: Legacy of debt from Founding Fathers not celebrated on Independence Day
The Founding Fathers of the United States of America left one legacy not celebrated on Independence Day but which affects us all (in the US and all over the world). It's the national debt.
The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion -- equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.
The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Federal Reserve Chairman Ben Bernanke recently told Congress.
Higher taxes, or reduced federal benefits and services -- or a combination of both -- may be the inevitable consequences.
The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.
Interest payments on the debt alone cost $452 billion last year -- the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.
Alexander Hamilton, the first treasury secretary, said, "A national debt, if not excessive, will be to us a national blessing."
Some blessing.
Since then, the nation has only been free of debt once, in 1834-1835.
The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply -- except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.
The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.
The odometer-style "debt clock" near Times Square -- put in place in 1989 when the debt was a mere $2.7 trillion -- ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.
The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.
The debt gap is "something that keeps me awake at night," Obama says.
He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.
Deficits don't reflect holdover indebtedness from previous years. Some spending items -- such as emergency appropriations bills and receipts in the Social Security program -- aren't included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.
By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
The Peter G. Peterson Foundation, established by a former US commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.
That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.
The Founding Fathers of the United States of America left one legacy not celebrated on Independence Day but which affects us all (in the US and all over the world). It's the national debt.
The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion -- equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.
The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth," Federal Reserve Chairman Ben Bernanke recently told Congress.
Higher taxes, or reduced federal benefits and services -- or a combination of both -- may be the inevitable consequences.
The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.
Interest payments on the debt alone cost $452 billion last year -- the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.
Alexander Hamilton, the first treasury secretary, said, "A national debt, if not excessive, will be to us a national blessing."
Some blessing.
Since then, the nation has only been free of debt once, in 1834-1835.
The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply -- except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.
The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.
The odometer-style "debt clock" near Times Square -- put in place in 1989 when the debt was a mere $2.7 trillion -- ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.
The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.
The debt gap is "something that keeps me awake at night," Obama says.
He pledged to cut the budget "deficit" roughly in half by the end of his first term. But "deficit" just means the difference between government receipts and spending in a single budget year.
This year's deficit is now estimated at about $1.85 trillion.
Deficits don't reflect holdover indebtedness from previous years. Some spending items -- such as emergency appropriations bills and receipts in the Social Security program -- aren't included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government's balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.
By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
The Peter G. Peterson Foundation, established by a former US commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.
That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.
Subscribe to:
Posts (Atom)
