Ali Lebanthal on why Meredith Whitney’s prediction of widespread muni defaults is way off base.
I know I have beaten this topic to death, but it is still amazing that Whitney continues to make these predictions when she has been proven wrong each and every time. In fact, each day that passes, she seems more incorrect, yet, she remains steadfast in her views.
by Jordan Eizenga
Durante la última década, el Departamento del Tesoro de EE.UU. se ha prestado miles de millones de dólares para financiar intervenciones militares en dos países, recortes de impuestos sin financiación, y, más recientemente, los esfuerzos para rescatar nuestro sistema financiero del colapso y ayudar a nuestra economía a recuperarse de la Gran Recesión. Pero hay un límite a estos préstamos, y se espera que el Departamento del Tesoro alcance este límite principios de julio a más tardar.
Mientras este plazo límite de la deuda se acerca, el pueblo estadounidense se está preguntando cuáles serán los efectos si el Congreso no levanta el límite de la deuda. Esta columna describe brevemente todo lo que necesita saber acerca de nuestro límite de la deuda, así como las posibles consecuencias de no levantarla.
Ok, this will be the last post on the muni market.
This video addresses some of the positive things happening in the municipal bond market and, as the hosts admit, it “busts a lot of the myths” about what is happening in the market right now.
by Jordan Eizenga
The new World Trade Center is the latest casualty of a municipal bond market in turmoil. The developer of the office-and-memorial project in lower Manhattan this month postponed issuance of $900 million in tax-exempt bonds, because of rising yields.
Liberty Development Corp.’s problems are emblematic of widespread distress in the municipal markets: Default worries, near-elimination of municipal bond insurance, and tight credit conditions have led to higher interest rates and delays of important infrastructure projects that create jobs.
by Jordan Eizenga and Seth Hanlon
In the months after the collapse of Lehman Brothers in September 2008, fear and uncertainty in the global credit markets spread to the municipal bond market. Investors fled muni bonds and prices plunged.
Advisers recommended that state and local governments delay issuing new debt because of high yields and weak demand. But pressing financial and infrastructure needs meant that state and local governments often could not just wait out the crisis. The turmoil in the municipal bond market threatened to worsen the nation’s plunge into recession.
Greg Ip, Economics Editor, gives a pretty good lay of the land regarding the debt ceiling.
Smart fellow.
by Jordan Eizenga
It has taken very little time for prognosticators to estimate the potential impact of the Japanese crisis on the financial markets, most notably, the U.S. Treasury market. Some economists have argued that, in order to finance reconstruction of its infrastructure, Japan may need to sell a substantial portion of its debt holdings.
And at the top of those holdings is US Treasury bonds.
Japan owns approximately 20 percent of U.S. government public debt, which makes it the second largest foreign creditor to the United States. If Japan were to engage in a large sell off of US Treasuries, interest rates would spike in the United States - a particularly undesirable outcome for a highly indebted nation.
by Jordan Eizenga
Pennsylvania Senator Pat Toomey’s proposal won’t prevent the U.S. from defaulting on its debt if the debt ceiling is not raised. At present, the United States is approximately $200 billion away from reaching its debt ceiling. The U.S. Treasury Department estimates that this will be reached by as early as April 5th and as a late as May, depending on tax receipts.
Toomey, along with other Republicans, has implicitly threatened to deny increasing the debt limit.
by Jordan Eizenga
Tax-exempt municipal bonds are an inefficient way of subsidizing state and local governments.
To move beyond the ongoing stimulus and tax cut debate to an equally salient issue, I have posted a video of a conversation between Secretary of the Treasury Timothy Geithner and Charlie Rose on the issue of China’s exchange rate policy. Geithner argues that China should let its currency appreciate - not simply because it helps cure global imbalances, but also because allows for the increased prosperity of Chinese citizens.
He is right - the artificially depressed Renminbi favors Chinese exporters at the expense of Chinese workers who have artificially depressed wages.
For global capitalism to work, it must be broadly shared. Letting the Renminbi appreciate is one giant step to achieving that end.
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