After it was announced that the FY2003 budget deficit would inch even closer to the one-half trillion mark ($455 billion), the OMB announced that the average budget deficit for the next five years will be $380 billion--and this is based on the most optimistic assumptions.  The White House defends its small tax cuts as being part of the solution to the deficit crisis, but based on its own projections, the solution it envisions must not kick in until sometime after 2008.

Idyllic Aura has Faded in the Pacific Northwest (CSM): “Dot-com collapse in the land that Bill Gates built. The move of Boeing’s headquarters from Seattle to Chicago. The highest unemployment rate in the country. Schools closing weeks early for lack of funds. Even the iconic salmon are dying out. What’s happening here?

Spitzer plans action against Morgan Stanley-report (Reuters): “New York State Attorney General Eliot Spitzer plans to bring forward on Monday a “significant enforcement action” against Wall Street investment bank Morgan Stanley MWD.N, Bloomberg News reported, citing two people close to the investigation.

The Road Ahead in Iraq, and How to Navigate it, by L. Paul Bremer (NYT): “We are pouring resources into re-establishing basic services and creating jobs....We are also creating a social safety net for any resulting disruptions. And we believe that a method should be found to assure that every citizen benefits from Iraq’s oil wealth. One possibility would be to pay social benefits from a trust financed by oil revenues.

Mon, 04/09/2018 - 17:38

Clay

by Mark Thornton

Ludwig von Mises en ligne en français

The two housing GSEs (government-sponsored enterprises) Fannie Mae and Freddie Mac, dominate the mortgage finance sector.  They operate on tremendous amounts of leverage and they exposed to swings in their asset and liabilitiy values if interest rates move.  They claim to have hedged their interest rate risk through derivatives, but even if that were true, then some other financial institutions are now exposed to enormous risk.

Or so the article says.  However, it appears they are really opposed to the current economic system, which is a far cry from capitalism. They do advocate abandoning the dollar and the euro, and returning to gold, so good for them as far as that goes.  No US politician would suggest that.
 

According to this article by Bloomberg reporter William Pesek, Asian investors, who own a huge amount of agency debt, are getting worried about the soundness of Fannie and Freddie.  Freddie has recently been rocked by an accounting scandal.   In spite of the denials by Fannie and Freddie that their securities are government-guaranteed, the Asian markets think that they are and this is one of their main appeals.