The great debt crash

[errolanderson]

The interest to finance U.S.debt now exceeds 928 billion annually and spiralling. This debt payment now exceeds the entire U.S. military budget spent yearly.

Houston . . . we have a problem here.

[biglentil]

"What does that typically do to their agricultural production?"

The main reason I posted this, do farmers in Argentina become "holders" of their raw commodities, "quick sellers", or might there be "no change" in their selling pattern? On the input side, fert and chem costs, where do they go for those producers?
and how, if any does that effect Canadian farmers?

From what I understand, Farmers in such regions will tend to hoard production and prebuy inputs as early as possible. Its all psychological, as a buyer if the expectation is that tomorrow it will cost more I shall buy today, on the otherhand as a seller if the expectation is tomorrow it will be worth more I want a premium today because the cost to restock or grow the crop maybe higher than the inventory just sold. You can see how hyperinflation can spiral very quickly, during the Weimer Germany period it was said that by the time you finished your coffee in a restaurant the price would have doubled. When paychecks were received by factory workers would race to their wives who would spend it as quickly as possible before prices went up. If paying by cheque merchants would require 50% more because of the time it required the cheque to clear. It becomes very difficult for businesses to operate in such an environment, only adding to supply shortages and making matters worse. Confidence in the purchasing power of the dollar is the only thing propping up fiat currency. Once that it lost, its very difficult to get back.

[sumdumguy]

It’s all about expectations - sort of like us planting a crop and sinking hundreds of thousands of dollars in the ground.

[errolanderson]

Home Depot posts worst revenue miss in 20 years. A 'full-on' casualty of the great debt crisis.

But apparently, no recession said by those in-the-know. A miracle or simply economic deception?

[LWeber]

Home Depot posts worst revenue miss in 20 years. A 'full-on' casualty of the great debt crisis.

But apparently, no recession said by those in-the-know. A miracle or simply economic deception?

Surveillance: ‘Discretionary Recession’ Creeps Across Retailing
Consumers are starting to trade down and pivot to services from goods

Home Depot’s quarterly earnings offered a reminder of the headwinds facing US consumers.
Home Depot’s quarterly earnings offered a reminder of the headwinds facing US consumers.Photographer: Dustin Chambers/Bloomberg
ByLisa Abramowicz
May 16, 2023 at 7:38 AM CST
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Welcome to the Bloomberg Surveillance newsletter, a daily look at the best interviews and insights from Bloomberg Television and Radio’s flagship morning show co-hosted by Tom Keene, Jonathan Ferro and me. Sign up here if you’re not yet a newsletter subscriber.
‘It’s happening everywhere’
The US consumer has had an amazing propensity to spend, defying all expectations over the past six months and helping to fuel a surprising degree of economic resilience. That is, up until now, when things are starting to get a bit, well … confusing.

On one hand, US retail sales showed that Americans are still spending, albeit with more borrowed money and their savings. On the other, transactions are clearly slowing. We saw this today with Home Depot, which gave a disappointing forecast in light of what the company's chief financial officer called a “broad-based pullback on the part of the consumer with respect to discretionary spend.”

Home Depot isn't alone as weakness takes hold for sellers of electronics, home improvement goods and home furnishings. “It’s happening everywhere," said Chuck Grom at Gordon Haskett Research Advisors. Grom called this a “discretionary recession,” with this emerging sense of shoppers’ choosiness from buying goods to focusing on services.

relates to Surveillance: ‘Discretionary Recession’ Creeps Across Retailing
“Retailers are going to have a much harder time taking prices from here,” Grom said. “We are seeing the consumers pushing back and trading down.”

That said, Home Depot’s miss is “not the end of the world,” Grom noted. Certainly, overall retail sales showed some ongoing consumer strength. And Ed Yardeni at Yardeni Research said the economy is, all things considered, “proving to be resilient.”

But like Grom, Yardeni sees an important slowdown at the sector level as consumers pivot to services. “The Home Depot issue suggests we are not out of the woods yet,” he said.

relates to Surveillance: ‘Discretionary Recession’ Creeps Across Retailing
Pimco’s Tiffany Wilding said the Fed’s rate-hiking cycle is forcing shoppers to tap the brakes as policymakers want. The rub, Wilding said, is that the pullback isn’t yet enough to deliver the results the Fed needs to see before — potentially — it calls time on higher rates and even gets around to cuts.

“Inflation is actually still reasonably robust,” Wilding said. “Obviously at 5% or more it is over the Fed’s target. We expected it to come down but it continues to be stickier than expected.”

‘Another test of McCarthy’
Wendy Schiller of Brown University’s Taubman Center for American Politics and Policy said the likeliest outcome of Washington’s debt-ceiling showdown remains a 2011-style deal, with some caps on future spending as a sweetener to get Republicans on board. But she nodded to the restive hard-liners in the House GOP.

relates to Surveillance: ‘Discretionary Recession’ Creeps Across Retailing
With some Republicans willing to embrace a default — egged on by Donald Trump — Speaker Kevin McCarthy will find it difficult to corral a majority behind any agreement, Schiller said. “This will be another test of McCarthy and his power over his caucus.”

The two sides meet again today after President Joe Biden’s lieutenants talked up hints of progress in negotiations with Republican aides while McCarthy poormouthed the discussions as going nowhere.

BTIG’s Isaac Boltansky said his base case is for a short-term extension of the debt limit to create time to craft a broader agreement. “I’m still operating under the old maxim in DC that things are impossible right up until they’re inevitable.”

Washington’s rhetoric echoes 2011’s, Macro Risk Advisors’ Dean Curnutt said. Even some of the personalities are the same, he added, saying he had rewatched a video of then-Treasury Secretary Tim Geithner that showed him accompanied by New York’s Charles Schumer, the current Senate majority leader.

“It’s going to take some flare-up in market prices to motivate this negotiation,” Curnutt said.

One chart helps frame the reality behind the rhetoric: Buyers of one-month Treasuries aren’t feeling quite as confident as the commentators.


We've gotten to a place of exhaustion with this. All of us — in markets, media and beyond. Tom is keeping engaged by thinking about the contours of the tin can that legislators will inevitably kick down the road: “The can is kept in a hermetically sealed vault in Providence, Rhode Island.”

Quick takes
Some notable quotes today:

“Ultimately, Chair Powell is going to have to bring the committee together.”
— Citigroup’s Andrew Hollenhorst, on Jerome Powell’s pivotal role with Federal Reserve officials’ divergence on their assessment of the path ahead. As Jon noted, there’s a subtle splintering underway among policy makers on the Federal Open Market Committee

“I don’t think this banking crisis is over.”
— BTIG’s Isaac Boltansky

Bloomberg Surveillance is live weekdays from 6 to 9 a.m. New York time. Watch on Bloomberg Television, on the Terminal at TV<GO> and on YouTube; or listen to the show on Bloomberg Radio and RADI<GO> from 7 to 10 a.m. Subscribe to the Bloomberg Surveillance podcast. Check out GTV<GO> for all the charts seen on Bloomberg Television.

[furrowtickler]

Good info , thanks Larry 👍

[errolanderson]

TAKE A DEEP BREATH: U.S. Federal Reserve indicates 722 American banks now have unrealized losses of more than 50% of their entire capital.

A hair-trigger financial crisis on-the-doorstep . . . .

[Richard5]

I don’t Canadian banks are in any better shape. When you lend the same dollar 15-20 times over and hang your hat on the fact that everyone will make good on debts the system is broken and has been for decades.

The savers will lose and those that borrow to the nuts will be the smart ones.

Not much we can do about it other than hope to start over when the day of reconning happens

[errolanderson]

Yellen Warning Again . . . .

Treasury Secretary Janet Yellen on Tuesday delivered her most dire warning yet about the debt ceiling, urging Congress to raise it immediately so the government avoids running out of cash by early June. “A default would crack open the foundations upon which our financial system is built,” Yellen warned in prepared remarks. “It is very conceivable that we’d see a number of financial markets break – with worldwide panic triggering margin calls, runs and fire sales.”

[errolanderson]

U.S. debt ceiling talks halted . . . . markets beginning to sell off. U.S. government default risk now high.