Washington, DC — Looks like President Obama’s meeting with Rep. Cantor went really badly. They are saying that they cannot get through this impasse by Aug. 2nd, when the U.S. is going to hit its debt ceiling and technically default on its debt. The Foreign Ministry of China, probably our largest single foreign creditor holding more than $1 trillion in U.S. debt is quietly warning us to “do the right thing” by our investors. The Europeans do not care because they have their own debt problems that are threatening to explode across the continent. All this bad news about sovereign debt is obscuring the good news that is being reported by our glorious corporate citizens (e.g., Google, JPMorgan Chase, etc.) on their second quarter earnings. 

I’m not an economist, and in fact my undergraduate studies were in Computer Science and Finance, and my graduate work in the noble field of law, so at the risk of stating the economically obvious, I think we have a problem here. On the one hand, in order to “de-leverage” (which seems like the chic term of the last 3-1/2 years), a country must tighten its proverbial belt because we can all agree that there is no such thing as taxing oneself to prosperity (even the most ardent liberal will acknowledge that truth). But, to cut costs, as the Republicans insist, that takes away additional spending that is sorely needed for economic expansion, which then creates a higher debt-to-GDP ratio leading to more cuts, and down the rabbit hole we go. On the other hand, if we just say “f@ck it” and default (God forbid), investors lose money and confidence, and interest rates skyrocket and we cannot pay our bills and again, we lay waiting to die. From a pure layman’s point of view, does this not seem like a “Catch 22,” or “damned if you do, damned if you don’t,” or whatever other saying is appropriate? To the untrained eye, the answer seems fairly obvious. We cannot default because that is the quickest way to systemic failure, and we can’t do draconian cost cutting or tax ourselves to oblivion. Therefore, it seems that only the middle ground is a possible way through this mess – i.e., raise the debt ceiling, increase taxes by allowing certain tax benefits to expire, and cut as much from entitlements as possible without sending us all back to caves. Then, in a more stable economic environment, businesses can actually be persuaded to make investments that will reap future benefits, and grow the GDP.

http://dealbook.nytimes.com/2011/07/14/jpmorgan-chase-quarterly-profit-rises-13/

Thank goodness there is some good news at the start of the Q2 earnings season from a bank no less.  JPMorgan Chase is more diversified than say a Goldman Sachs or Morgan Stanley (pure investment banks), but more investment oriented than Bank of America or Wells Fargo.  So it will be interesting to see the rest of the group report (hopefully, not a parade of horribles). But nevertheless, some respite from the woes in Europe and the U.S. (e.g., jobs, financial, debt limits, etc.). 

I know that all parents must say that their kid is the “most beautiful” kid in the world, but I think it’s true here. She is a gift from heaven that gives joy beyond all happiness that I have known in my brief 33 years of life, on Earth. All people change when their children are born (for better or worse) but I have to say that Amélie has made my life full, as opposed to the emptiness before her. Nothing really compares to the feeling of having her in my arms, or watching her smile at me. Hopefully, in a year, Amélie will be able to join me on the slopes, and learn to fly on skis!

New York — Looks a lot like we’re going to repeat 2008/9, except that this time around, instead of banks faltering, it will be entire countries. That’s scary! The not so vigilant credit ratings companies of 2008 (e.g., #Moody‘s, #S&P, #Fitch) are now becoming the ever so vigilant guardians of the credit ratings of entire countries, and the P.I.G.S. (#Portugal, #Italy, #Greece, and #Spain) are in deep trouble, and throw in our friends in #Ireland for good measure. Downgraded sovereign debt to junk status, leaving the ECB unable to stimulate these economies through any meaningful monetary policy. The EU has warned the ratings services for being too quick to “jump the gun” these days, and Italy has taken legislative action against short traders, but alas, the trouble deepens and worldwide investor fear is not so quick to subside. The EU and the ECB really have no power to avert these oncoming disasters, unless EU members see the severity of the trouble that lays ahead, and acts immediately to orderly bring these bankrupt countries’ finances under control.

In the U.S., we here are grappling with the inability to come to a budget deal that will allow us to not technically default on our debt. Republicans insist on cutting costs without raising revenues, and Democrats seek to raise revenue at the expense of economic growth. Nobody here is willing to cross the aisle, as an important election year approaches in 2012. So, maybe the U.S. will default on its debt obligations because our leaders (and I use the term very loosely) are unwilling to part with radical ideology. President Obama has actually reached across the aisle and even raised the ire of sects of his own party to do “the biggest deal possible.” I think that is brave, and it certainly appeals to independently minded voters like myself, but I fear it is a little more than idle rhetoric. Democrats and Republicans, Tea Party and Libertarians, Communists and Fascists, and Liberals and Independents, need now to all lay aside their radical ideology, and come together for the good of the country (and world) collectively, to insure the U.S. does not technically default on its obligations.

Let me finish by saying that I hope we are not staring down a repeat of 2008/9. But if it comes to pass that entire countries will default on sovereign debt, then the crisis that we witnessed in 2008/9 will be but a miniature preview of the grotesque collapse that is coming. These defaults will bring the entire world economy to its knees, and even the collective economic might of the B.R.I.C. will not be enough to stave off an economic meltdown of proportions that have never been seen in human history. This will truly be the beginning of the end, if it comes to pass. But ironically, we have the power to avert our own economic demise, and it’s only if we have the courage to set aside our deepest held convictions, to help the betterment of our fellow men/women. I strongly urge world leaders to take this opportunity to show that we can work together, as people of the same species.

It’s been a long while, but I’m back!  I started this Xanga account when I first moved from my home in CoLoRaDo in 2006 to New York City. After 5 years, I have become resigned to the fact that I’m a New Yorker now, and I live and breathe Manhattan.  Oh, and I got married here, to a girl from Connecticut, and now we have a wonderful, beautiful 3.8 mo. old daughter! I can’t complain about life, and my greatest blessing is my gorgeous baby, who was born on March 17, 2011 (St. Patrick’s Day) in the heart of Manhattan! It’s these last 5 years that keeps me stoked for the next 5 years!