The tough road facing next administration.

Obama is facing an unprecedented fate, that USD's default may very well be upon his term.

Car manufacturing companies, insurance companies, credit card companies are all facing the bad debts problems. Plus the infamous housing sector is continuing its downward trend.  There is no solution for the bond refi since mortgage bonds, student loans, credic card loans,  and car loans are "securitized" meaning chopped, minced, and packaged to have been sold to investors. The investors have no freaking idea who the borrowers are. Now some pundits in the government are suggesting to refi those loans at lower interest rate and pay back the original bond investors 50 cents on the dollar with those refi.

I thought, we are freaking doomed if that is next administration will do. For those investors will lose their confidence and dump the rest bond holdings in the open market. The rest is a sure thing: plunging dollar, high interest rate, hyper inflation on life's necessities. And worse yet, unemployment, debt instruments (corporate bonds, muni bonds and credit market) will all collapse at same time.

But never say never, it can happen. We hope not though.

A few year ago I wrote the about the risk of a democratic presidency being elected, one of them is the forces of union supporters of demo party. Next administration will need keep their promise to bring jobs back to US or say "do not read my lips".

Let's see how to bring back jobs:
how tough will that be when the foreign worker's wage is much lower than the US. So end of the day there are two ways to achieve it 1) allow the deflationary depression to happen so people will take lower wages and 2) devalue the dollar to cause hyper-inflation that depress the real wages of US workers (along with all the wealth and savings of middle class).

As what we would likely guess, government won't take the deflationary road (although that is healthy and natural road to the recovery), for it immediately adds tremendous interest payment burden to the nation while much less tax receits will come in. So if we look at the recent FED liquidity injection, we are already sure of the inflationary road taken by government, which will be long and painful with much more pain than the deflationary road.

People say, how come we have deflation now instead inflation, the possible answer is that there are huge hidden bad debts on financial companies' balance sheets. My guess are those bad debts are in the trillions, 2-3 trillions. This is why we do not see the 700 billion rescure packege trickle down to the businesseswho needs money to run; banks are hoarding them for their own protection against more debts default.

Soon FED will inject another 1 to 2 trillions into the economy, hoping that to wipe out the bad debts and stablize the economy. While wiping out debts for those irresponsible entities are possible and probable, but stablizing economy is a fantacy dream. Those 1 to 2 trillion dollars will emergy as a Gene comes out the bottle to engulf the global assets market. We will see amagodon like nothing in the history.

Same thing happen in Argentina. When private debts had been transferred to public debts, unthinkable happened. Government can not afford the payment of debts so they defaulted.

I am afriad the default will happen in the next term of this presidency. One got to ask, who really wants to be the elected official any way?

We are freaking doomed.