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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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 Posted: Fri Oct 03, 2008 7:39 am Post subject: |
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In case you missed it, here's what you need to know:
Do you know what the "sub prime" problem means?
It means easy credit with low interest.
Do you know where the low interest came from?
It came by rapidly expanding the money supply with fiat money which forced interest rates down while accelerating inflation.
Do you know how this created a bubble?
The inflation was pushed into housing prices, due to the easy credit and low interest, as well as tax incentives for home ownership, as a matter of Government policy. This created an inflationary housing bubble that got ahead of the inflation in the rest of the economy. In other words, as with any product or service, with more money chasing the available supply, the purchase price of houses soared.
Do you know where the problem came from?
The borrowers became unable to pay since salaries and other prices lagged behind the rate of increase in the hyperinflated housing sector. Homeowners' salaries could not sustain the inflated housing price level. This was exacerbated by the rising interest rates that always appear as a result of increased inflation. Since homeowners could not afford their mortgage payments, and new buyers were priced out of the market, housing prices declined precipitously. This left millions of borrowers in default with negative equity, which generated massive losses for financial institutions.
This left hundreds of financial institutions in default as well.
Now, you know what "sub prime" means.
It is the same in Europe, Canada and the US.
It was caused by the Federal Reserve and fiat money.
The only solution is to go back on a 100% gold standard. |
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Gatsby
Joined: 09 Feb 2007
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| Posted: Fri Oct 03, 2008 7:46 am Post subject: |
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ontheway, did you ever take an economics course from an accredited college? (A real introductory economics course is taught as a two-semester macro and micro economics set.)
You ought to try it some day.
You might be surprised by what you learn. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Oct 03, 2008 7:52 am Post subject: |
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Well, what he says is largely correct. The gold standard part at the end is editorializing and I don't know if I agree.
I see that many people are confusing this targeted financial crises with the looming government financial crises. When entitlement programs implode you can blame Reaganomics etc. But this crises is the product of a poorly designed and managed monetary system.
Roger Cohen from the NYT shows tepid support for a gold standard:
http://www.nytimes.com/2008/10/02/opinion/02Cohen.html
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At the same time, Bush, who often seemed to need directions to the Treasury, opted to allow an opaque derivatives market to grow into the trillions without supervision, regulation or information. The market knew best. Turns out that what the market knew best was how to turn capitalism into a pyramid scheme for trading worthless paper.
The cost is now clear. But we should be grateful for small mercies. Remember Bush wanted to throw Social Security into the casino, too, by privatizing it!
Market capitalism is a sophisticated thing that calls for transparency, ethics and rules. Bush and his crowd gambled that some �new paradigm� meant these things were pass�.
They�re not. We have to be careful now. Already the contagion of bank failures has spread to Europe. People are asking of the United States: what became of this country?
The Chinese have been ready to treat U.S. Treasuries as a rock-hard store of value and loan us the dollars they accumulate at a very low interest rate. But what if they start to doubt the U.S. government will repay its debt?
�We are getting closer to a tipping-point,� said Benn Steil, an economist. �People are asking: can we really trust the dollar as a store of value?�
The Bretton Woods system of monetary management collapsed in 1971, under Nixon. Since then the dollar�s been the primary reserve currency. Now, we�re reaching another point where a rethink of the foundations for a global economy is needed.
Global trade and capital flows are essential to prosperity. But it�s illogical to have a global system with no global reserve as insurance. Perhaps the trillions of Gulf and Chinese surpluses could be used to finance that. Or perhaps it�s time for a return to the gold standard.
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We need a discussion about these topics. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Fri Oct 03, 2008 8:23 am Post subject: |
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Here's a new slogan from flyover country:
�Stop the BOMB �BushObamaMcCainBailout�
Wake up Gatsby.
I have taught University economics.
And here comes an economist, from Mises:
| Quote: |
�We are getting closer to a tipping-point,� said Benn Steil, an economist. �People are asking: can we really trust the dollar as a store of value?�
The Bretton Woods system of monetary management collapsed in 1971, under Nixon. Since then the dollar�s been the primary reserve currency. Now, we�re reaching another point where a rethink of the foundations for a global economy is needed.
Global trade and capital flows are essential to prosperity. But it�s illogical to have a global system with no global reserve as insurance. Perhaps the trillions of Gulf and Chinese surpluses could be used to finance that. Or perhaps it�s time for a return to the gold standard. |
You see, Gatsby, real economists agree with what I keep telling the economically illiterates here at Dave's.
The Fed caused this problem. Proven.
The bailout will make it worse. Proven in the 1st Great Depression and we shouldn't have to do it again.
The only solution is to return to the Gold Standard. Also Proven. Every fiat currency in history has collapsed, with the exception of the dollar and its dependents, and those currencies are collapsing before our eyes, as I predicted.
The US has NEVER had a recession while on a gold standard. Recessions come when we are off the gold standard. Proven.
And if you want to know more, go to a good University and study Austrain economics and Economic history. You will have to read and study hundreds of books, more than 50,000 pages. It will take you years.
Then, come back and discuss Economics. |
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Gatsby
Joined: 09 Feb 2007
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| Posted: Fri Oct 03, 2008 4:41 pm Post subject: |
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ontheway:
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| I have taught University economics. |
And what are you doing in Korea? |
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bacasper
Joined: 26 Mar 2007
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| Posted: Fri Oct 03, 2008 4:53 pm Post subject: |
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| Gatsby wrote: |
ontheway:
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| I have taught University economics. |
And what are you doing in Korea? |
This comment is off-topic and way out of line.
There are any number of private, personal reasons one might be in Korea.
If you wish to dispute any of ontheway's assertions, please address them directly and not with snide comments. |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Mon Oct 06, 2008 8:56 pm Post subject: |
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| ontheway wrote: |
In case you missed it, here's what you need to know:
Do you know what the "sub prime" problem means?
It means easy credit with low interest. [/b] |
Sub prime refers to the PEOPLE getting the mortgage. Prime mortgages are for prime people, i.e. those with steady jobs, good income, assets, and most importantly, the ability to REPAY the mortgages. Sub prime are those in the NINJA category, No Income, No Job, no Assets.
| ontheway wrote: |
Do you know where the low interest came from?
It came by rapidly expanding the money supply with fiat money which forced interest rates down while accelerating inflation.
Do you know how this created a bubble?
The inflation was pushed into housing prices, due to the easy credit and low interest, as well as tax incentives for home ownership, as a matter of Government policy. This created an inflationary housing bubble that got ahead of the inflation in the rest of the economy. In other words, as with any product or service, with more money chasing the available supply, the purchase price of houses soared.
Do you know where the problem came from?
The borrowers became unable to pay since salaries and other prices lagged behind the rate of increase in the hyperinflated housing sector. Homeowners' salaries could not sustain the inflated housing price level. This was exacerbated by the rising interest rates that always appear as a result of increased inflation. Since homeowners could not afford their mortgage payments, and new buyers were priced out of the market, housing prices declined precipitously. This left millions of borrowers in default with negative equity, which generated massive losses for financial institutions.
This left hundreds of financial institutions in default as well. [/b] |
What does the expansion of the money supply have to do with the price of tea in China? The Fed expands and contracts the money supply to lower or raise the interest rate to control inflation. They do it all the time, so what? The housing bubble may have been pushed by low interest rates, but at the same time, so was the expansion of every other business and industry in the country who benefited from cheap money.
The bubble was created by inflation of prices, true. However, low interest and tax breaks are unimportant. What IS important is the EXPANSION OF CREDIT to the SUB PRIME market. The cause of the problem is 1) the NINJA mortgages should never have been issued, and 2) they were of the adjustable rate variety. When the low teaser rates expired, the much higher rates, and thus payments, came due and people could not pay.
The inflating price of the home has ZERO bearing on whether or not the people can pay their mortgage. They buy a house today at 50,000 dollars, and because of the inflationary pressures, it's worth 100,000 next year. That's GOOD for them because they OWN it. Their mortgage is only for 50,000.
So, people who should not have gotten mortgages did. They did not pay attention or did not plan well enough for the future and the rate hikes that were PART OF THE MORTGAGE CONTRACT! They began to default, the banks couldn't cover it, the market collapses. The people who DO have mortgages and ARE making their payments are getting screwed because NOW the value of their homes is decreasing because the supply is too large.
| ontheway wrote: |
Now, you know what "sub prime" means.
It is the same in Europe, Canada and the US.
It was caused by the Federal Reserve and fiat money.
The only solution is to go back on a 100% gold standard. |
The housing bubble is the cause of the credit problems in the United States, and as such, the rest of the world suffers (being the largest economy in the world and all). The problem was not caused by fiat money, but by poor lending decisions by banks and by the customers who accepted the money. The gold standard is a relic that need not be revisited. The value of gold is an illusion, just like fiat currency. You can trade it for goods and services, just like fiat currency. The only difference is that you cannot make more of it, unlike fiat which can be manufactured. But there are strict laws governing the production of fiat currency, and as such, its a moot point. |
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Gatsby
Joined: 09 Feb 2007
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Gatsby
Joined: 09 Feb 2007
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| Posted: Wed Oct 08, 2008 1:19 am Post subject: |
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Mortgage defaults are small change compared to the credit-default swaps, one of the "derivatives" the press keeps mentioning, without explaining.
The total value of credit-default swaps is currently estimated to be $62 trillion.
Not million, not billion. Trillion.
62,000,000,000,000 dollars.
Warren Buffet has called them "financial weapons of mass destruction."
Investment banks and insurance companies are big holders of these CDS's. AIG has $441 billion exposure to CDS's, also referred to as "derivatives." If AIG had failed, the fear was that it could have caused a domino effect series of failures in other banks with CDS's.
The CDS was invented by Blythe Masters in 1997, when she was a recent math whiz graduate of Cambridge University.
http://www.guardian.co.uk/business/2008/sep/20/wallstreet.banking
A CDS is a sort of hybrid between banking an insurance. It serves as insurance against default on credit, i.e., a loan. It promises to make good the loss to the insured, which was originally estimated to be a small risk back when the economy was booming. So investment banks did not feel they needed to keep large reserves on hand in case of multiple payouts.
But good times eventually come to an end, as Warren Buffet tried to warn the world about:
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Last Updated: Tuesday, 4 March, 2003, 13:32 GMT
Buffett warns on investment 'time bomb'
The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy and most shares are still "too expensive", legendary investor Warren Buffett has warned.
The world's second-richest man made the comments in his famous and plain-spoken "annual letter to shareholders", excerpts of which have been published by Fortune magazine.
The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.
But Mr Buffett argues that such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system. |
http://news.bbc.co.uk/2/hi/business/2817995.stm
I am not an expert on these things. I suspect few people fully understand them. But here is a general description of them, from the New York Times:
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Credit Default Swaps
Credit default swaps, which were invented by Wall Street in the late 1990's, are financial instruments that are intended to cover losses to banks and bondholders when a particular bond or security goes into default -- that is, when the stream of revenue behind the loan becomes insufficient to meet the payments that were promised.
In essence, it is a form of insurance. Its purpose is to make it easier for banks to issue complex debt securities by reducing the risk to purchasers, just like the way the insurance a movie producer takes out on a wayward star makes it easier to raise money for the star's next picture.
Here is a more detailed, but still simplified explanation of how they work, given by Michael Lewitt, a Florida money manager, in a New York Times Op-Ed piece on Sept. 16, 2008:
"Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss.
"The insurer (which could be a bank, an investment bank or a hedge fund) is required to post collateral to support its payment obligation, but in the insane credit environment that preceded the credit crisis, this collateral deposit was generally too small.
"As a result, the credit default market is best described as an insurance market where many of the individual trades are undercapitalized."
The market for the credit default swaps has been enormous. Since 2000, it has ballooned from $900 billion to more than $45.5 trillion � roughly twice the size of the entire United States stock market. Also in sharp contrast to traditional insurance, the swaps are totally unregulated.
When the mortgage-backed securities that many swaps were supporting began to lose value in 2007, investors began to fear that the swaps, originally meant as a hedge against risk, could suddenly become huge liabilities.
The swaps' complexity and the lack of information in an unregulated market added to the market's anxiety. Bond insurers like MBNA and Ambac that had written large amounts of the swaps saw their shares plunge in late 2007.
Credit default swaps also played an integral role in the federal government's decision to bail out the American International Group, one of the world's largest insurers, in September 2008. The Federal Reserve concluded that if A.I.G. failed and defaulted on its swaps, throwing the liability for the insured securities onto the swaps' counterparties, the result could be a daisy chain of failures across the international financial system. |
http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_default_swaps/index.html?scp=1-spot&sq=credit%20default%20swaps&st=cse
The $62 trillion total is cited in several recent articles, including this one, with the cheerful title: "A Nuclear Winter?"
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A nuclear winter?
Sep 18th 2008
From The Economist print edition
The fallout from the bankruptcy of Lehman Brothers
WHEN Warren Buffett said that derivatives were �financial weapons of mass destruction�, this was just the kind of crisis the investment seer had in mind. Part of the reason investors are so nervous about the health of financial companies is that they do not know how exposed they are to the derivatives market. It is doubly troubling that the collapse of Lehman Brothers and the near-collapse of American International Group (AIG) came before such useful reforms as a central clearing house for derivatives were in place.
A bankruptcy the size of Lehman�s has three potential impacts on the $62 trillion credit-default swaps (CDS) market, where investors buy insurance against corporate default. All of them would have been multiplied many times had AIG failed too. The insurer has $441 billion in exposure to credit derivatives. A lot of this was provided to banks, which would have taken a hit to their capital had AIG failed. Small wonder the Federal Reserve had to intervene.
The first impact concerns contracts on the debt of Lehman itself. As a �credit event�, the bankruptcy will trigger settlement of contracts, under rules drawn up by the International Swaps and Derivatives Association (ISDA). Those who sold insurance against Lehman going bust will lose a lot. But Lehman had looked risky for some time, so investors should have had the chance to limit their exposure.
The second effect relates to deals where Lehman was a counterparty, ie, a buyer or seller of a swaps contract. For example, an investor or bank may have bought a swap as insurance against an AIG default, with Lehman on the other side of the deal. That protection could conceivably be worthless if Lehman fails to pay up. Until the Friday before its bankruptcy, Lehman would have posted collateral, which the counterparty can claim. After that day, the buyer will have been exposed to price movements before it could unwind the contract.
The third effect will be on the collateralised-debt obligation (CDO) market, which caused so many problems last year. So-called synthetic CDOs comprise a bunch of credit-default swaps; a Lehman default may cause big losses for holders of the riskier tranches.... |
http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=12274112
Sounds pretty serious, doesn't it?
It's not surprising that some have referred to to mortgage crisis as just the tip of the iceberg, and the $700 billion bailout as a "pebble tossed into a churning sea."
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October 7, 2008
Global Fears of a Recession Grow Stronger
By MARK LANDLER
WASHINGTON � When the White House brought out its $700 billion rescue plan two weeks ago, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Three days after the plan was approved, it looks like a pebble tossed into a churning sea.
The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home, where it pummeled stock and credit markets on Monday.
While the Bush administration�s bailout package offers help to foreign banks, it seems to have done little to reassure investors, particularly in Europe, where banks are failing and countries are racing to stave off panicky withdrawals after first playing down the depth of the crisis.
Far from being the cure for the world�s ills, economists said, the rescue plan might end up being a stopgap for the United States alone. With Europe showing few signs of developing a coordinated response to the crisis, there is very little on the horizon to calm rattled investors.
The vertiginous drop in stock markets on both sides of the Atlantic on Monday reflected not only those fears, experts said, but also a growing belief that the crisis could tip the world into a global recession.... |
http://www.nytimes.com/2008/10/07/business/worldbusiness/07global.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1223378177-qWjqFQwrOaWXFMyZPlMF8A&pagewanted=all
If the fears of a CDS meltdown are not baseless, we may be lucky if all we get is a global recession. Actually, there may be an even bigger problem than CDS's, according to "The Economist":
| Quote: |
Insiders say the biggest exposure may be in the interest-rate swaps market, which is many times larger than those for credit derivatives. In a typical interest-rate swap, one party agrees to exchange a fixed-rate obligation with another that has a floating, or variable, rate exposure. Depending on whether floating rates rise or fall, one will end up owing money to the other. Again, those banks that dealt with Lehman should have been fine until Friday, when the bank was still posting collateral. But not afterwards.
Although there are ISDA rules to cover such events, the sheer size of Lehman in the market (its gross derivatives positions will be hundreds of billions of dollars) makes this default a severe test. There will inevitably be legal disputes as well. The good news is that the swaps markets did not utterly seize up after it went bust on September 15th. But the reaction may be a delayed one. Mr Buffett�s WMD could leave behind a cloud of toxicity.
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http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=12274112
If all this makes you very nervous, you are not alone.
7:58 AM, 23 Feb 2008
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Alan Kohler
Credit default swap vertigo
I got vertigo reading a New York Times article the other day. The room started spinning and I had to grip the desk, before pouring an emergency cup of tea.
It was a piece about credit default swaps, and how it will be the next subprime-type debacle. The CDS market is getting the wobbles, it seems. |
http://www.businessspectator.com.au/bs.nsf/Article/Credit-default-swap-vertigo-C3S5W?OpenDocument
The piece he is referring to is apparently this one:
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February 17, 2008
Arcane Market Is Next to Face Big Credit Test
By GRETCHEN MORGENSON
Few Americans have heard of credit default swaps, arcane financial instruments invented by Wall Street about a decade ago. But if the economy keeps slowing, credit default swaps, like subprime mortgages, may become a household term.
Credit default swaps form a large but obscure market that will be put to its first big test as a looming economic downturn strains companies� finances. Like a homeowner�s policy that insures against a flood or fire, these instruments are intended to cover losses to banks and bondholders when companies fail to pay their debts.
The market for these securities is enormous. Since 2000, it has ballooned from $900 billion to more than $45.5 trillion � roughly twice the size of the entire United States stock market.
No one knows how troubled the credit swaps market is, because, like the now-distressed market for subprime mortgage securities, it is unregulated. But because swaps have proliferated so rapidly, experts say that a hiccup in this market could set off a chain reaction of losses at financial institutions, making it even harder for borrowers to get loans that grease economic activity.
It is entirely possible that this market can withstand a big jump in corporate defaults, if it comes. But an inkling of trouble emerged in a recent report from the Office of the Comptroller of the Currency, a federal banking regulator. It warned that a significant increase in trading in swaps during the third quarter of last year �put a strain on processing systems� used by banks to handle these trades and make sure they match up.
And last week, the American International Group said that it had incorrectly valued some of the swaps it had written and that sharp declines in some of these instruments had translated to $3.6 billion more in losses than the company had previously estimated. Its stock dropped 12 percent on the news but edged up in the days after.... |
http://www.nytimes.com/2008/02/17/business/17swap.html?sq=credit%20default%20swaps&st=cse&scp=2&pagewanted=all
Note the date of the article, and the explicit warnings, including in the title. AIG was cited as having experienced what at the time presumably would have been considered a massive loss: $3.6 billion -- but now relative chickenfeed.
This is outrageous. The federal government had obvious warning signs at least eight months before their announcement of an impending meltdown. They could have asked for action months ago, in a way that could have allowed Congress to consider the alternatives responsibly.
It is a financial echo of Hurricane Katrina. Despite the obvious warning signs, we were not prepared for either catastrophe. And there have been others of this general sort during the Bush administration.
Clearly, Gretchen Morgenson deserves credit for getting the story right, and doing her part.
Here is an interview with her by Terry Gross on Fresh Air, where she explains the situation far better than I can:
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Fresh Air from WHYY, September 23, 2008 � With financial markets in flux and a massive government rescue package in the works, financial reporter and New York Times columnist Gretchen Morgenson looks into what's involved in the nearly $700 billion deal.
One central concern: The way troubled banks' assets get valued when the federal government buys them. "Depending on how [the bailout program] is operated, and how the assets are valued before taxpayers are forced to buy them, it could bloat our final bill for this mess while benefiting the very institutions that got us into it," Morgenson wrote in a recent column.
Morgenson talks to Terry Gross about strategies the government might employ to value the assets taxpayers are buying from endangered institutions � and how regulators might earn back some of the trust they've lost in recent weeks. |
http://www.npr.org/templates/story/story.php?storyId=94928783
Watching CNN last night as the NYSE tanked, I saw fear that I have never seen before on reporters' faces. It was not just the fear of a bad day on Wall Street. It was in part the fear of a global recession. But I suspect they know something of the bigger picture. The real danger is indeed a global economic meltdown that could make the Great Depression look like a bad hair day. I hope we never find out if this is true, as we all do. But lately wishful thinking hasn't worked too well.
Good luck, and good night. |
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Kimbop
Joined: 31 Mar 2008
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BreakfastInBed
Joined: 16 Oct 2007
Location: Gyeonggi do
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| Posted: Wed Oct 08, 2008 9:00 am Post subject: |
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I know next to nothing about economics. I'm not proud of this. It's rather embarassing as an adult. But, I'm intrigued by parts of the money speech in Ayn Rand's "Atlas Shrugged." Is she way off base?
http://www.capmag.com/article.asp?ID=1826
Sure, it's not great philosophy and it's not great literature and it may be an oversimplified or idealistic view of economics, nevertheless, it is great rhetoric. |
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arjuna
Joined: 31 Mar 2007
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| Posted: Wed Oct 08, 2008 1:00 pm Post subject: |
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| Gatsby wrote: |
| The real danger is indeed a global economic meltdown that could make the Great Depression look like a bad hair day. I hope we never find out if this is true, as we all do. But lately wishful thinking hasn't worked too well. |
WTF are you afraid of? That there will be no money? You have yourself, your family, your friends, all of whom are, to greater or lesser degree, able to be and do. The Earth is still there. All things are still as they are. The only obstacle to your survival is your thought that you need money to survive.
Look into the eyes of a stranger and see that he is another human being, just as much in need as you, and just as much able as you. Where is the difficulty? Is it so difficult to divide your loaf of bread in half and share it with another who is just as willing to share with you his bottle of water, or a good story of his adventures on the streets, or even just a thankful smile and handshake?
Are you really so small to think that the end of money as you know it is the end of your life? Money is only as valuable as your ability to work, and work is a fundamental aspect of your being. You have been so beaten down by the system of ownership and false values that you cannot imagine that abundance for all is the natural order of things in the universe.
The problem is not in money. It is in your thinking. Your false thinking has created the miserable world in which you have lived so far. Yes false, because it has not agreed with your physical emotional mental spiritual being. Correcting your thinking is as easy as you have allowed it to run false. You will go through convulsions in the process, but correct you must. Your survival depends on it. |
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Kimbop
Joined: 31 Mar 2008
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| Posted: Wed Oct 08, 2008 2:15 pm Post subject: |
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| arjuna wrote: |
WTF are you afraid of? That there will be no money? You have yourself, your family, your friends, all of whom are, to greater or lesser degree, able to be and do. The Earth is still there. All things are still as they are. The only obstacle to your survival is your thought that you need money to survive...
...The problem is not in money. It is in your thinking. Your false thinking has created the miserable world in which you have lived so far. Yes false, because it has not agreed with your physical emotional mental spiritual being. Correcting your thinking is as easy as you have allowed it to run false. You will go through convulsions in the process, but correct you must. Your survival depends on it. |
Hippie! |
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bacasper
Joined: 26 Mar 2007
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| Posted: Wed Oct 08, 2008 6:03 pm Post subject: |
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Link's not working. |
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Gatsby
Joined: 09 Feb 2007
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| Posted: Thu Oct 09, 2008 7:25 am Post subject: |
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Ever been to Manhattan? Then you may have seen the National Debt Clock. Turns out, we need a new one, thanks to you know who.
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US debt clock runs out of digits
Until last month, the clock had enough digits to measure US debt levels
The US government's debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiralling figure.
The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount.
The board was erected to highlight the $2.7 trillion level of debt in 1989.
The clock's owners say two more zeros will be added, allowing the clock to record a quadrillion dollars of debt.
Douglas Durst, son of the late Seymour Durst - the clock's inventor - hopes to replace the Manhattan clock with its lengthier replacement early next year.
For the time being, the Times Square counter's electronic dollar sign has been replaced with the extra digit required.
For its part, the digital dollar symbol has been supplanted by a cheaper version - perhaps a sign of the times for the American economy.
Some economists believe the $700bn bail-out plan for ailing US financial institutions could send the national debt level to $11 trillion. |
http://news.bbc.co.uk/2/hi/business/7660409.stm
http://www.npr.org/templates/story/story.php?storyId=95545773 |
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