Vince Farrell: We Need To Be Careful

Vince Farrell is a financier/talking head on CNBC, good points made last Thursday the 11th which go to explaining why the government is reluctant to just keep backstopping the AIGs and Lehmans of the world:

"The trade deficit widened to over $62 billion...the four-week moving average [jobless claims] we like to track is at 440,000. That is still on the recessionary side of things. With the Fannie/Freddie takeover accomplished, do we have to worry about the creditworthiness of the U.S. government ?

There have been, say the guys at Merrill who keep tabs on such things, two AAA sovereign downgrades the past dozen years. Canada had a debt-to-GDP ratio of 114% and Japan had 120%. The U.S is now at 63% according to the International Monetary Fund. If you add the debt of FNM and FRE the total would be 84%. But either way, enough is enough. No more bailouts. We are going to have an expanding deficit anyway due to the economic downturn we are in. We cannot threaten the credit standing of the U.S.

...Russia says it would like an expanded relationship with OPEC. I bet they would. Russia and Saudi Arabia alone account for almost one quarter of the world's production of oil. Russia is heavily dependent on the price of oil. In its budget, 20% or more is funded by oil revenues. If they can get into OPEC and influence the price, their adventures in Central Asia can continue. Falling oil helps the U.S. consumer and hurts Vladimir Putin. "