RE:Us macro update Jay.....I recall us having a discusion about the repo market many months ago and how the US Government funding a one trillion dollar debt issue after the debt ceiling deal would result in higher short term rates which is what actually happened.
I also agree with your overall analysis.
That said, a problem that many Government face and especially in the US as it impacts Canada is the ongoing annual budgetary borrowing to the tune of 2 trillion rising to 3 trillion according to the CBO. With these annual borrowing, the US Government would have to significantly cut Government spending and neither political party is going to to do that. If they did then we could face a major recession or possibly a depression.
Governments have put us into a deep hole and they continue to dig the hole bigger. Just to put this into an easy perspective, this fiscal year, the US Government will pay out 1 trillion in interest payments to service the national debt and this doesn't count the IOUs to the Social Security Administration. In the last Bush Administration, total Government spending on everything was 2 trillion. So interest payments on the national debt are now equal to half of what was spent for all Government programs 20 years ago. In 10 years from now, they will be equal to total Government spending under Bush.
When you look at it this way, it is pretty scary IMHO.