Here’s the clip and a transcript, for those who want to read along.
Erin: american borrowing is up about 70% since — because of the all the borrows, t.a.r.p., stimulus, you name it. while our borrowing has been surging, lenders seem to trust it will we’ll pay it back. in fact, while our borrowing has surged, interest payments have dropped by nearly 20%. as a share of our economy, we’re paying less in interest payments than when bill clinton was running surpluses. is it the calm before a storm of surging borrowing costs? are we about to go junk credit? michael pento is vp of europe capital, and fixed income strategist, our second speaker says no way. at least right now, we don’t appear to be the world the market sets borrowing costs and interest costs –
Michael interrupts Erin: well, the fed is setting the borrowing costs. let’s be honest they’re controlling the whole yield curve. they’ve duped the rest of the world. that’s going to rise to $14 trillion at least by 2015, that’s not me saying that, that’s the omb, the cbo, the department of treasury. that means instead of paying 5% of all federal revenue on interest expense, we’re going to be paying 30% at a bare minimum in just a handful of years. unless you believe that the chinese, who have stopped buying our treasuries, and you believe the japanese will have unlimited savings to purchase our treasuries, which they don’t, we’re going to rely on our own savings, which is very, very small, so interest rates must rise dramatically. that’s the only thing that’s giving the understand any semblance of solvency.
Erin: joseph, what’s your response? he’s saying they’re going to surge.
Joseph: i think it’s a long-term problem to worry about today. let’s face is, we are the safe haven. from corporations from government government entities look at a day like today, the canary in the coal mine is there. it’s the currency, until such time as our currency goes down on bad days, we will remain the safe haven and demand for our debt will be there. and house prices will continue to go up until they don’t, but when they do, it’s too late, and it will be a debacle.
Erin: it still comes down to this, until someone else is better with a deeper, smarter, better labor pool –
Michael, interrupting again: why is that?
Erin: — because they have to put their money somewhere. please let me finish the question, okay? where else would they put it? right now they’re voting with their dollars, with their yen and putting it in u.s. treasuries –
Michael, interrupting again: do they have to go into treasuries? commodities? international?
Erin, cuts Michael off: what i’m telling you is they are going to commodities. you need to explain –
Michael: they have stopped buying commodities –
Erin: they actually haven’t –
Michael: — they have been in a series of months declining their participation in the u.s. treasury market…
Erin: michael, michael –
Michael: …and now 62% of reserves.
Erin: let me finish my case. you have to make the case, which they are, people are putting money in treasuries, if they weren’t interest rates would be going up. you have to make the case why those rates will surge.
Michael: the treasury has influenced the whole yield curve lower, but you have to explain if we have a publicly traded debt that’s going to be over 75% of gdp in a handful of years, why do you believe the entire world with squander their savings into the u.s. dead market forever? why do you think the u.s. dollar will always be the world’s reserve currency? the onus is on you to explain that.
Erin: no, i am the moderator of the conversation.
Michael: the u.s. bond market is the most overpriced –
Erin: michael, you are so rude.
Michael: — currently in existence.
Erin: you have definitely gotten my temper up, you have been rude in this conversation and i have done nothing but ask you questions. joseph, please let me give you a chance to say something before we wrap up this conversation.
Joseph: sure. the question is our treasury’s in a bond bubble. the really is nothing in a bubble which people want to buy it. there are legitimate reasons when they have to buy the u.s. government debt. economic growth is fairly slow. when you are the safe haven, when you are the largest economy on the planet, when you are the world’s educator, when you are the technological advancer, people want to own your debt, and we will remain that safe haven.
Michael: and by that time, it will be too late.
Erin: thank you very much. joseph, michael, if you’re going to come back on the show, please by a little more polite and gracious about how you present your points of view, okay?
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