Government Debt

WASHINGTON - Despite what you may have heard, China isn't the country's biggest creditor. America is. The bulk of the national debt - soon to exceed a staggering $17 trillion - is held by the Federal Reserve, the Social Security system, various pension plans for civil service workers and military personnel, U.S. banks, mutual funds, private pension plans, insurance companies, and individual domestic investors. China is responsible for just a shade over 7 percent of the total debt.

Will sequestration hurt the stock and bond markets? Not this month, when the budget cuts are scheduled to take effect. What about the economy? Probably not that much either, according to prognosticators. The sequestration cuts themselves are actually quite tiny. Total federal spending in 2012 was $3.53 trillion. President Obama's budget request for 2013 was $3.59 trillion. Under sequestration, total federal spending in 2013 would be $3.55 trillion, an increase of only $25 billion, a little less than 1 percent, according to the Congressional Budget Office (CBO)

Scott Powell is a senior fellow at the Discovery Institute in Seattle A year ago, Congressman Paul Ryan spoke out about Standard & Poor's having fired a shot across America's bow, downgrading its coveted AAA rating to a AA-plus. S&P's rationale for the rating cut was that Congress' Budget Control Act "fell short of the amount . . . necessary to stabilize the general government debt burden by the middle of the decade. " For several weeks, pundits and policymakers were jolted out of denial about the assumption that deficit spending could continue in the same trajectory.

President Bush yesterday signaled his determination to overhaul Social Security, even if it means piling up huge new government debt to pay for the transition to a partially privatized system. Underscoring his commitment to the issue, Bush invited 16 top congressional leaders - including eight Democrats - to the White House to promote his plan to let workers invest part of their Social Security taxes in the stock market and other investment vehicles. The President did not provide details of his proposal, but White House spokesman Scott McClellan said Bush was willing to add to government debt to cover transition costs, which are estimated at $1 trillion to $2 trillion over 10 years.

NEW YORK - A warning from Standard & Poor's that the agency might lower its rating on U.S. government debt sent stocks on their steepest slide in a month Monday. S&P said there is a 33 percent chance it would lower the country's credit rating from "AAA," its highest rating, in the next two years if Washington fails to pare the country's debts. The Dow Jones industrial average, the S&P 500 index, and the Nasdaq composite all had their sharpest falls since March 16. The Dow fell 140.24 points, or 1.14 percent, to close at 12,201.59.

NEW YORK - The wait for an expected deal between Greece and its creditors rattled financial markets around the world Monday. Yields for ultra-safe U.S. government debt hit their lowest this year, the euro dropped against the dollar, and European stocks took a fall. But U.S. stocks dropped only slightly. The Dow Jones industrial average fell 6.74 points to close at 12,653.72, for a drop of 0.05 percent. The Dow lost as much as 131 points in morning trading, then slowly recovered in the afternoon.

NEW YORK - A day of broad swings in the stock market ended with modest gains Tuesday as investors balanced strong U.S. retail sales with Europe's lingering debt crisis. The Dow Jones industrial average gained 17 points. The Dow ping-ponged between gains and losses for much of the day. It had been down as many as 78 points at noon and up as much as 86 during a late-afternoon rally that fizzled just before the market closed. Technology stocks had the biggest gains. Hewlett-Packard rose 3.4 percent, the most among the 30 stocks in the Dow. Intel Corp.

ATHENS, Greece - Greece's private creditors agreed Friday to take cents on the euro in the biggest debt write-down in history, paving the way for an enormous second bailout for the country to keep Europe's economy from being dragged further into chaos. Greece would have risked defaulting on its debt in two weeks without the agreement. Prime Minister Lucas Papademos called the deal - which shaves some $138 billion off Greece's $487 billion debt load - an important "historic success" in a televised address to the nation Friday night.

NEW YORK - Stocks had their worst drop in more than three months as the prospect of political paralysis in Italy raised the specter of Europe's debt crisis flaring up again. The Dow Jones industrial average fell 216.40 points, or 1.6 percent, to 13,784.17, its biggest drop since Nov. 7. The Standard & Poor's 500 index fell 27.75 points, or 1.8 percent, to 1,487.85, dropping below 1,500 for the first time in three weeks. The Nasdaq composite dropped 45.57 points, or 1.4 percent, to 3,116.25.

FRANKFURT, Germany - The European Central Bank says Italian government bonds account for nearly half of its total holdings under a now discontinued bond-buying program launched in 2010 to ease the eurozone's debt crisis. The bank on Thursday detailed for the first time what countries' bonds it acquired under the so-called Securities Markets Program, which it started when the euro area's debt crisis flared in May 2010. The central bank for the 17 European Union countries that use the euro said it held bonds with a face value of 218 billion euros ($287 billion)

NEW YORK - News that IBM will buy back more stock and raise its dividend helped pull major stock indexes out of a morning slump Tuesday. IBM and other tech stocks led the Standard & Poor's 500 index to a record. The broad-market measure ended April with a 1.8 percent gain, the sixth month in a row the index has climbed higher. Worries about slower economic growth have rattled the stock market this month, but it has consistently bounced back. Brad Sorensen, director of market research at the brokerage Charles Schwab, said that's a result of investors having few alternatives.

WASHINGTON - Despite what you may have heard, China isn't the country's biggest creditor. America is. The bulk of the national debt - soon to exceed a staggering $17 trillion - is held by the Federal Reserve, the Social Security system, various pension plans for civil service workers and military personnel, U.S. banks, mutual funds, private pension plans, insurance companies, and individual domestic investors. China is responsible for just a shade over 7 percent of the total debt.

By Scott S. Powell U.S. stock prices have just reached record highs, erasing the losses since the previous 2007 peak. But the U.S. economy as measured by the labor-force participation rate, which captures the percentage of working-age people in the labor force, has just dropped to a new 34-year low of 63.3 percent. Since the Great Depression, recessions have always been followed by strong recoveries within two years of market bottoms. Not this time. Gross domestic product (GDP) growth from the market bottom in March 2009 has averaged 1.94 percent annually, the worst post-recession rebound in the last 70 years.

Will sequestration hurt the stock and bond markets? Not this month, when the budget cuts are scheduled to take effect. What about the economy? Probably not that much either, according to prognosticators. The sequestration cuts themselves are actually quite tiny. Total federal spending in 2012 was $3.53 trillion. President Obama's budget request for 2013 was $3.59 trillion. Under sequestration, total federal spending in 2013 would be $3.55 trillion, an increase of only $25 billion, a little less than 1 percent, according to the Congressional Budget Office (CBO)

NEW YORK - Stocks had their worst drop in more than three months as the prospect of political paralysis in Italy raised the specter of Europe's debt crisis flaring up again. The Dow Jones industrial average fell 216.40 points, or 1.6 percent, to 13,784.17, its biggest drop since Nov. 7. The Standard & Poor's 500 index fell 27.75 points, or 1.8 percent, to 1,487.85, dropping below 1,500 for the first time in three weeks. The Nasdaq composite dropped 45.57 points, or 1.4 percent, to 3,116.25.

FRANKFURT, Germany - The European Central Bank says Italian government bonds account for nearly half of its total holdings under a now discontinued bond-buying program launched in 2010 to ease the eurozone's debt crisis. The bank on Thursday detailed for the first time what countries' bonds it acquired under the so-called Securities Markets Program, which it started when the euro area's debt crisis flared in May 2010. The central bank for the 17 European Union countries that use the euro said it held bonds with a face value of 218 billion euros ($287 billion)

By Peter Morici The Justice Department is accusing Standard & Poor's of defrauding investors with optimistic ratings of mortgage-backed securities and derivatives prior to the financial crisis. While investors are entitled to answers about those conflicts, compensation, and reforms, Attorney General Eric Holder and President Obama, by singling out S&P, appear to be engaging in political vengeance. In 2011, S&P, Moody's, and Fitch were accused by a Senate committee of giving overly rosy ratings on mortgage-backed securities in the years prior to the financial meltdown of 2008, and then contributing to the severity of the crisis by hastily downgrading hundreds of securities after the housing bubble burst.

DAVOS, Switzerland - The crisis mood is gone, but that doesn't mean you can slip back into your old ways - that's the message from top international finance officials wrapping up the World Economic Forum in Davos, Switzerland. They warned governments Saturday against letting their relief over an improved economic climate turn into complacency over reforms that many want to see in order to sustain a still-uncertain recovery. "Do not relax," International Monetary Fund head Christine Lagarde urged at a closing panel on the economic outlook.

NEW YORK - The Standard and Poor's 500 closed at another five-year high Thursday after the stock market got a boost from reports suggesting that the outlook for economic growth may be improving. The S&P 500 rose 11.10 points to 1,472.12, its highest close since December 2007, when the U.S. economy was entering the Great Recession. It also closed at a five-year high on Friday and is now 93 points off its record close of 1,565.15, logged in October 2007. The Dow Jones industrial average closed up 80.71 points at 13,471.22.

From John Paulson's call for a collapse in Europe to Morgan Stanley's warning that U.S. stocks would decline, Wall Street got little right in its prognosis for the year just ended. Paulson, who manages $19 billion in hedge funds, said the euro would fall apart and bet against the region's debt. Morgan Stanley predicted the Standard & Poor's 500 Index would lose 7 percent, and Credit Suisse Group AG foresaw wider swings in equity prices. All of them proved wrong last year, and investors would have done better listening to Goldman Sachs Group Inc. chief executive officer Lloyd C. Blankfein, who said the real risk was being too pessimistic.