Posts Tagged ‘David Cote’

Getting a grip on the debt

Tuesday, November 9th, 2010

The top story in today’s Wall Street Journal:
Fed Global Backlash Grows
China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth

Global controversy mounted over the Federal Reserve’s decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism.

The Fed’s decision to buy $600 billion in U.S. Treasury bonds and therefore flood the financial system with money after last year’s stimulus is an inherently inflationary measure.

Why should we be alarmed?

Recently, Dave Cote, CEO of Honeywell, gave a speech to the Chamber of Commerce that you should read and watch:

Bruce McQuain posted on the speech,

For instance, the discussion about China’s defense expenditures being paid for by our interest payments.  Cotes points out that if spending remains unchanged through 2020, we’ll be paying almost a trillion dollars in interest a year.   At this point, foreign governments own 45% of our 9 trillion in debt.  China owns at least a trillion of it.  And there’s no end in sight of the sale of government debt here.

The last point Cote makes that echoes Dales warning is about how quickly this will happen if we don’t do something.

While the problem builds slowly and inexorably, financial markets respond abruptly. When that decline does happen, it won’t be a case of minor monthly changes that give us 15 months to adjust. The hurt will come overnight as the herd moves against us. And then it’s too late.

That could happen at any time without warning triggered, as Dale points out, by some seemingly insignificant occurrence that normally would receive only passing attention. I don’t think, for the most part, people understand that very important point or they’d be beating down the doors of Congress.

Look at today’s headline above. Cote is not speaking empty words.

As Nick Schulz said,

It’s impressive to see a guy running a $36 billion firm develop a level of detailed policy knowledge that would put most congressmen to shame.

After you watch the speech and read it, make sure to look at the slides.

Cote ought to be is in Obama’s debt commission.

Cote poses the question,

Do We Still Have The Political Will To Be A Great Country?

And to do what it will take?