As a result of the increasing pressure on Congress to finish health reform and spend much more to fix the unemployment situation the United States is likely to see much higher deficits.  Thus, we have decided to investigate the impact of increasing deficits on BRIC nations and their unique economies.  Below is a chart of treasury securities held by each of the BRIC nations over the period of 2000 to 2007 (a period of relatively consistent bullish trends accross the globe, similar to what we expect for the next several years).  The data was compiled from the United States TreasuryDepartment.  The chart is followed by  a chart of GDP in billions of dollars, accounting for inflation in each of the BRIC nations over the same time period (data compiled from Index Mundi).  Analysis follows the jump:

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In October of last year Fiscal Frenzy analyzed a column in the NY Times by the Oracle of Omaha himself, Warren Buffett. (If you want to see our full article from last year, click here.)  Months ago in 2008 Warren Buffett was a buyer of American companies such as Goldman Sachs, General Electric, and Conoco Phillips.  However, more recently he has begun distancing himself from American companies in the near term.  Buffett’s newest editorial talks about the rising debt of the United States and resolves that there really is no advantageous way to fix it.

“To understand this threat, we need to look at where we stand historically. If we leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually — and in combination.”

(Emphasis Mine)

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The markets surged today as investors found extremely low stock all around not to mention oil extending it’s two day slide to more than $10.  The Dow was up an astonishing 276 points or 2.5% while the Nasdaq was up almost 70 points or 3.12%.  The biggest gainer for Fiscal Frenzy today was BBD, up almost 7.5%.  Prior to today the stock was down almost 12% in the last month alone.  Our second biggest gainer was LVS.  This gambling company has been hit hard, down 77% since October 30th of last year, but today rebounded more than 6%.  This rally today was not only spurred by the incredible lows some stocks have hit in recent weeks but also a major decline in oil the past two days.  Oil is down more than $10 a barrel the past two days and the amazing thing is that the price is still at $134.60, not even close to the price of oil months ago.  The decline pushed stocks higher none the less as investors look for any sign financial aide in these markets.  After hours however the good news turned into bad news as Ebay reported it’s earnings.  The company soundly beat expectations but gave a weak third quarter outlook that has the stock down more than 5.5% after hours.  This news could be a drag on the technology sector and the Nasdaq tomorrow after a stellar day like today.