Posted on 10/29/2008 2:01:34 AM PDT by TigerLikesRooster
28 October 2008
In 2009 the US Will Be Forced to Selectively Default and Devalue Its Debt
We have seen estimates that next year the US will have to finance a $2 Trillion annual deficit. They may be able to push it further into the next Administration than that by the forbearance of the world, but not by much. We'd expect a significant drop in Treasuries by 2011 at the latest.
It should be obvious to anyone that we are approaching the apogee of the Treasury bubble, with the credit bubble having broken already.
When the Treasury says they are facing unprecedented challenges in financing the US public debt next year that is an understatement.
Once the deleveraging of the markets subsides, the dollar and Treasuries will drop, perhaps with some momentum, as the rest of the world realizes that the US has no choice but to default. This can be resolved in several ways, including continued subsidies from foreign sources in the form of virtual debt forgiveness, devaluation of the dollar, raising of taxes, and higher interest rates on debt.
The problem now is that the US has breached the point where it can service its debt out of real cash flows, and turning this around will require a severe devaluation of the US dollar.
Devaluation and selective default are the only foreseeable systemic alternatives. There are other exogenous paths of a more political nature such as consolidation and war that may color the default a slightly different color, but a selective default it remains.
This is the fundamental situation. Everything else is speculation and commentary.
This article too is speculation and commentary, with manure baked right in.
All those soon to worthless dollars we've sewn up in mattresses should be spent and used immediately!
May I suggest to those not ready for it: Shooting irons, plenty of bang, pitchforks, torches, and rope?
I expect at some point they are going to say to us who have saved our money, we are screwed as to Social Security, Medicare, etc.
That's a fast way to destroy the financial markets...and bring them all the way to zero. Those trillions in 401(k) accounts are largely invested in the markets, not in "special" or otherwise government obligations.
The big gorillas in Washington and New York will do whatever it takes to protect themselves, even if such actions inadvertently destroy the rest of the United States and her citizens.
Figure out ways to benefit from their idiocy that don't hurt you now, and you will win in the long run. [Examples: fixed-rate thirty-year mortgage on your house; fixed-rate Federal (not private) PLUS, Stafford, and other student loans (if you use PLUS, find a lender who grants forbearances until graduation) to finance the entire cost of your child's education beyond any grant or scholarship assistance]. Invest in things that won't devalue: your family, education, etc.
I keep hearing that gun and ammo sales have been "brisk" lately......Just sayin'.......
What you are hearing is true. My local gun store says they have sold more guns in October than in any month in the 56 years they have been in operation.
Yep, mine too. I bought a Glock 26 last week (had to order it because he was out of stock). The owner said his business was the best it's been in 36 years in business. I was looking at a shotgun a couple of weeks ago at another gun and outdoor store and the clerk made a comment about how busy they'd been since about mid summer.
This is the best reason I've yet seen to not believe the polls.....
Bye, Peggy. Next time we see you, I hope you would be a nice and juicy target.:-)
Even with the forecasted deficits, the US is still better off than most Western European governments and Japan in terms of GDP/debt ratio.
We are also in a position (due to the reserve status of the USD) where we can, in effect, coerce loans from holders of large dollar denominated deposits, as the Chinese are learning-- the yuan is effectively worthless without its dollar backing, so they either help the whole dollar-economy (including the US) by injecting liquidity at favorable rates (lowering their rate of return and absobing more risk) or they can face the consequences of our central bank policies rendering their reserves worthless or raising interest rates and sucking capital like a vacuum cleaner out of their economy.
We are allowed to play this game because we play it fairer than any other country would (look at the assistance we are giving Korea and Switzerland via our Federal Reserve).
Zimbabwe here we come...
The way this is going to happen is to take the Terri Schiavo route, on steroids.
Bankers gone wild. Starring the Fed Reserve and the Treasury depart. They will unveil the new Zimbabwe plan the day after the election.
I believe it.
This would be my worst fear coming true.
Buy stock in wheelbarrows ?
For example, what would happen to the economies of Japan, China, and the EU if the biggest market for their goods (the US) collapsed? Wouldn't they want to prevent this even if it meant eating some debt?
Brass and Lead; silver; weapons; soon-to-be-forbidden knowledge; liquor never devalues (at least that I've seen)
Cigarettes make good trade goods too.
If we ever hit hyperinflation, pay off your mortgage / debts as late as possible but before the revluation of the currency.
I took some money out of the market and put it into US Treasuries. My broker said some quote like “backed by the full faith and credit of the U.S. government” and I laughed at him - but clarified it with “well, I sure as heck aren’t going to put it in Chinease or Russian T-Bills.” And then a brief discussion of international trade, etc. I’m still a bit leery though.
We owe em big time. WE have been borrowing money from them. We do not have the money to pay them back. What useually happens in a bankruptcy?
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