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.
I was trying to get a 100 oz bar of silver two weeks ago. The guy would not sell it for spot. Wanted 15 a oz.
Get paid in silver or gold.
Don’t forget the tar and feathers.
Buy gold. If you can find it to buy. Take physical possession and don’t keep it in a “safe” deposit box. The last time we had this kind of economic shenanigans the banks called in boxholders who had to go through their boxes in front of a fed and turn over all their gold to the fed. If they come into your house to search for and take your guns they will take your gold and silver, too.
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