Posted on 07/31/2009 5:25:48 AM PDT by Need4Truth
There's some fear out there that one of the big "shoes to drop" could be dropping -- namely our massive debt and the potential unwillingness of our trading partners to keep financing it.
This week saw a series of monster bond sales--so many, in fact that buyers may be getting a stomachache.
(Excerpt) Read more at businessinsider.com ...
Another Freeper said Luxembourg and cayman Islands buy more and hold more US debt than China. He seems to know this area well.
Not a good sign at all. Once our creditors are full we cannot magically generate more money.
And yet we keep spending like madmen. The only answer to service the debt now will be to raise taxes. The Dems will declare the recession over and institute massive tax increases. Also, don’t forget, there’s about 4 trillion in IRA’s and 401K’s they can tap. Remember Hillary’s statement about taxing 10% right off the top of all those retirement accounts? Hers was the least intrusive suggestion. Some analyst actually suggested seizing all retirement accounts and putting them in the “social security trust fund”. Get ready for it because you ain’t seen nothin’ yet.
Hmmm... what’s the goal... what’s the goal...
Could it be, complete financial collapse, requiring a “strong hand” to step in and “take charge”?
No, it couldn’t be. These people are the best and the brightest, and there’s no way they are this devious and malicious. /sarc
Thanks. I wouldn’t have known how to research that and it gives me additional perspective in reading what people post here.
Of course this is a gov’t report, so take it with a grain of salt. ;)
The biggest problem is that most of our debt is financed short term. The problem is not that China is cashing in. They are not buying more. Thus, the short term treasuries are coming due and we as a country are between a rock and a hard place!
Our debt is like a giant ponzi scheme in that if we do not get new buyers, we can’t pay the interest on the old debt.
Can you blame them?
Canada needs to pony up some real money to “invest” in the mother country who’s teat they feed from. Maybe they’re stretched a little thin paying for all their “free” services.
The Fed Reserve purchasing our debt is the equivalent to printing more money. It’s very inflationary.
I expect that interest rates will reach 10% by the end of this year. With a $12 trillion debt at 10% interest, that’s $1.2 trillion in interest expense.
If you want to have a rude awakening. Look at our total federal revenues and subtract out social security and medicare taxes which are restricted funds. If you divide the total revenue by the total debt, you will see that if interest rates reach the highs they did in the early 1980’s, it will take 100% of our Fed. Revenue just to pay the interest on the nat’s debt.
In this period if run away spending, fed. revenues are also dropping. In April, the highest fed revenue month of the year, receipts from corporate tax revenues were off 62% and individual tax revenues were off 44%. We should be measuring our countries life expectancy based upon the cash burn rate as we did the tech companies of the late 1990’s.
If you look at the link posted in #3 above, you will note that the growth in foreign owned debt is in T-bills, not T-Bonds and Notes. T-Bills by definition are due within 1 year of issuance. Many are 90 days. It’s like having your house financed on a credit card rather than having a mortgage. Short term notes are subject to wild interest rate fluctuations, similar to a variable rate mortgage.
Thanks for posting. Someone posted this article earlier and it has a lot of good reasoning in it.
http://www.marketskeptics.com/2009/07/doubts-about-feds-ability-to-control.html
And then of course
http://market-ticker.org/archives/1267-US-5yr-Bond-Auction-Effectively-FAILS.html
p.s. did you read this one?
http://www.businessinsider.com/jim-rogers-another-collapse-coming-in-china-video-2009-7
So you should look at the collapse of the international market for US Treasury debt as a good thing. In fact, I am encouraged when I hear talk of the end of the dollar as the international reserve currency.
If the United States can not pay its debts in its own currency it will be forced to stop borrowing. Better would be to have a fiscally responsible government and own the world's reserve currency. But we have allowed our government to destroy that lofty post. And we the citizens are going to pay dearly for this mistake, especially our children and grandchildren.
When you borrow from Peter to pay Paul, you are up the creek when Peter says “No more”.
If I ever get a sense that Uncle Sam is going to start messing around with my 401(k), I intend to borrow as much as I can from the remaining funds and walk away without making a single payment on the loan.
No, I hadn’t seen those articles. Thanks. Interesting quote by Jim Rogers “Mr. Geithner has been dead wrong for 15 years”.
Well, no. We should be measuring our government's life expectancy this way.
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