Best quote I've seen all week regarding the European debt crisis. From Erik Nilsson, an economist at Scotia Capital: "Let me get this straight: investors are getting out of the euro zone (2010 deficit/GDP 6.7 per cent; debt/GDP 88 per cent, according to OECD) because of its poor fiscal situation and flocking to the U.S. (10.7 per cent and 92 per cent, respectively)."
From bad to worse. It's amusing enough that they dump bad Euro debt for worse US debt, but they shun Gold to chose between these two evils?
The U.S. is in Worse Shape Than Any Other Country
By Dave Kranzler, The Golden Truth
It's awesome the way the Government/Wall Street can blow smoke up our ass and people still believe it. But let's examine some facts. First, Obama did NOT include the Government guarantee of Fannie and Freddie in his absurd budget proposal. BUT, the U.S. is guaranteeing roughly $6 trillion of FNM/FRE mortgage debt. Given current default rates, it's not unreasonable to assume a 10% loss on that paper this year. That means you add another $600 billion on top of Big O's budget numbers. There's plenty of other off-budget black holes just like that, although maybe not as large (GMAC, AIG, etc.).
What about the myth that we have a deflationary debt contraction going on? That would be news to anyone who examines the numbers.
It stuns me that everyone one in this country is focused on the financial troubles occurring in Greece right now. Greece is about 3% of the total EU GDP. In reality, the bell tolling for California right now is much worse in terms of its potential impact on the global economy. California is about 13% of the U.S. GDP and California is the world's 7th largest economy. And what about the list of other States teetering on bankruptcy: Illinois, Michigan, Pennsylvania, New Jersey, New York...it seems to me that the financial media, Wall Street and the Obama Government is spending a lot of energy keeping Europe front and center in front of everyone when, in reality, we should be looking at ourselves.
The golden truth is that the Fed is going to be forced to embark on a money printing operation that will blow our minds. It will be interesting to see what kind of smoke screens they put up in order to mask the truth. At some point this nasty short-squeeze rally in the dollar will rip in reverse and the rest of the world will flee from the dollar the way they are fleeing from the euro right now. When that happens, gold will finally become the ultimate safe haven investment and those who poo-poo it now will be left chasing a train that leaves the station suddenly, quickly and with a sharp move higher.
http://truthingold.blogspot.com/2010/02/us-is-in-worse-shape-than-any-other.html
"Bernanke has guaranteed a collapse of the financial system. We're in the center of the storm, the eye of the storm right now. The hundred or so people in the world who actually understand what's going on are all going, "oh, shit." And Ben Bernanke's sitting there with a grin on the cover of Time magazine. Well, I can guarantee next year he isn't going to be sitting on the cover of Time magazine with a grin. He'll be sitting on the cover of Time magazine with a noose around his neck."
-Bob Moriarty
The bankruptcy of the United States is now certain
Tuesday, November 24, 2009
From Porter Stansberry in the S&A Digest:
It's one of those numbers that's so unbelievable you have to actually think about it for a while... Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?
How did we end up with so much short-term debt? Like most entities that have far too much debt - whether subprime borrowers, GM, Fannie, or GE - the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss." What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt… at ever shorter durations… at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.
When governments go bankrupt it's called "a default." Currency speculators figured out how to accurately predict when a country would default. Two well-known economists - Alan Greenspan and Pablo Guidotti - published the secret formula in a 1999 academic paper. That's why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."
The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.
So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world's largest holder). That's 16,267,000 pounds. At current dollar values, it's worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that's roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether... that's around $500 billion of reserves. Our short-term foreign debts are far bigger.
http://www.thedailycrux.com/content/3455/Porter_Stansberry
What you must know about bankruptcy of the United States
Tuesday, February 02, 2010
From Porter Stansberry in the S&A Digest:
OBAMA! has sent a new budget to Congress. It contains several provisions that will make people unhappy. Taxes are going up on the rich. They're going up on private-equity firms and hedge funds. They're going up on oil and gas companies. And they're going up on multinational companies.
These new taxes are what you'll see people arguing about. They are what the politicians will complain and campaign about. Nobody wants to pay the costs of government, so that's the easy sell. But the taxes aren't the real problem with OBAMA!'s budget...
The real problem is that government spending is literally out of control.
The government is going to reduce its so-called "discretionary" spending by a grand total of $200 billion. Only about $1.4 trillion of the government's $3.8 trillion budget is discretionary. The rest is legally required, thanks to unfunded entitlement programs, like Medicare. So right now, far less than half of the government's annual budget can legally be restrained.
Meanwhile, there's no accurate tally of the government's debt. Supposedly, we owe around $12 trillion. This number is so large that it is meaningless. What does it really mean? According to the IRS, almost 143 million people filed tax returns in 2007 (the most recently reported year).
Of these people, roughly 96 million paid something in taxes - even one penny. Thus, technically, you could say there are basically 100 million taxpayers in the United States. Dividing the total debt ($12 trillion) by the number of taxpayers, you can see our total debt is actually $120,000 per taxpayer. How many people do you know can afford an additional $120,000 in debt?
And the truth is, the $12 trillion figure is only a down payment on our actual debts.
For example, nobody really knows how much more money Fannie and Freddie will require. (My bet is $500 billion each - or $1 trillion.) On Christmas Eve, when no one was looking, Congress approved unlimited funding for the two national mortgage banks.
And that's far from the only "off-budget" item. We have committed to fighting two civil wars - in Iraq and Afghanistan. The costs are likely to be $50 billion or so next year alone. How much over the next 10 years? Maybe $1 trillion? Or maybe more. And there's a new "jobs package" that's estimated to cost $76 billion next year with another $25 billion to bail out cash-strapped state governments.
Even if you only looked at the dollar amounts that have been budgeted today and you ignored all of the rest of the growth of future entitlement spending, you'll discover that we actually owe something around $20 trillion right now.
And if $20 trillion is the real number, then the amount owed by taxpayers is actually $200,000 each. Of course, that's if you're counting all of the taxpayers. Most people, though, pay almost nothing in taxes. Unless you're earning more than $50,000 per year, you're not really contributing to the tax receipts. Roughly 50 million folks are in this category. These people pay less than 10% of all income tax receipts. So you shouldn't count on them to repay much, if any, of these debts - they can't.
http://www.thedailycrux.com/content/3989/Porter_Stansberry
It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.
And the U.S. government would still be massively in debt.
So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?
Well, for one very simple reason.
That is not the way our system works.
You see, for more dollars to enter the system, the U.S. government has to go into more debt.
http://theeconomiccollapseblog.com/archives/it-is-now-mathematically-impossible-to-pay-off-the-u-s-national-debt
Not a day passes that the US debt crisis doesn't worsen. Not a single day. As a matter of fact, this week alone the US will auction off another $80 BILLION of DEBT, further indebting our nation. We will be lead to believe by the financial media that there were lines of foreign creditors waiting to bid on a chance to own some of that pious US debt.
Do you honestly believe anybody in the world is standing in line to buy this crap debt offered by the US Treasury? It is no secret to anybody that the US is sitting atop a ticking debt bomb of epic consequence. Countries globally struggle to finance their own fiscal shortcomings and we're expected to believe that they will gladly part with their savings to purchase our debt? Because it is safe? Because Little Timmy Geithner says it's safe?
Geithner Says U.S. Will ‘Never’ Lose Aaa Debt Rating
Feb. 8 (Bloomberg) -- Treasury Secretary Timothy F. Geithner said the U.S. is in no danger of losing its Aaa debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010.
“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”
Geithner said investors around the world turn to U.S. Treasury securities and dollar-denominated assets whenever they are worried about global stability. That reflects “basic confidence” in the U.S. and its ability to bounce back from the global recession, he said.
Moody’s Investors Service Inc. last week said the U.S. government’s bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.
The U.S. plans to rein in the deficit once the labor market recovers, Geithner said. In the short run, that means focusing on ways to “make sure that this economy is growing again,” he said. The administration says the deficit will shrink over the next four years as more Americans find jobs and the economy accelerates.
“This is within our capacity to do,” Geithner said.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aDYv97KxyEtU
Am I the only one that doubts a guarantee by Little Timmy Geithner? This sniveling rat has told more lies than Pinocchio. Geeze Timmy, I doubt anybody is gonna buy your "growth" story. 4th quarter GDP has been debunked by every analyst with a keyboard as nothing more than bloated inventories backed up by zero demand. Consumer credit fell in November for a record 11th straight month. The jobs deterioration in the country has been revised even lower than was believed. Tax revenues continue to fall across the board. Just what do you plan to use to back up this claim that the US debt rating will never slip? Bumbling Ben's printing press? Printing more money to pay one's debts does not endear one's creditors to that debt. The US Dollar is becoming a global hot potato, soon to be dropped.
The Biggest Financial Deception of the Decade
By Jeff Clark, Editor, Casey’s Gold & Resource Report
We’re bailing out corporations that should fail, making financial promises we can’t keep, and adding layers of debt we can’t possibly repay. And the real killer is, if we don’t have the cash, we just print it. It is, by any reasonable account, the “blunder that will plunder” the next several generations. It is changing America permanently, and the problems will persist long after you and I are laid to rest.
Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.
This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.
Yet, what is the guardian of our economy and money telling us now?
“Will the Federal Reserve's actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).
This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.
Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.
Any level-headed individual has to conclude that there will be a steady – and likely accelerating – decline in the dollar’s purchasing power. It’s inevitable.
http://news.goldseek.com/GoldSeek/1262805304.php
And we couldn't close up shop today without some commentary on the January non-farm payrolls report released this past Friday...not to mention the BLS revision of jobs lost in the previous 18 months. Unemployment as many have suspected all along is FAR WORSE than the US Government has led us, and continues to lead us, to believe.
If you are discouraged and no longer look for work you don’t count as unemployed…
TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 104,000 jobs in January. Meanwhile, the Bureau of Labor Statistics (BLS) reported the U.S. economy lost 20,000 jobs. We believe the BLS has underestimated January’s results due to problems inherent in their survey techniques.
In addition to their regular report, the BLS published benchmark revisions to their employment estimates derived from an actual payroll count for March 2009. As a result, job losses from April 2008 through March 2009 were revised up a whopping 930,000, or 23% from their earlier revisions. In addition, the BLS revised their job loss estimates for 2009 up 617,000, or 14.8%.
While the BLS originally reported job losses of 4.2 million in 2009, TrimTabs reported 5.3 million, a difference of more than a million lost jobs. We consistently reported that based on real-time tax data, job losses were much higher than the BLS was reporting. This past January, the BLS revised their job loss estimate to 4.8 million, an increase of almost 600,000 lost jobs. The new total brought the BLS’ revised estimates much closer to TrimTabs’ original estimate based on real-time tax data.
Since July 2009, TrimTabs estimates and the BLS estimates have diverged again. While the tax data points to a weak job market, the BLS estimates point to a steadily improving job market. We believe the job market is much worse than the BLS is reporting and that in January 2011, when the BLS revises their estimates for 2010, their April 2009 through December 2009 results will move much closer to TrimTabs’ results.
The BLS has seriously underreported job losses for the past two years due to their flawed methodology. TrimTabs has identified the following four problems:
http://investment-blog.net/if-you-are-discouraged-and-no-longer-look-for-work-you-dont-count-as-unemployed/
The headline unemployment number fell once agin as over 500,000 individuals LEFT the work force, aka, quit looking for work. Recall, in the US, if you are not looking for work, but still out of a job, you are no longer "unemployed". ONLY IN AMERICA. Unadulterated employment statistics reveal that the total of unemployed/underemployed in the US is now above 20%.
Would somebody please ask Mr Geithner again, "What backs up your claim that the US will 'never' lose it's Aaa debt rating?"
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