Recently, President Obama claimed that a strong renminbi or yuan was good for China and that a weak dollar was good for America. Coming from the President, who would question such a statement? The facts however, demand that you question this nonsense. Monetary policy is not so difficult especially when you ignore everything that Keynesian economists will tell. I was trained as a Keynesian economist over 4 years at one of Canada's leading business schools and I can tell you from 20 years of post post-secondary self education that it is all bunk. Real monetary wealth can be understood very simply by examining the extremes.
On the ultra weak end of this sliding scale is any country/currency that has been hit by hyperinflation. The country is impoverished, its people are impoverished and the only way out is to start producing things that exploit the natural resources of the region.
On the ultra strong is a country that produces most of the world's goods and and its people and businesses own a significant amount of the world's physical resources, especially natural resources and other commodities.
As I said, this is a sliding scale from ultra weak to ultra strong and people become better and better off as you move from the weak end to the strong end.
So, when President Obama said a strong currency is good for China he was making a statement that some people like to call a no-brainer, but when he said a weak dollar was good for America, it was as though he had no brain.
Friday, January 28, 2011
Monday, January 24, 2011
The Decline of Gold and Silver
Gold, silver and other metals are in decline recently including a decent drop in today's markets. There is no need to panic and investors should hold tight and allow these markets to fall without selling their investments. This is a bull market correction and IS FULLY ANTICIPATED. When it bottoms (correction is over) then it will be time to start buying again. Gold and silver shares shares cannot go straight up. They need time to consolidate and shake out the weak investors.
If you are invested in ETF's such as GLD or SLV, you should probably sell now and buy back when the bottom arrives, but buy into real gold and silver backed ETFs managed by Sprott or EuroPacific Capital . The GLD and SLV are huge ponzi schemes and they will blow up just like Madoff's scheme did. Don't get suckered.
Gold and silver are not being invested in by too many people, so there is nothing to worry about. Just look up drutter (correct spelling) on youtube and watch one of his walks around a coin show. There is very little demand so far from the general public. Only the smart money is moving into precious metals. you can join the smart money now or wait til there is a mania and be part of the dumb money crowd.
Cheers!
If you are invested in ETF's such as GLD or SLV, you should probably sell now and buy back when the bottom arrives, but buy into real gold and silver backed ETFs managed by Sprott or EuroPacific Capital . The GLD and SLV are huge ponzi schemes and they will blow up just like Madoff's scheme did. Don't get suckered.
Gold and silver are not being invested in by too many people, so there is nothing to worry about. Just look up drutter (correct spelling) on youtube and watch one of his walks around a coin show. There is very little demand so far from the general public. Only the smart money is moving into precious metals. you can join the smart money now or wait til there is a mania and be part of the dumb money crowd.
Cheers!
Minimum Wage vs Wage Subsidies vs No Welfare
I've been labeled as someone who wants a return to slavery because I oppose the minimum wage laws. I believe that few people actually give any real thought to these laws as they very effectively raise the cost of living for the working poor and also very effectively kill jobs. As it is apparently not too obvious to most people how this works, let me explain with some analogies:
Angela is a high school dropout and must apply for any jobs that are available. She's smart and hard working and takes on a job as a waitress that pays $6/hr plus tips. She figures that if she works hard, she'll easily make more than the minimum $10/hr wage. Unfortunately, the restaurant she's working at is struggling and the customers are few and far between. After a couple of months she is looking for another job. She is not making $10/hr even with the tips and her rent is beyond her means. It's not a great place, but the minimum wage has made all of the low rentals demand the same price, regardless of their condition, and that price is about 40% of full-time minimum wage income (40% of $1600/month) or $640. She would have willingly taken a lower cost rent if one was available until she could afford something better, but instead she cuts back on her food and goes without other necessities.
Brad got into drugs in his early teens and never quite got his act together. He's had 4 or 5 minimum wage jobs but keeps getting fired and is basically unemployable. He applies for and receives welfare which is enough to get him by if he keeps out of the drugs. There are thousands of people like Brad who are living in very good government housing units, significantly better in fact than anything that Angela, who's working hard can afford. As a worker, Brad needs constant supervision, but at $10/hr, nobody will hire him. A wage subsidy instead of welfare would allow Brad to work, maybe develop some self esteem, and perhaps turn his life around. A wage subsidy would allow taxpayers to not pay 100% of his existence as they do now. A wage subsidy would not fix the rent problem, but it would reduce the reliance on social assistance.
Charles is just like Brad. In fact they hung out together growing up but Charles' parents moved their family to a state that believed in people helping themselves. Anything resembling socialism was outlawed in the state. There was no income tax, just a consumption tax to pay for infrastructure. When they moved to NuState Charles' father (Edward) bought several rental properties because they cheap. The rents he collected were low, but it was enough to cover his costs and give him some cash flow. Charles entered his 20's as basically unemployable. With no minimum wage laws and no social welfare, Charles wasn't able to live off the taxpayers like Brad. His parents allowed him to stay in their home for a while but told him he had to get a job.
Charles took a job at a grocer's collecting carts in the parking lot for $2/hr and managed to stay out of trouble. After a couple weeks, the store owner needed someone to clean the property and offered an extra $1/hr if he did it well. Charles feared living on the streets and agreed to do the job. He was only making $120/week but it was enough to pay for his share of the groceries and his parents were pleased. For the first time in his life he had paid at least part of his own way and decided that he would like to live on his own someday so he worked hard and eventually moved to stocking shelves at $8/hr and would get bonuses for helping elsewhere in the store. At this rate, Charles was able to afford to live in one of his father's rental properties.
Edward was very wise when it came to exploiting his rentals. In NuState his rentals averaged an income of just $500/mth, but that was more than enough to cover his cost. As he expanded his rental property business, he began hiring some of his own tenants to perform maintenance tasks at all of the properties in exchange for lower rent. As there was no income tax in the state, no laws were being violated and he was free of the paperwork that other states required of their employees.
NuState is not a Utopian state. In fact, it was the way the world worked until the early 20th century. Very few people were ever left behind by this system because charity was handled by individual people who took it upon themselves to look after those people that were truly unable to look after themselves.
While these examples certainly do not cover all aspects of each area, the general idea of how each one works can certainly be ascertained. Minimum wage kills jobs for those who lack the skills to earn the minimum wage. It also drives up the cost of living for the lowest rents in the marketplace forcing those who truly are unemployable to be unable to afford shelter. Wage Subsidies are pretty much similar with regard to the effect on housing costs, but fewer people are truly unemployable and the tax burden is lowered for everyone. A system of no wage minimums requires deregulation in housing to work as well as described. People who have no skills must be allowed to earn a wage and rental spaces will be built or modified to provide minimalist living requirements.
Unfortunately, this problem isn't going to resolved with common sense by getting rid of minimum wages and moving first to subsidized wages and later to no subsidies. In the meantime we must rely on groups like GivemShelter.com who are developing profitable and sustainable ways for charitable groups to assist the homeless.
Angela is a high school dropout and must apply for any jobs that are available. She's smart and hard working and takes on a job as a waitress that pays $6/hr plus tips. She figures that if she works hard, she'll easily make more than the minimum $10/hr wage. Unfortunately, the restaurant she's working at is struggling and the customers are few and far between. After a couple of months she is looking for another job. She is not making $10/hr even with the tips and her rent is beyond her means. It's not a great place, but the minimum wage has made all of the low rentals demand the same price, regardless of their condition, and that price is about 40% of full-time minimum wage income (40% of $1600/month) or $640. She would have willingly taken a lower cost rent if one was available until she could afford something better, but instead she cuts back on her food and goes without other necessities.
Brad got into drugs in his early teens and never quite got his act together. He's had 4 or 5 minimum wage jobs but keeps getting fired and is basically unemployable. He applies for and receives welfare which is enough to get him by if he keeps out of the drugs. There are thousands of people like Brad who are living in very good government housing units, significantly better in fact than anything that Angela, who's working hard can afford. As a worker, Brad needs constant supervision, but at $10/hr, nobody will hire him. A wage subsidy instead of welfare would allow Brad to work, maybe develop some self esteem, and perhaps turn his life around. A wage subsidy would allow taxpayers to not pay 100% of his existence as they do now. A wage subsidy would not fix the rent problem, but it would reduce the reliance on social assistance.
Charles is just like Brad. In fact they hung out together growing up but Charles' parents moved their family to a state that believed in people helping themselves. Anything resembling socialism was outlawed in the state. There was no income tax, just a consumption tax to pay for infrastructure. When they moved to NuState Charles' father (Edward) bought several rental properties because they cheap. The rents he collected were low, but it was enough to cover his costs and give him some cash flow. Charles entered his 20's as basically unemployable. With no minimum wage laws and no social welfare, Charles wasn't able to live off the taxpayers like Brad. His parents allowed him to stay in their home for a while but told him he had to get a job.
Charles took a job at a grocer's collecting carts in the parking lot for $2/hr and managed to stay out of trouble. After a couple weeks, the store owner needed someone to clean the property and offered an extra $1/hr if he did it well. Charles feared living on the streets and agreed to do the job. He was only making $120/week but it was enough to pay for his share of the groceries and his parents were pleased. For the first time in his life he had paid at least part of his own way and decided that he would like to live on his own someday so he worked hard and eventually moved to stocking shelves at $8/hr and would get bonuses for helping elsewhere in the store. At this rate, Charles was able to afford to live in one of his father's rental properties.
Edward was very wise when it came to exploiting his rentals. In NuState his rentals averaged an income of just $500/mth, but that was more than enough to cover his cost. As he expanded his rental property business, he began hiring some of his own tenants to perform maintenance tasks at all of the properties in exchange for lower rent. As there was no income tax in the state, no laws were being violated and he was free of the paperwork that other states required of their employees.
NuState is not a Utopian state. In fact, it was the way the world worked until the early 20th century. Very few people were ever left behind by this system because charity was handled by individual people who took it upon themselves to look after those people that were truly unable to look after themselves.
While these examples certainly do not cover all aspects of each area, the general idea of how each one works can certainly be ascertained. Minimum wage kills jobs for those who lack the skills to earn the minimum wage. It also drives up the cost of living for the lowest rents in the marketplace forcing those who truly are unemployable to be unable to afford shelter. Wage Subsidies are pretty much similar with regard to the effect on housing costs, but fewer people are truly unemployable and the tax burden is lowered for everyone. A system of no wage minimums requires deregulation in housing to work as well as described. People who have no skills must be allowed to earn a wage and rental spaces will be built or modified to provide minimalist living requirements.
Unfortunately, this problem isn't going to resolved with common sense by getting rid of minimum wages and moving first to subsidized wages and later to no subsidies. In the meantime we must rely on groups like GivemShelter.com who are developing profitable and sustainable ways for charitable groups to assist the homeless.
Tuesday, January 11, 2011
America WILL Default on Its' Debt
I was invited to speak to a Unitarian Fellowship group this coming weekend on issues related to the coming crash of the U.S. dollar. The group is very unique in that it encompasses both Americans and Canadians in the border cities of Port Huron, MI and Sarnia, ON.
While I won't include the background or foundation of what happens in hyperinflationary situations from the Roman Empire, Colonial America or the Weimar Republic, I am including the full text of the speech as it pertains to America defaulting on its' debt.
+++
I’ve provided some historical information on hyperinflation. These were all great nations that failed to comprehend the outcome of their continued inflation of the money supply.
Now I will explain why I believe that hyperinflation is coming to America just like it hit 32 other countries in the past 100 years. I will begin with the most damning evidence yet of the danger of this situation. In a January 6th letter by Tim Geithner, the Treasury Secretary for the United States addressed to all members of the U.S senate regarding the issue of raising America’s debt ceiling, Mr Geithner states: “Failure to raise the limit would precipitate a default by the United States. It could lead to the loss of millions of American jobs. Even a short term default would have catastrophic economic consequences that would last for decades.”
The bulk of the letter urges the senators to raise the debt ceiling and speaks of the responsible measures being taken to cut the deficit in half in the medium term. This by the way is still adding to the debt. 2010’s deficit was in excess of $1 trillion, so they are proposing to only add 500 billion to the debt. How is that responsible?
Geithner continues to build the argument for fiscal responsibility as he continues:
“The Treasury would be forced to default on our national obligations causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.
A default would raise all borrowing costs as interest rates would rise sharply. Equity prices and home values would decline significantly…..
It would have prolonged and far reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of people and businesses to invest in the United States.
Payments on a broad range of benefits would have to be discontinued, limited or adversely affected including salaries of all federal civil servants including the military; all social security and Medicare benefits; veteran’s benefits; interest payments on treasury bonds, and payments required to keep federal government offices open. (Time 2:30)
As you can tell from this letter, the head of the U.S. Treasury is worried about a default.
What exactly is a default? It’s easier to understand when you examine this at the household level. Let’s suppose you are fresh out of high school. You get an entry level job and an apartment. Your wants exceed your income so you spend more money this month than your income. This is your monthly "budget deficit". So you borrow money using your credit card. The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. In the next month you still don't have enough money to cover your spending and have another deficit. You finance this by adding to your credit card and pay interest on the total debt that you owed before the month began. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy for individuals and companies, but for a government this is called a default. (3:30)
….
Geithner warns that raising the debt ceiling will prevent America from defaulting on its debt? I believe default is inevitable as there is no political will to change this ill-fated course.
In a June 2010 opinion piece in the Wall Street Journal, former chairman of the Federal Reserve, Alan Greenspan noted that "Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit."
The facts speak very loudly to those willing to listen. The debt ceiling has been raised 80 consecutive times, and will continue to be raised until there is no need to raise it. That time will come when the interest due on the public debt exceeds the government revenues from taxation and the American dollar will become worthless to the rest of the world.
I’ve crunched the numbers to prove this point.
A close look at the projections of the US Government, including future revenues of an additional $1 trillion annually, show that if there is no NEW spending and the government is able to stick to its planned reductions, then in 2023, just 12 years from now, the interest on the $46 trillion of total debt will exceed government tax revenues.
If interest rates rise by just 1% as the long bond is suggesting they will this year, then the year to fear is 2020.
If the Oil producing countries stop valuing oil in dollars in the same manner that China and Russia have just done with their bilateral trade, then experts say the bond market premium will jump 4-5% within a single year. To ease into this scenario, I adjusted interested rates upward by 1% per year and the default timeline shrunk to 2016.
Examining historical examples of interest rates, I found that in ALL cases of the bond markets raising interest rates due to rising debt loads, the rates tend to rise ¼ point or more a month meaning a minimum of 3% a year. This scenario, which has more fundamental truisms than any of the other cases, brings the American debt default squarely into 2012. THAT IS NEXT YEAR
Am I certain that the default will happen next year? Absolutely not, but I am certain that there will be a default within the decade. As Greenspan said, politically toxic decisions will have to be made to keep the default at bay for as long as possible. While I won’t get into my personal opinions about which cuts need to be made, I can assure you that the cuts will be deep, they will anger America, and there will be widespread hardship.
Before concluding, it is important to note that of the 105 million housing units in the USA and using the broadest measure of gun ownership, 65 million American homes already have access to guns. Since the financial crash of 2008, Americans have bought enough ammunition to supply all of the world’s armies several times over.
Given the right of Americans to bear arms, what politician has the will power to reduce the social security payments to 59 million Americans; to slash veterans’ benefits; to hike taxes or cancel Obamacare?
For all of the reasons I outlined, I believe with conviction that there will be widespread unemployment, poverty, hunger and maybe even a 2nd revolution in America.
© 2011 Shaun Larocque
While I won't include the background or foundation of what happens in hyperinflationary situations from the Roman Empire, Colonial America or the Weimar Republic, I am including the full text of the speech as it pertains to America defaulting on its' debt.
+++
I’ve provided some historical information on hyperinflation. These were all great nations that failed to comprehend the outcome of their continued inflation of the money supply.
Now I will explain why I believe that hyperinflation is coming to America just like it hit 32 other countries in the past 100 years. I will begin with the most damning evidence yet of the danger of this situation. In a January 6th letter by Tim Geithner, the Treasury Secretary for the United States addressed to all members of the U.S senate regarding the issue of raising America’s debt ceiling, Mr Geithner states: “Failure to raise the limit would precipitate a default by the United States. It could lead to the loss of millions of American jobs. Even a short term default would have catastrophic economic consequences that would last for decades.”
The bulk of the letter urges the senators to raise the debt ceiling and speaks of the responsible measures being taken to cut the deficit in half in the medium term. This by the way is still adding to the debt. 2010’s deficit was in excess of $1 trillion, so they are proposing to only add 500 billion to the debt. How is that responsible?
Geithner continues to build the argument for fiscal responsibility as he continues:
“The Treasury would be forced to default on our national obligations causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.
A default would raise all borrowing costs as interest rates would rise sharply. Equity prices and home values would decline significantly…..
It would have prolonged and far reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of people and businesses to invest in the United States.
Payments on a broad range of benefits would have to be discontinued, limited or adversely affected including salaries of all federal civil servants including the military; all social security and Medicare benefits; veteran’s benefits; interest payments on treasury bonds, and payments required to keep federal government offices open. (Time 2:30)
As you can tell from this letter, the head of the U.S. Treasury is worried about a default.
What exactly is a default? It’s easier to understand when you examine this at the household level. Let’s suppose you are fresh out of high school. You get an entry level job and an apartment. Your wants exceed your income so you spend more money this month than your income. This is your monthly "budget deficit". So you borrow money using your credit card. The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. In the next month you still don't have enough money to cover your spending and have another deficit. You finance this by adding to your credit card and pay interest on the total debt that you owed before the month began. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy for individuals and companies, but for a government this is called a default. (3:30)
….
Geithner warns that raising the debt ceiling will prevent America from defaulting on its debt? I believe default is inevitable as there is no political will to change this ill-fated course.
In a June 2010 opinion piece in the Wall Street Journal, former chairman of the Federal Reserve, Alan Greenspan noted that "Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits, or significant inflation, can close the deficit."
The facts speak very loudly to those willing to listen. The debt ceiling has been raised 80 consecutive times, and will continue to be raised until there is no need to raise it. That time will come when the interest due on the public debt exceeds the government revenues from taxation and the American dollar will become worthless to the rest of the world.
I’ve crunched the numbers to prove this point.
A close look at the projections of the US Government, including future revenues of an additional $1 trillion annually, show that if there is no NEW spending and the government is able to stick to its planned reductions, then in 2023, just 12 years from now, the interest on the $46 trillion of total debt will exceed government tax revenues.
If interest rates rise by just 1% as the long bond is suggesting they will this year, then the year to fear is 2020.
If the Oil producing countries stop valuing oil in dollars in the same manner that China and Russia have just done with their bilateral trade, then experts say the bond market premium will jump 4-5% within a single year. To ease into this scenario, I adjusted interested rates upward by 1% per year and the default timeline shrunk to 2016.
Examining historical examples of interest rates, I found that in ALL cases of the bond markets raising interest rates due to rising debt loads, the rates tend to rise ¼ point or more a month meaning a minimum of 3% a year. This scenario, which has more fundamental truisms than any of the other cases, brings the American debt default squarely into 2012. THAT IS NEXT YEAR
Am I certain that the default will happen next year? Absolutely not, but I am certain that there will be a default within the decade. As Greenspan said, politically toxic decisions will have to be made to keep the default at bay for as long as possible. While I won’t get into my personal opinions about which cuts need to be made, I can assure you that the cuts will be deep, they will anger America, and there will be widespread hardship.
Before concluding, it is important to note that of the 105 million housing units in the USA and using the broadest measure of gun ownership, 65 million American homes already have access to guns. Since the financial crash of 2008, Americans have bought enough ammunition to supply all of the world’s armies several times over.
Given the right of Americans to bear arms, what politician has the will power to reduce the social security payments to 59 million Americans; to slash veterans’ benefits; to hike taxes or cancel Obamacare?
For all of the reasons I outlined, I believe with conviction that there will be widespread unemployment, poverty, hunger and maybe even a 2nd revolution in America.
© 2011 Shaun Larocque
Saturday, January 8, 2011
Between Default and Hyperinflation
There must be a happy place somewhere between defaulting on treasury debt obligations and hyperinflating the world's reserve currency. I say this because the US political asylum keeps humming along in this neverland and dares not deal with reality. It's a delusional place full of delusional people who do whatever it takes to keep themselves in this delusional world.
Helicopter Ben insists that he isn't printing money and technically he's right. HE isn't standing behind a Gestetner churning out pages after pages of fiat money that bears the words - In God we Trust. He pays somebody to do it for him. What he does is work on rhetoric with his other fed cronies; rhetoric to to keep the spin going as long as possible. The problem for him and his god backed currency is that reality is taking hold.
The country has been technically insolvent for several years according to University of Boston professor, Lawrence Kotlikoff. This is because he accounted for all of the unfunded liabilities. In time, we won't need to worry about unfunded liabilities because they will all be washed away with the coming default. Let me explain:
At present debt levels, a rate of interest of 11.1% would cause the US government to have to pay more interest on the debt than total income from taxes. As the debt rises at a present burn rate of over 110 billion per month, the interest portion also rises. Unemployment figures continue to rise, so the amount of tax income is dropping. The stock market is at the same level is was at 4 years ago indicating no new net revenue from capital gains on stocks. Housing prices continue to decline very slowly - no new taxes there. Consumer spending has declined considerably over the past few years as they are getting tapped out - don't look for any new sales tax revenue. Given the limitations for any new tax revenues, we are left with only the growing expenditures with the main culprits being the debt service, military, social security and medicare but also includes the rest of the ballooning public service.
Did you catch that?
Debt service in December $104 billion and total NEW debt per month averaging $110 billion. Looks that happy place (the difference) is getting a lot smaller than it used to be.
I may put together an estimate of when this default becomes actual rather than technical for the next time I write.
Helicopter Ben insists that he isn't printing money and technically he's right. HE isn't standing behind a Gestetner churning out pages after pages of fiat money that bears the words - In God we Trust. He pays somebody to do it for him. What he does is work on rhetoric with his other fed cronies; rhetoric to to keep the spin going as long as possible. The problem for him and his god backed currency is that reality is taking hold.
The country has been technically insolvent for several years according to University of Boston professor, Lawrence Kotlikoff. This is because he accounted for all of the unfunded liabilities. In time, we won't need to worry about unfunded liabilities because they will all be washed away with the coming default. Let me explain:
At present debt levels, a rate of interest of 11.1% would cause the US government to have to pay more interest on the debt than total income from taxes. As the debt rises at a present burn rate of over 110 billion per month, the interest portion also rises. Unemployment figures continue to rise, so the amount of tax income is dropping. The stock market is at the same level is was at 4 years ago indicating no new net revenue from capital gains on stocks. Housing prices continue to decline very slowly - no new taxes there. Consumer spending has declined considerably over the past few years as they are getting tapped out - don't look for any new sales tax revenue. Given the limitations for any new tax revenues, we are left with only the growing expenditures with the main culprits being the debt service, military, social security and medicare but also includes the rest of the ballooning public service.
The Interest Expense on the Debt Outstanding includes the monthly interest for:
- U.S. Treasury notes and bonds
- Foreign and domestic series certificates of indebtedness, notes and bonds
- Savings bonds
- Government Account Series (GAS)
- State and Local Government series (SLGs) and other special purpose securities.
Did you catch that?
Debt service in December $104 billion and total NEW debt per month averaging $110 billion. Looks that happy place (the difference) is getting a lot smaller than it used to be.
I may put together an estimate of when this default becomes actual rather than technical for the next time I write.
Thursday, January 6, 2011
Saviour Sent to the Sidelines
The one person responsible for saving America from its government in the early 1980's has been sent packing by Obama. Paul Volcker was the one person with the guts to raise interest rates and head off inflation 30 years ago, a situation that resulted in his effigy being burned by people hating his actions. In reality he saved the entire country and now, when another man with his conviction is desperately needed at the Fed, he gets the boot.
This is just another Obamanation.
This is just another Obamanation.
Sound The Alarm - America to Default on Debt
Well, I had put away the proverbial pen to focus on family and business projects, but recent events have me preaching too much to stay away any longer. Hearing about remarks made by Treasury Secretary Tim Geithner earlier today made me bolt up and say enough is enough! I have to help spread the word. It's time to sound the alarms!!!
Geithner told the entire world that if the 'debt ceiling' is not raised, then the U.S government will default on its debt obligations before the end of March. WOW! Can you believe that it has come to this?
There's a couple of ways to look at this. First from his perspective, he his blaming the people who are talking about voting against raising the debt ceiling. He says the default will be there fault!! Forgetting of course that the only way to default is to SPEND more than you can afford, Geithner wants to shoot the messengers. What he means technically by this statement is that the US government has already made the decision that it will default on its major debt obligations. Holders of US treasuries (mostly other countries like China, Japan, Russia and many others) will get burned but it will continue to spend like crazy - currently borrowing 110 billion MORE per month.
The US government has hired hundreds of thousands of additional workers over and above the temporary jobs it created for the census and these people will continue to collect paychecks before bondholders will get paid for loaning the US the money.
Honestly, though do you think this is really going to happen? - I doubt it, at least not yet.
We are going to go through the debt ceiling issue a few more times before this bubble bursts but It WILL Burst.
How do I KNOW when this bubble will burst?
Before it does, there will be another flight to the false security of the U.S. Dollar as we will see plenty more trouble in Europe with Italy, Portugal and Spain all on the brink. Then the flight will get grounded when California, New York and many other states come sniffing for a homegrown bailout.
Oh did I mention the municipalities? The smart ones are now issuing as much debt as they can get away with because they KNOW they can never pay back the debt holders. They'll get new and upgraded infrastructure paid for at a long term cost of ZERO. If you own any muni bonds, get out of them NOW!!
The plane goes off the runway when the long bond rates spike up and America's debt - ALL FINANCED SHORT TERM - is forced to roll over.
My guess is that by MARCH of 2012, the plane will be already on the runway if not in flames.
Geithner told the entire world that if the 'debt ceiling' is not raised, then the U.S government will default on its debt obligations before the end of March. WOW! Can you believe that it has come to this?
There's a couple of ways to look at this. First from his perspective, he his blaming the people who are talking about voting against raising the debt ceiling. He says the default will be there fault!! Forgetting of course that the only way to default is to SPEND more than you can afford, Geithner wants to shoot the messengers. What he means technically by this statement is that the US government has already made the decision that it will default on its major debt obligations. Holders of US treasuries (mostly other countries like China, Japan, Russia and many others) will get burned but it will continue to spend like crazy - currently borrowing 110 billion MORE per month.
The US government has hired hundreds of thousands of additional workers over and above the temporary jobs it created for the census and these people will continue to collect paychecks before bondholders will get paid for loaning the US the money.
Honestly, though do you think this is really going to happen? - I doubt it, at least not yet.
We are going to go through the debt ceiling issue a few more times before this bubble bursts but It WILL Burst.
How do I KNOW when this bubble will burst?
Before it does, there will be another flight to the false security of the U.S. Dollar as we will see plenty more trouble in Europe with Italy, Portugal and Spain all on the brink. Then the flight will get grounded when California, New York and many other states come sniffing for a homegrown bailout.
Oh did I mention the municipalities? The smart ones are now issuing as much debt as they can get away with because they KNOW they can never pay back the debt holders. They'll get new and upgraded infrastructure paid for at a long term cost of ZERO. If you own any muni bonds, get out of them NOW!!
The plane goes off the runway when the long bond rates spike up and America's debt - ALL FINANCED SHORT TERM - is forced to roll over.
My guess is that by MARCH of 2012, the plane will be already on the runway if not in flames.
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