Three Horrifying Facts About the US Debt “Situation”
Since too often financial articles consist of some stooge blathering on and on with opinions instead of facts, I thought today we’d simply focus on some FACTS about our current financial system which few if any want to acknowledge.
#1: The US Fed is now the second largest owner of US Treasuries.
That’s right, this week we overtook Japan, leaving China as the only country with greater ownership of US Debt. And we’re printing money to buy it. Setting aside the fact that this is abject lunacy, this policy is trashing our currency which has fallen 13% since June… as in four months ago. Want an explanation for why stocks, commodities, and Gold are exploding higher? Here it is.
#2: “There are only about $550 billion of Treasuries outstanding with a remaining maturity of greater than 10 years.”
This horrifying fact comes courtesy of Morgan Stanley analyst David Greenlaw. And it confirms what I’ve been saying since the end of 2009, that the US has entered a debt spiral: a time in which fewer and fewer investors are willing to lend to us for any long period of time… at the exact same time that we must roll over trillions in old debt and issue an additional $100-150 billion in NEW debt per month in order to finance our massive deficit.
And only $550 billion of the debt we’ve got to roll over has a maturity greater than 10 years!?!?
So we’re talking about TRILLIONS of old debt coming due in the next decade. The below chart depicting the debt coming due between 2009 and 2039 comes courtesy of the US Treasury itself. In plain terms, we’ve got some much debt that needs to be rolled over that you can’t even fit it on one page and still read it.
#3: The US will Default on its Debt
… either that or experience hyperinflation. There is simply no other option. We can NEVER pay off our debts. To do so would require every US family to pay $31,000 a year for 75 years.
Bear in mind, I’m completely ignoring the debt we took on with the nationalization of Fannie and Freddie, AIG, and the slew of other garbage we nationalized or shifted onto the Fed’s balance sheet. And yet we’re STILL talking about every US family making $31,000 in debt payments per year for 75 years to pay off our national debt.
Obviously that ain’t going to happen.
So default is in the cards. Either that or hyperinflation (which occurs when investors flee a currency). Either of these will be massively US Dollar negative and horrible for the quality of life in the US. But they’re our only options, so get ready.
Good Investing!
Graham Summers
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Spot Gold At Record High
Matthew Walls
The Wall Street Journal
Octover 7, 2010
- A d v e r t i s e m e n t
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Spot gold surged higher to a new record, fueled by bullish sentiment and a weak dollar.
News that Vietnam had lifted a two-year old ban on gold imports was cited as just one more reason to buy gold, adding steam to the rally as gold races towards $1,400 a troy ounce faster than many had predicted.
Spot gold reached a high of $1,364.95 a troy ounce. In morning trading, it was 0.8% higher on the day at $1,359.50. Other metals followed, with palladium jumping nearly 4% to a nine-year high of $600.50.
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Spot Gold At Record High
Wall Street Journal | Spot gold surged higher to a new record, fueled by bullish sentiment and a weak dollar.
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Dave Forest | Five years ago, a big investment house like Merrill Lynch would have scarcely thought to mention gold.
Re: “... trashing our currency ...”
ReplyDeleteIf the stated value, of “Federal” Reserve notes, declines enough with respect to copper and nickel, the 1946-2010 U.S. Mint nickels, composed of cupronickel alloy, could become somewhat rare in mass circulation.
The October 8th metal value of these nickels is “$0.0617794” or 123.55% of face value, according to the “United States Circulating Coinage Intrinsic Value Table” at Coinflation.com.