Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

America's Double Trouble and The Reckoning, U.S. Debt Higher than Greece

Economics / US Debt Nov 09, 2012 - 01:01 PM GMT

By: Andy_Sutton

Economics

Diamond Rated - Best Financial Markets Analysis ArticleNow that the untold billions have been spent trying to convince America that our leaders actually know what they’re doing, they’re going to get put to an early test, and a critical one at that. Looming large are two big issues: the debt ceiling (again), and the ‘fiscal cliff’ automatic budget cuts. While they may seem like two separate issues, it all really ties together rather nicely into one big package that can be loosely labeled as yet another attempt to spend more than is brought in and at the same time justify it.  The good news is that the players are the same so the egos are the same and we can use that as barometer based on how they ‘handled’ the situation in 2010. The bad news is the egos are the same and they did a pitiful job in 2010, opting to simply kick the can down the road as opposed to actually embarking on any meaningful reform pathway.


The ‘American Superiority’ Myth

We’ve all heard countless times from mainstream economists, policymakers, and their ilk that America is somehow immune from consequences. They always pin their argument on the dollar standard.  ‘Our’ central bank issues the reserve currency of the globe and that alone immunizes us from any repercussions. The 25% unemployment of Spain and Greece? The 50% unemployment among the young people in Spain? Forget about it! Never going to happen here because our paper is better than everyone else’s. Right? Sounds good, but only if you take them at their word and ignore the realities that lie just under the surface.

While it may be true that the reserve status can buy us some extra time, it is by no means a guarantee against hardship. In fact, it is quite the opposite in that it guarantees that our beating will be worse than everyone else’s because we’ll be the last to fall. Greece’s problems started when debt/GDP crossed the 103% area. The rest of the PIIGS and all of Europe for that matter ran into problems in that same area, a few points here and there.

What would you say if I were to tell you that America’s per capita share of the national debt currently outstanding was 35% higher than that of Greece’s per capita share? You might do a double take. Now, what if I were to tell you that America’s per capita share of the fiscal gap (net present value of future unfunded liabilities) was more than 18 times that of Greece? These little useful tidbits of information are precisely the kind of thing the syndicate that runs the global financial system would prefer you remain ignorant about. Because you might start to wonder how exactly are we to sustain our current path? The answer is we’re not. However, the syndicate would prefer that you continue to load up on iPhones, big screen televisions, and all the modern day trappings of a neo-Roman society. There are even cracks in that façade, however. Sony Corporation was recently downgraded by Moody’s to one step above junk due to its seventh consecutive quarterly loss and falling demand for its televisions, phones, and cameras.

Now I’m not going to put my reputation on the line and give a timeline for this great unraveling and period of reckoning. There are too many quality analysts who have already discredited themselves in the eyes of the general public as the boy who cried wolf by putting absolute dates on these events. And that is a shame because the rest of their message is, for the most part, spot on. All I’m willing to say is that this might very well go on a while longer than most people would think. It could also end next week. Look at Europe. It was going. Then it stopped.

While it is true that the USFed is backed into a corner, there are still some tricks they can pull. The same goes for the USGovt. Accounting is a lovely business, especially when you can change the rules to suit your whims (see FASB Rule 157 as a great example).

The Consumer’s Millstone

Another problem facing America that is perhaps unique in the world is the level of personal indebtedness. I know I sound like a broken record, but I’ll say it again. When you borrow money, you are essentially voting for your own economic enslavement – in more ways than one. First, your borrowing allows the banking system to create inflation, which lowers the purchasing power of your currency. So you end up having to borrow even more because your current borrowings don’t buy as much. And it quickly becomes a cycle.

Secondly, the job market is downright pitiful. The ‘good’ jobs keep disappearing. For example, Lockheed Martin laid of 3,000 workers this week. And the jobs the economy is ‘creating’ are junk, paying below-subsistence wages. It is pretty sad when you can have a job and still qualify for all types of government assistance because the job doesn’t pay a living wage. This is another consequence of the USFed’s inflationary Keynesian rattletrap policies. Wages haven’t kept up with prices. Borrowing has filled the gap. Enter a good dose of materialism and voila – instant serfdom to the banking system. In this type of environment, who in their right mind would want to further encumber themselves with debt?

Yet the latest report from the USFed shows that consumer credit outstanding hit a record high. Yes, an ALL-TIME RECORD HIGH. Ironically, the culprits were automobile and student loans. I’ve already written previously about the student loan crisis that is brewing. Aside from the bubble in USGovt debt, the student loans mess qualifies as the #2 bubble as far as I’m concerned. Of course the ignorant media spun this utterly awful report as a good thing, following in their good Keynesian bias that debt to spend is good and doesn’t matter. Debt equals prosperity in fact. Very 1984ish. More on this later.

 What the Reckoning Will Look Like

Austerity will be coming to America. Of course it will not be called austerity, because that is now another of the ‘bad words’ for which there is no place in American journalism outside describing Europe woes. We seem to be settling on the idea of using ‘fiscal cliff’ to describe our own set of woes.

Austerity will not be any prettier in America than it has been in Greece because we’re of the same mindset by and large. The freeloaders in this country are not going to take well to the idea that they can no longer eat off the sweat of someone else’s brow. They’re no different than the freeloaders in Greece and the rest of Europe who are now rioting in the streets along with pretty much everyone else.

America has already defaulted on its debt and the rest of the world for the past several years has been playing along, leading people to the idiotic notion that the Chinese don’t realize that they’re being paid back in dollars of steadily decreasing value. Does anyone actually believe this nonsense? The Chinese (and the rest of the world) might be a lot of things, but ignorant isn’t one of them, especially their policymakers. This default is one of the main reasons that China, Russia, and the OPECs have been cutting deals quietly to exclude the USDollar from their trade. And we’re not talking about two-bit countries either. China and Russia have massive economies and massive economic power. They are making some very poor choices by the way, but they are still miles ahead of America. They are cutting us out.

Everyone on earth has been quietly and slowly stepping away from USDebt, particularly that of a longer-term nature. The USFed and other central banks have been sopping up that debt to keep the game going. The syndicate then dispatches its minions to monkey with the precious metals markets to keep the illusion that the dollar is still worth something. They bash gold in their banker-owned television networks, and then load up behind the scenes. Has anyone noticed that the Cash4Gold places won’t sell you gold? They only buy. They’re more than happy to give you paper for the family jewels.

However, there will soon come a major paradigm shift. Central banks will stop printing fiat money to buy bonds. They will continue printing like crazy, but instead of buying debt, they’ll be buying gold. The big (and smart) money is moving towards metals. Soros, Paulson, Putin in Russia, and China have all been buying gold. Soros doubled his holdings in one day, albeit it through the gold ETF. Think he doesn’t have physical gold? Think again. The syndicate knows gold is money and is preparing for a massive power shift. He that has the gold makes the rules.

The end of the USBond bubble will spell a certain end to the entitlement structure and America’s welfare society. Much in the way the Greeks and Spaniards have been suffering so shall Americans who have not properly prepared. By prepared, I mean shunning new debt, paying down (preferably paying off) existing debt, and building up savings, a good portion of which are stored in precious metals. Too many people consider metals an investment. Gold and silver are cash. Pure and simple. Just another way of holding cash that happens to be a lot better at holding value than paper currency.

I and countless others have been beseeching people to accumulate metals since the beginning of this publication over six years and took untold flak for calling gold the opportunity of a lifetime back in 2008 before the crisis. This is not pat on the back time. Gold is still a marvelous opportunity, even though it has pretty much doubled from when that 2008 article was written. For those who can no longer afford gold, silver is an excellent (though more volatile) alternative. Bear in mind the syndicate actively manipulates the silver markets, so be prepared to exercise some serious patience.

Other austerity measures in the US will consist of steady increases in the retirement age to ‘save’ Social Security, increases in premiums and cuts in benefits to keep Medicare from blowing up. Be prepared to pay a lot more from healthcare, despite the massive reform that is forthcoming. That reform doesn’t even come close to dealing with the real problems, but instead mandates that approximately 35 million Americans who don’t have health insurance buy it from the insurance industry. Rather convenient, but should be no surprise considering the insurance industry crafted the reform bill.

Much of this austerity will fall under the labeling of ‘shared sacrifice’ and those who are against the theft of their Social Security contributions for example, will be deemed to be ‘unpatriotic’.  That is already happening and, regardless of your worldview, the facts are out there.

The K-winter, Generational Theory, and Death of Keynesianism

There are clear cycles in society and they come under a vast array of names. The Kondratieff winter and the Strauss-Howe Generational Theory are two of the more popular monikers given to the period in the progression of societies where decadence leads to complacency, which ultimately results in bondage. We’re clearly either at the very end of the decadence/complacency stage or the beginning of the bondage stage, depending on how cynical you happen to be.

What cannot be denied is that the world is going through a massive paradigm shift. The dollar standard era, the age of consumerism, and the parabolic accumulation of debt are all slated for termination. As is Keynesianism. The great experiment that began with “A Treatise on Money” in 1931 that encouraged people to spend rather than save (among other things) is beginning its disastrous end as central banks and governments around the world engage in unlimited monetary stimulus as a means by which to ‘fight’ economic malaise. The patented answer and justification for additional stimulus was, is, and will continue to be ‘well, the last one just wasn’t big enough’. We’ve seen that with the USFed’s failed policies over the past half dozen years. When the mere lowering of interest rates failed to achieve the desired ends, interest rates were lowered to zero. When that didn’t work, they pledged to maintain ZIRP until 2015. That hasn’t worked and we’ve seen two QE failures and a TWIST program that has done absolutely nothing. So now we’re into QEunlimited.

The mainstream parrots the party line that unlimited QE is the way to prosperity. I reject that hypothesis out of hand because every last one of them already knows what the end result will be. The banksters will end up owning the title to your house, your car, and will enrich themselves infinitely with the spoils of your labor. It is quite obvious that the Keynesian experiment results in prosperity, but it is not that of the people as was asserted back in the 1930’s, but rather it is that of the financial oligarchy. At the end of this cycle, Keynesianism will meet its well-deserved demise, but the American standard of living that has been enjoyed since the Depression will die along with it. In truth, that living standard has been compromised for quite some time now with its maintenance becoming more and more dependent on the accumulation of debt, but even that will no longer be enough.

In conclusion, our society has reached a point where we are so far disconnected from our last great lessons in economics and hardship that we are now doomed to experience the next round. All the ingredients are in the mixing bowl and the blender has been slowly picking up speed for the last half dozen years.

My parting question to you is which side are you on? Are you on the side that is willing to face these problems head on and impose some austerity on yourself so as not to be caught off guard or are you on the side that wishes to remain blissfully ignorant? If you’re in the former group, you are to be commended. If, however, you find yourself in the latter group, I’ll leave you with a prescient quote from Sam Adams:

“If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you. May your chains set lightly upon you; and may posterity forget that ye were our countrymen.”

By Andy Sutton
http://www.my2centsonline.com

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. His firm, Sutton & Associates, LLC currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar. For more information visit www.suttonfinance.net

Andy Sutton Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules