Debt & Deficits

If the implications of the current Greek tragedy were not so serious it would have been seen more as a Greek comedy (of fiscal errors). In fact, however, to deploy another metaphor, Greece's sovereign debt is seen as the proverbial canary in the coal mine - a microcosm of the relentlessly growing sovereign debt that has taken much of Europe by storm and is threatening to spread to the U.S.. Words: 1008

The head of the International Monetary Fund, Christine Largarde, said Friday the world economy is entering a “dangerous new phase.” Lagarde is referring to a debt bubble, the likes of which the planet has never seen before, and the possibility that it could all unravel at any moment. Uncertainty over the debt crisis in Europe is what caused the Dow to crash more than 300 points at the end of last week. What is Lagarde going to do about the debt problem? Words: 1752

The kind of impact [our economy is] going to have will not be like flying into the side of a mountain. It will be the kind of crash that skids over land, clipping trees and buildings until the plane ends up wingless in a smoldering heap. I just hope the fuel tanks don’t ignite when the long rough ride is over. [Let me explain.] Words: 832

It really is hard to find the words to describe the true horror of the national debt of the U.S. The U.S. government has been on the greatest debt binge in all of human history, and a day of reckoning is coming that is going to be so painful that it is going to shock America to the core. We have lived so far above our means for so long that none of us really has any concept of what "normal" is like anymore. The United States has enjoyed the greatest party in the history of the world, but now this decades-old party is ending and the bills are coming due. Our current system is headed for an inevitable collapse. There is no way of getting around it - a horrific economic collapse is coming [and] it is going to change the world. You better get ready. [Let me explain further.] Words: 1771

The new [debt ceiling deal] legislation will add $2.4 trillion to the $14.3 trillion national debt in a little over a year - and we don’t even start saving money until after the debt reaches $16.7 trillion! This bill doesn’t even cut the deficit. It just slows the growth of government spending to around 8% a year! So, even if Congress cuts $2.1 trillion out of the budget over the next 10 years, we will still be running annual deficits of more than $1 trillion...[That means that in addition to a deficit that will continue to grow we can look forward to a shrinking economy, an imploding U.S. dollar and exploding inflation. Some future! Let me explain.] Words: 827

Even though the U.S. has managed to avert a debt crisis and perhaps a ratings downgrade, there remains a stain on our reputation, a scarlet “A” for budgetary “Abuse,” that will not disappear. The whole world was watching, and what they saw was a dysfunctional government taking its country to the financial precipice and backing off at the very last moment. [That being said, what options does the U.S. government have to reduce/eliminate its current $10 trillion of outstanding Treasury debt and an unfathomable $66 trillion of future liabilities? I have identified 4 likely courses of action all of which will lower the standard of living of every American.] Words: 1374

Credit rating agency Standard & Poor's has downgraded the U.S. debt rating for the first time since the country won the top ranking in 1917. The rating was dropped from AAA to AA+ because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation and S&P's was “pessimistic about the capacity of Congress and the administration to leverage their agreement this week into a broader [deficit cutting] plan that stabilizes the government’s debt dynamics any time soon.” S&P also issued a negative outlook, meaning that there was a chance it will lower the rating further within the next two years, and warned that a downgrade to AA would occur if the agency sees smaller reductions in spending than Congress and the administration have agreed to make, higher interest rates or new fiscal pressures during this period. Words: 733

It was suggested 1.5 years ago that the next stock market crash might be one orchestrated by the Fed to create interest from historic buyers of US debt. The scenario went like this: you let the stock market collapse (i.e. no interference by the infamous "Plunge Protection Team") to generate a “flight to safety” environment which would push billions, if not hundreds of billions, of dollars into U.S. Treasuries, soaking up its increasing debt issuance and roll-over with little difficulty thereby flooding the bond market with much needed demand. Were the recent dramatic declines in the U.S. stock markets so engineered by the Fed? Words: 852

What are the implications for gold in each of the debt and "default" scenarios possible after August 2nd? [Let's take a look.] Words: 1111

Republicans and Democrats probably will reach a deal to pay America’s bills before the U.S. government runs out of cash at the end of July - probably - but in the meantime it has pushed the United States — and the world economy — toward a fearsome shock at a time when the world economy cannot afford any more shocks. If a U.S. default did happen, however...what would it mean for Canada? The answer is surprising. Read on. Words: 832