Many articles are being written these days that more or less scope the dire financial circumstances the U.S. is in. That being said, I had not been able to find one “analyst” – even one – who had the guts to outline the probable outcome and general hopelessness of the situation and to offer any meaningful prescription for investors to survive this coming catastrophe – until now. Words: 710
Finally someone has stepped up to the plate to actually:
- analyze America’s dilemna,
- call a spade a spade as to what the future holds for the U.S. and the rest of the world’s advanced economies and
- offer some suggestions as to how to ride out the storm, not unscathed, but at least with ones’ finances somewhat intact.
“Robert Jenkins, a former fund manager and current external member of the Financial Policy Committee of the Bank of England, has written an excellent article – as far as it goes – entitled Think the unthinkable on US debt. Unfortunately, while it says many of the things other articles address he, like all the others of his ilk, only outlines the severity of the problem, fails to do a meaningful analysis of the true situation and refuses to admit that the ‘solution’ is all but impossible.
Yes, Jenkins outlines, and more or less articulates, the problem in terms of sovereign debt and its magnitude. He also goes to some lengths to show how higher interest rates would kill the economy given the scale of the debt.
One thing he never mentions or attempts to scope, however, are the unfunded liabilities for Social Security, Medicare, Medicaid and now Obamacare and other government pensions to employees and military personnel.
Derivatives, albeit not sovereign debt, are also of a magnitude that it is totally impossible for any financial institution to ever make good on their obligations.
Talking about financial institutions, if they ever were to adopt FASB accounting practices, all would be insolvent.
Of course the FED and the Treasury department have the most amazing and ongoing fraud scheme going with the Fed conjuring money from vapor, giving it to these favored 17 who then head to the Treasury auctions to buy the 42% of federal government expenditures, plus the existing and maturing debt, that have to be borrowed.
To say that the problem will become unsolvable after four years is a joke. It can’t be fixed even now because the government can’t tax enough, can’t grow the economy enough and has no political will to do anything of consequence other than to defer hitting the wall for a little while longer.
Watch this to play out again over the next few weeks when dealing with theso-called ‘fiscal cliff.’ There will be lots of huffing and puffing in the mainstream media, and much ado about nothing following ‘unprecedented’ bipartisan negotiations and cooperation. An honest appraisal would be that their solution didn’t scratch the surface. Nothing of consequence will take place to solve the debt tsunami.
Printing money, devaluing the currency and using financial repression to meet government obligations with cheaper nominal dollars, isn’t a solution. It is merely a means of deferring the inevitable crash.
I have no fix on the time and magnitude of the crash, but I do know for certain that the debt debacle is inevitable.
The only assets worth having are tangibles, commodities, unmortgaged real estate and the only real money – precious metals bullion. Oh yes, should some of us be so fortunate as to ‘cash in’ with these kinds of assets, an Executive Order under existing legislation designed to adjust the tax rate on ‘windfall profits’ will cause our gains to evaporate.
Confiscation of this kind is a political slam dunk. Class warfare makes measures like this politically popular. I personally expect to win, but then will lose my gains through an arbitrary 50 to 90% windfall profits tax.
The financial system as we know it is doomed.”