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Timing the U.S. debt implosion in advance is virtually impossible. Thus far,
we’ve managed to [avoid such an event], however, this will not always be the case. If the U.S. does not deal with its debt problems now, we’re guaranteed to go the way of the PIIGS, along with an episode of hyperinflation. That is THE issue for the U.S., as this situation would affect every man woman and child living in this country. [Let me explain further.] Words: 495
So says Graham Summers (www.gainspainscapital.com) in edited excerpts from his original article* posted under the title The Recipe for Hyperinflation.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Summers goes on to say, in part:
The U.S. is running its fourth consecutive $1+trillion deficit. Our Deficit to GDP ratio is nearly 10%. Our “official” Total Debt to GDP is well over 100% though when you include the debt hidden in various Government entities and unfunded liabilities we’re well over a Debt to GDP ratio of 300% at this point.
To put these numbers into perspective, Greece had a Deficit to GDP ratio of 12% and a Debt to GDP ratio of 150% when it first entered its sovereign debt crisis. It’s since seen a GDP collapse of 20%: one of the largest economic collapses worldwide in the last 30 years.
Of course, you cannot simply compare economies by just two numbers. The U.S. has many advantages Greece does not, including:
1) The U.S. has never defaulted on its sovereign debt.
2) The U.S. has its own Central Bank that can print Dollars (Greece’s Central Bank cannot print Euros).
3) The U.S. is the largest most dynamic economy in the world and the provider of the world’s reserve currency: the U.S. Dollar.
Because of the 3 points above, the U.S. gets a pass where other countries (Greece, Spain, Ireland, Portugal, Italy and soon France and Germany) do not. However, this will not always be the case. Once the debt implosion finishes in the EU, it will then spread to the U.K., China, Japan, and finally the U.S.. At that point, the U.S. will experience something very similar to what Greece has experienced.
Timing the U.S. debt implosion in advance is virtually impossible but we get clues as to when it might happen. Last year, the U.S. Federal Reserve monetized over 70% of all debt issuance. The recipe for hyperinflation and a currency collapse has been the same throughout history: the rampant monetization of deficits.
Thus far, we’ve managed to get away with this for the reasons I listed above. However, this will not always be the case and, if the U.S. does not deal with its debt problems now, we’re guaranteed to go the way of the PIIGS, along with an episode of hyperinflation. That is THE issue for the U.S., as this situation would affect every man woman and child living in this country.
If you are not preparing for a US debt collapse , now is the time to do so. The reality is that the Central Banks are fast losing their grip on the markets. They’ll never admit this publicly, but I can assure you that Bernanke and pals are scared stiff by what’s happening in the banking system right now.
* Source of original article: http://gainspainscapital.com/2012/10/20/will-the-us-get-away-with-debt-monetization-nope/
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
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