Posted on 12/01/2009 6:41:05 AM PST by blam
Run On The U.S. Dollar ....Soon
Currencies / US Dollar
Nov 30, 2009 - 04:33 PM
By: DailyWealth
Porter Stansberry writes: It's one of those numbers that's so unbelievable you have to actually think about it for a while...
Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion.
Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?
How did we end up with so much short-term debt? Like most entities that have far too much debt – whether subprime borrowers, GM, Fannie, or GE – the U.S.
Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss."
What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt... at ever shorter durations... at ever lower interest rates.
Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.
When governments go bankrupt, it's called a "default." Currency speculators figured out how to accurately predict when a country would default
. Two well-known economists – Alan Greenspan and Pablo Guidotti – published the secret formula in a 1999 academic paper. The formula is called the Greenspan-Guidotti rule.
The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities.
The world's largest money-management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."
The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.
So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default.
[snip]
There are economists who know, don’t know, and know they don’t know where interest rates are going. The third makes sense in light of recent and long term historical data on the accuracy of forecasting.
Where will the money come from?,China sends memo to Obama all your stuff belong to ours.
I agree not living in a big city is better, but the problem you got to watch out for is where do the people go when they run out of food? They will head for the hills thinking that's where all the food is. Folks indeed had better be ready. I recommend the book "One Second After" for a good read.
I believe the first will be by Steal-Care, and the second by Theft Added Tax (V.A.T).
I believe the first will be by Steal-Care, and the second by Theft Added Tax (V.A.T).
Buying gold won’t help. The Government will confiscate the private gold. For the public good, all must suffer. Except the politicians, that is.
Oh, I will shoot one of those buggers the first time I see it. Everytime. I have even read on the internet the tired old typical snake theory of “they are more afraid of you..” Uh, no. They will CHASE YOU THROUGH THE WOODS. We try to keep them under control, but they are still pretty scary to come across.
I have a friend from Australia and we went sight seeing through Georgia and got to talking about native animals and such. Of course Australia is home to some pretty viscious critters, but she said most are in an area that isn’t heavily populated. Like the outback and such. It frightened her more to think of how casual we are in Georgia to roaming dangers. Like I told her to be careful when we were in south Georgia before getting to Savannah at the river. There are saltwater crocs that come out on the banks and aligators lounge everywhere. We walked past one about 15 feet away on Fort Polaski and then she saw it move. And how fast they move.
She was like “You people just WANDER around these beasts?!” LOL! Then I pointed out the cotton mouth swimming up on the bank next to the bridge we were standing on. She said “I travel all over the world and hear how brave our men are and I will tell them NO! You haven’t been to Georgia!” LOL!
That's what the lead is for. Knowing my neighbors and the arsenals they have, it would be really foolish for city folk to come out here to try and steal anything. I suspect it's that way in farming areas across the country. We believe gun control is the ability to hit your target ;')
I'm also rebuilding the fence around the perimeter of my farm, 70 acres worth. Actually, I've been at it for a couple of years now. I'm including a hot wire on the top of the fence to make it hard to climb. I can also monitor the voltage on the wire and know if someone touches it.....
Yes, they are very aggressive, especially if you are near their nest. We have copperheads, timber rattlers, eastern diamond backs and water moccasins here in the venomous category. The moccasins are by far the most aggressive of the bunch.....
With the spread you got, have you read the book “Patriots” by a man named Rawles? It is a “how-to” book wrapped in a fictional story. How to reinforce doors, windows, how to set up OP’s on your land, how to store gasoline, food, and ammo, what to stock up on, field medicine, etc. If you haven’t read it, grab it, and have a highlighter with you to highlight the how to parts. This guy is a straight up survivalist, he’s got some really good info and ideas.
If it is indeed a fixed income from a company pension for example, then you are correct. But “fixed income” is usually code for Social Security, which is not “fixed” at all.
It would be nice to be perfectly prepared, but it’s not going to happen here unfortunately. However, if a family can survive through the first or second stages of the disaster, then their odds of ultimately surviving must increase considerably.
Please correct me if I didn't hear that SS would be cut 500B with no cost of living increase for this coming year.
I am, by know means imaginable, an economics expert but that sounds “fixed” to me.
Gold just hit $1,200.
JUST in time for the bogus hopenhagen global communism to force all into global currency.
why would other countries force the issue?...we are still the richest most consumer driven economy in the world, my guess.....and why would other countries that have so much at stake in the US want the US to default?...it will only come back at them.....
perhaps just get out of the Heloc and nail down a solid rate?......but I love my Heloc....
can you at least give us one solid piece of advice without us having to buy the book?
the problem with fences is that it holds YOU in as well as keeping others out....think about it....
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.