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Don't Get Caught Holding Dollars When The US Default Arrives

Discussion in 'Financial Cents' started by Quigley_Sharps, Jul 24, 2011.

  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Greece can’t solve a problem of too much debt by taking on even more. We will note, however, that by some measures, the United States is even more deeply in hock than Greece.

    Greece’s debt-to-GDP ratio is 143%. America’s is officially 97%. But the $14.3 trillion national debt, stacked up against a $14.7 trillion economy, doesn’t tell the whole story. Look at these numbers:

    • $14.3 trillion: “official” national debt
    • $5 trillion: Amount Uncle Sam is on the hook for Fannie Mae and Freddie Mac
    • $62 trillion: Total liabilities and unfunded obligations for Social Security and Medicare

    That doesn’t count the black box of bailouts.

    We know how much the Federal Reserve doled out in emergency loans: $16.1 trillion between Dec. 1, 2007, and July 21, 2010. We know that because yesterday the Government Accountability Office completed its first-ever audit of the Fed, made possible largely through the persistence of Rep. Ron Paul (R.-Tex.) making that audit, however incomplete, the law.

    What we don’t know is how much of that has been paid back. “We have literally injected about $5.3 trillion,” said Dr. Paul earlier this month during his questioning of Fed chief Ben Bernanke, “and I don't think we got very much for it. The national debt went up $5.1 trillion.”

    Bernanke did not challenge those figures.

    “To get our overall fiscal gap under control,” writes Boston University professor Laurence Kotlikoff in Bloomberg, “the U.S. must cut spending or raise tax revenue by $20 trillion over the next decade, far more than either the president wants or the House Republicans seek.”

    Yep: The latest number we see bruited in Washington is $3 trillion. Whatever the final number -- and there will be a last-minute deal; there always is -- it will be substantially less than $20 trillion over 10 years. The can will be kicked as it keeps getting kicked in Greece.

    We note here that the total of outstanding credit default swaps on U.S. Treasuries crested $4.8 billion this week. Uncle Sam has now surpassed Greece in this category.
    Measured in year-over-year change, America is number one: Net notional CDS outstanding grew 109%. That means there’s double the bets out there on a U.S. default compared with a year ago.

    “You may not know this, but the U.S. has actually defaulted a number of times already,” writes Chris Mayer this morning. He cites five instances:

    • 1779: The government was unable to redeem the continental currency issued during the Revolutionary War
    • 1782: The colonies defaulted on the debt they took out to pay for the war
    • 1862: During the Civil War, the Union failed to redeem dollars for gold at terms stated by the debt contracts
    • 1934: FDR defaults on the debt issued to finance World War I, refusing to redeem it in gold. The dollar is devalued 40% against gold
    • 1979: A bureaucratic SNAFU results in interest going unpaid on some small bills.

    “With the exception of 1979,” Chris says, “which was mostly due to administrative confusion -- the U.S. simply ran out of money each time. The end result was the dollar had to be devalued. Meaning it lost significant purchasing power.

    “My guess is that the U.S. will default again. It may not technically be called that, but the only way for the U.S. to meet its financial obligations is to print a lot of money.”
    What does that mean in practical terms? In Greece, professor Savas Robolis at Panteion University in Athens reckons that by 2015, the average Greek employee and pensioner’s standard of living will have fallen 40% compared with 2008.

    Even now, Americans are turning to their credit cards to pay for groceries and gas. According to First Data Corp., the volume of gasoline purchases put on credit cards jumped 39% over the last 12 months.

    You don’t want to be the average American in a default scenario, whenever it arrives. Ray Dalio, the head of Bridgewater Associates, the world’s biggest hedge fund, puts that day in “late 2012 or early 2013.”

    Don't Get Caught Holding Dollars When The U.S. Default Arrives - Yahoo! News
  2. RouteClearance

    RouteClearance Monkey+++ Site Supporter

    Here it comes!

    BAT1 and Falcon15 like this.
  3. Falcon15

    Falcon15 Falco Peregrinus

    Cephus likes this.
  4. Cephus

    Cephus Monkey+++ Founding Member

  5. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Good read I like this part..... might no be so bad after all.[beer]
    Falcon15 likes this.
  6. -06

    -06 Monkey+++

    Have seen this "crisis" come up several times because congress procrastinates till the last minute. It will come up again and again if we allow it by continuing to vote the same crowd in.
    The big problem looming horribly over our heads today is a severe inflation. When the world sees just how worthless our FRNS are they will start cashing them in for what ever they can grasp. When it starts it will be catastrophicly rapid. Would not surprise me if it does not happen within hours--with communication the way it is. Sure hope I am very wrong but I see no way we can keep the "ship" afloat with nobammy tossing money into the wind with both hands.
  7. VisuTrac

    VisuTrac Ваша мать носит военные ботинки Site Supporter+++

    "Almost without exception, for the average person it would mean a massive destruction of wealth and a severe reduction in living standards."

    You mean like loosing all your money in the dotcom bubble, the housing market bubble, losing your house having to move in with family member and being unemployed for month and months on end.

    Oh wait, we've already experienced that. In Michigan it's been that way for 10+ years.

    Welcome aboard [js]
    dragonfly likes this.
  8. Falcon15

    Falcon15 Falco Peregrinus

    Even IF the politicians decide to raise the debt ceiling, that is a green flag for Chair-satan Bernake to print money till the presses blow up. Can you say hyperinflation? Can you say reduction in credit rating for the US? Can you say China owns one third of the US because they will take tangibles instead of dollars in exchange for their Treasury Bonds? This is a zero sum game.
  9. VisuTrac

    VisuTrac Ваша мать носит военные ботинки Site Supporter+++

    Yeah, but we got nukes and have used them in the past so don't make us use them. BTW, we should start another war to keep the sheeple from looking at what we are doing. Oh let's sacrifice Wu!
  10. UGRev

    UGRev Get on with it!

    It's important to note that this will not affect us preppers as much as it will the sheeple.
    ratsg, dragonfly, Sapper John and 3 others like this.
  11. Falcon15

    Falcon15 Falco Peregrinus

    <iframe src="http://player.vimeo.com/video/26838978?autoplay=1" width="398" height="224" frameborder="0"></iframe>
  12. Hispeedal2

    Hispeedal2 Nay Sayer

    Great Video.

    I need to buy a house before rates rise.
  13. Falcon15

    Falcon15 Falco Peregrinus

    Cephus likes this.
  14. Capt. Tyree

    Capt. Tyree Hawkeye

    Dicey Times

    The art and science of longevity during these dicey times will depend on our ability in large part to avoid the irrational sheeple, and make alliance with those that can be salvaged. We'll need to know our neighbors closely if we don't already.
    VisuTrac, Falcon15 and Cephus like this.
  15. Falcon15

    Falcon15 Falco Peregrinus

    On a long enough timeline everyone's survivability drops to Zero.
    RouteClearance and jimroberton like this.
  16. bluedog

    bluedog Monkey+

    Hope everyone has a bit of gold, silver, trade goods. A couple grand in cash might buy survival short term in upcoming opening turmoil rounds as more folks begin to learn we're in deep doo doo.

    I mean last minute tanks of gas maybe.

    I think stock market is major indicator to many of the sheeps. They like to see it up and stable, forgetting that with inflated dollars this amounts to something that rhymes with lasterbation.

    With recent events, as more start to get it, things could accellerate.

    Lets all stay tuned.
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