Just watch this and be mentally prepared what is coming!!!
When will the debt bubble burst?
With the Fed printing more and more money, when will the federal debt problem become too big to handle?
Just consider what is going on over in Europe right now. Even the countries that have supposedly “tried austerity” continue to rack up debt at a mind blowing pace. New numbers that have just been released show that government debt-to-GDP ratios for some of the most financially troubled nations in Europe are absolutely soaring:
•Greece: 160.5%, up from 136.5% a year ago
•Italy: 130.3%; up from 123.8% a year ago
•Portugal: 127.2%, up from 112.3% a year ago
•Ireland: 125.1%, up from 106.8% a year ago
•Euro zone: 92.2%, up from 88.2% a year ago
•Spain: 88.2%, up from 73.0% a year ago
•Netherlands: 72.0%, up from 66.7% a year ago
Meanwhile, the debt-to-GDP ratio in Japan is now well past the 200% mark and continues to march upward with no apparent end in sight….
At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. It is a giant mess, and yet our politicians continue to recklessly spend more money.
A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash unlike anything that the world has ever seen before. If the U.S. government purposely wanted to damage the global financial system, the best way that they could do that would be to default on U.S. debt obligations. A U.S. debt default would cause stocks to crash, would cause bonds to crash, would cause interest rates to soar wildly out of control, would cause a massive credit crunch, and would cause a derivatives panic that would be absolutely unprecedented.
Where are we going, and what lies next? To address these questions, we need to know how we got here in the first place.
I want to share with you an interesting observation that I think will provide great clarity and insight into our current predicament, as well as indicate that our recovery, such as it is, will be protracted and incomplete.
Lot of interesting information here….
Intragovernmental Holdings – Just under one-third of the Federal debt is owed to about 230 other Federal agencies. How does this happen? Some agencies, like the Social Security Trust Fund, take in more revenue from taxes than they need right now. Rather than stick this cash under a giant mattress, these agencies buy U.S. Treasuries with it.
This effectively transfers their excess cash to the general fund, where it can be spent. Of course, one day they will redeem their Treasury notes for cash. The Federal government will either need to raise taxes, or issue more debt, to give the agencies the cash they will need.
•Social Security (Social Security Trust Fund and Federal Disability Insurance Trust Fund) – $2.72 trillion
•Office of Personnel Management (Federal Employees Retirement, Life Insurance, Hospital Insurance Trust Funds, including Postal Service Fund) – $1.12 trillion
•Dept. of Health and Human Services (Federal Supplementary Medical Insurance Trust Fund) – $69 billion
•Federal Deposit Insurance Corporation – $35 billion
•Department of Transportation (Airport and Highway Trust Fund) – $20 billion
•Department of the Treasury (Exchange Stabilization Fund) – $23 billion
•Department of Labor (Unemployment Trust Fund) – $21 billion
•Other Programs and Funds – $933 billion. (As of September 2012. Source: Treasury Bulletin, Monthly Treasury Statement, Table FD-3:Government Account Series)
Debt Held by the Public – Foreign governments and investors hold 48% of the nation’s public debt. The next largest part (21%) is held by other governmental entities, like the Federal Reserve and state and local governments. Fifteen percent is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. The rest (16%) is held by businesses, like banks, and insurance companies and a mish-mash of trusts, businesses and investors. Here’s the breakout:
•Foreign – $5.311 trillion
•Federal Reserve – $1.66 trillion
•State and Local Government, including their pension funds – $709.1 billion
•Mutual Funds – $864.9 billion
•Private Pension Funds – $605.2 billion
•Banks – $305.2 billion
•Insurance Companies – $259.1 billion
•U.S. Savings Bonds – $184.7 billion
•Other (individuals, government-sponsored enterprises, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors) – $1.14 trillion. (Federal Reserve as of January 2, 2013; All others as of June 2012. Source: Treasury Bulletin, Ownership of Federal Securities, Table OFS-2)
As the nation’s central bank, the Federal Reserve is in charge of the country’s credit, so it really doesn’t have a financial reason to own Treasury notes. So why did it double its holdings between 2007 and 2012? This is one way the Fed stimulated the economy to escape the grips of the 2009 recession. The Fed’s purchases stoked demand for Treasuries, which kept interest rates low.
Governments know that the economic system cannot be sustained. Government and central bankers around the world are strategically positioning themselves and preparing themselves for the upcoming economic collapse. The war in Syria is moving forward, the US setup an underground base outside of Syria, the base is protected and impervious to missiles. Egypt is in turmoil and the middle east is rising up against the central bankers and the US government.
Debt-Ceiling Standoff Threatens America’s Global Leadership