We Are Headed Directly Into A Brick Wall Where Everything Just Stops
Every market is going in the wrong direction in preparation for what is coming. Yes I know, this is always how it works when bubbles are being blown. Money is pouring into bonds in particular, stocks are being propped up and margin balances swollen, people are also being prodded into “selling” their Gold (paper obligations).
As I see it, we are headed [...]
The CBO said this week that America’s fiscal deficit will be much smaller than anyone thought, and that long term debt growth will slow by at least 3 points through the next decade.
That’s good news right?
In his note today, Deutsche Bank‘s Joe LaVorgna says there is even more than meets the eye in the report.
Specifically, the rosier CBO report means there’s now less pressure on Congress to keep the Sequester, and more [...]
Economists See No Crisis With U.S. Debt as Economy Gains
“Three years after a government spending surge in response to the recession drove the U.S. past that red line — the nation’s $16.7 trillion total debt is now 106 percent of the $15.8 trillion economy”
Federal Debt: Total Public Debt as Percent of Gross Domestic Product (GFDEGDQ188S)
Federal Debt: Total Public Debt as Percent of Gross Domestic Product (GFDEGDQ188S)
2012:Q4: 103.66867 Percent of GDP Last 5 [...]
from Russell Napier:
Napier’s presentation, “Deflation in an Age of Fiat Currency,” is thought-provoking, and the precise polar opposite of investing as usual. A wry and picaresque speaker, he starts with some conclusions. Among them:
- To reach record lows [akin to those on offer in 1921, 1932, 1949 and 1982], US equities will have to fall by more than 60%.
- Central banks are straining to produce inflation, and developments in emerging markets [...]
For the 50 million Americans in poverty the probability of a recession is 100 percent. Growing economic divide for working class.
The probabilities of the US slipping into another official recession are growing. Don’t tell this to the 50 million people that are reportedly at the poverty level according to a new US Census report. This trend isn’t something new and it certainly is not going to be resolved overnight. We [...]
Credit cards have been used as a lifeline and a way to live beyond one’s means in the United States for many years. Yet the current environment of deleveraging is hitting credit cards hard. The outstanding balance on credit card debt has reached a level last seen over a decade ago. This is positive since many were simply using credit cards as a method of spending money they did not have. [...]
Italy just announced its all-time record high general government debt load at EUR 1.973 trillion. What is perhaps most stunning, given all the talk of austerity, cutting back, reforms, and change is that the size of this debt is growing at an ever-increasing pace that is simply stunning. Pre-Euro (1999), Italy’s debt was growing at a rate of just less than EUR 2 billion per month; in the eight years [...]
The global economy is now addicted to debt. Once debt stops expanding, the economy shrivels. But expanding debt forever is unsustainable. Welcome to the endgame.
Regardless of whether you call it debt saturation or diminishing return on new debt, the notion that taking on more debt will magically enable us to “grow our way out of debt” is not supported by data. Correspondent David P. recently shared this chart of Total Credit [...]
The Global Market is being held together with the veneer of massive debt duct tape. The solution for much of the European Debt Crisiswas to simply add more debt to the current situation. Solve a debt problem with more debt in other words. All this does is delay the inevitable. The hope is that somehow GDP in these countries will grow fast enough to pay off existing debts but the Amount Of Debt Is [...]
Billionaire vulture investor Wilbur Ross told CNBC:
I think the greatest bubble that is about to burst is the 10-year and longer Treasury, because the idea that inflation is gone forever and for all time, and therefore these artificially low rates can last, is silly.
There is absolutely no reason to own long-term Treasury securities. Interest rates are heading up across the yield curve short-term rates and long-term rates.
When CNBC notices the problem, [...]
The typical consolidation that failed relied on 47 percent spending cuts and 53 percent tax increases.
The typical consolidation that succeeded consisted of 85 percent spending cuts and 15 percent tax increases.
The “most wildly successful” efforts by nations, as Brooks put it, went into tax cut territory: Finland in the late 1990s, pointed out by Biggs and Hassett as a model of successful consolidation, had 108 percent spending cuts along with modest tax cuts.
Regarding which [...]
December 18, 2011
The Fed’s third quarter audit data shows a total system debt of 355% and of GDP, in spite of so-called de-leveraging. It is down from the second quarter’s 375% of GDP, but up from 264% a dozen years ago. Financial sector borrowing fell almost 50% in the quarter but non-financial debt increased while financial debt fell – a push so to speak. Unfortunately most of the [...]
Intrinsic to any answer today must be a note that the context is Bernanke giving liquidity to banks ahead of dealing with these fundamental problems/questions. So we are lumbered with an extra consideration – what do you do now that banks HAVE vast pools of liquidity but that they will not/CANnot deploy?
1. Traditionally, it has been widely viewed that raising interest rates places pressure on inflation including on wage inflation. [...]
Uploaded by RTAmerica on Nov 25, 2011
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What’s the biggest impediment to Western economies, is it debt? Growth? Political leadership? We see the leaders of Germany, France and Italy pushing for a fiscal crackdown to solve the Eurozone crisis. As they push for fiscal union, is more Europe the problem or the solution? And in the US we see GOP hopefuls taking the [...]
From Dr. Edwin Vieira, constitutional lawyer and monetary expert:
If they were to void the current system as being unconstitutional, they would effectively blow apart the U.S. and global economy. But as they have no authority to even suggest an alternative system, they are faced with the reality that while they have the power to do great damage, they have no power to cushion the blow. And so, the Supreme Court [...]
For many commentators, gold is considered not only a constant store of value but, also, a barometer for the health of the global economic system and the currencies that pump through its veins.
For, John Embry, chief investment strategist at Sprott Asset Management, the current parabolic rise in prices, which have beat even his optimistic performance expectations this summer, is indicative of the unsustainable debt situation [...]
The period from 1953 to 2007 was hardly a desert. It is the post war normal of the US economy; it saw numerous recessions and a sustained period of high inflation in the 1970s, but overall robust real economic growth. Well, for financial sector debts to grow at their average rate over that period from today’s level, they’d have to rise by $2.4 trillion [...]
Marc Faber’s nickname is Dr Doom, and his investment letter is called the Gloom Boom Doom report. He sells advice about where to invest to wealthy people, companies and institutions. He is, in the lingo of the financial zoo, a bear. He’s bearish about Europe and bearish about China, and he thinks that gold is one of the safest places to put your money. His [...]
I think Rasputin has summed up everything right here:
Ras never thought debt could be so beautiful.
Rasputin – Sat, Sep 18, 2010 – 10:58 PM
This chart below (courtesy of Karl Denninger at The Market-Ticker: http://market-ticker.org) is actually appealing in its exponential growth and pleasing in its color scheme.
(Ras Conclusion): See? Runaway debt growth is a beautiful thing, not an ugly one. Also, [...]
1) Consumer, Corporate and Public sectors are ALL heavily in debt, a record level. Our standard of living must fall as a result. We will enjoy fewer options as debt service dictates our “must pays.” That robs us of essential flexibility, and reduces our options.
2) 23% of residential mortgages are underwater and projected to increase to 48% in 2011 per RealtyTrac. Housing affects us all, ie past, present and future. [...]
Frequent contributor Harun I. recently submitted a chart which may well be the “chart of the century”: exponential growth and depletion. The chart displays two lines: the blue line traces out exponential growth (for example, in demand for oil, deficit spending, etc.) while the lower lines traces out exponential depletion (for example, of oil reserves). The consequences of a “modest” 3% growth/depletion rate are striking and sobering. [...]
2011 Budget Request from President Obama
Table SÃ¢â‚¬â€œ13. Economic Assumptions (page 177)
Real GDP, percent change, year/year ………… 0.4
Interest on debt eats up more and more tax revenues too.
Pg 153 of budget (net interest)
However, the key is that tax revenue growth is always lower than Growth of Debt and [...]
Significant global imbalances remain Ã¢â‚¬â€œ indeed; the recent global financial crisis has served to exaggerate many of these imbalances. Of grave concern is the unsustainable Federal budget deficit, which may have morphed out of control, with no signs of government constraint over the near-term. The U.S. current account deficit remains at a high level, and will likely weigh on the dollar for years to come. Add to this the inflationary [...]