Page Nineteen
Firstly, I have to apologise as the article I am quoting for today's blog is not online but from a print copy. So I will refer you to P.19 of the Australian Financial Review 12-6-09. Some quotes in context:
"America's fiscal obligations exceed any realistic prospect of it restoring its financial well being"
"(America) is for all intents and purposes, heading into a ditch financially"
On its deficits.. "This is not sustainable without consequences, including the risk of default on America's debt obligations and the collapse of the US dollar".
What articles like this often fail to do is appreciate the reverse of the implied argument. The implied argument is that the US must rapidly curtail its spending. In fact the reality is the opposite, it cannot. The consequences are precisely as the article states...debt default and currency collapse. Both of which are imminent in the medium term.
The consequences for the world of the collapse of the US dollar and a default from an economy that represents over 20% of global gross product is unparalleled. It marks a turning point in the future of the world, and the beginning of the decline of the English speaking cultures.
"America's fiscal obligations exceed any realistic prospect of it restoring its financial well being"
"(America) is for all intents and purposes, heading into a ditch financially"
On its deficits.. "This is not sustainable without consequences, including the risk of default on America's debt obligations and the collapse of the US dollar".
What articles like this often fail to do is appreciate the reverse of the implied argument. The implied argument is that the US must rapidly curtail its spending. In fact the reality is the opposite, it cannot. The consequences are precisely as the article states...debt default and currency collapse. Both of which are imminent in the medium term.
The consequences for the world of the collapse of the US dollar and a default from an economy that represents over 20% of global gross product is unparalleled. It marks a turning point in the future of the world, and the beginning of the decline of the English speaking cultures.
posted by Peter at 11:09 am
2 Comments:
http://www.bloomberg.com/apps/news?pid=20601213&sid=ahLaaXr3qinM
More early indications of the inevitable rise in global interest rates.
The US will be looking at multi TRILLION $ deficits, for some time, which is a massive increase.
The standard areas they have gone to in the recent past have been China, Japan and some of the major US financial institutions, such as Banks, Insurers & Pension Funds.
All of these have been hit by the current downturn and are likely to reduce, not increase their support, as the basics continue to act as a Boa Constrictor, strangling the life out of the Global economy.
The second & only other avenue for the US, is for the FED to moneterise their debt, in other words to JUST PRINT MORE MONEY.
Zimbabwe & the Weimar Republic may ring a bell?
There would seem to be a few likely outcomes -
1) The US prints, prints, prints & then deliberately & substantially devalues its currency.
2) The US prints, prints, prints & then defaults on its Debt.
3) Other countries, such as China & Japan stump up with Triilions of $'s to support the US recovery, at a cost to their own economies. Options 1 &/or 2, will still then be activated.
All of which means, greater inflation (of some items, not all), weaker currencies and a prolonged economic downturn.
This event is only just starting, it has a long way to go and it will eventually be the single greatest economic downturn in history.
Why, because of the basic causes Population & Oil, irresistable forces & immoveable objects.
PS - There is much more going on here than just the US deficit & the GFC!
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