Tag Archives: government debt

End of a global debt supercycle is way overdue

We could be facing the greatest global debt crisis in all of human history.

 

Never before have we seen such a level of debt saturation all over the planet, and pretty much everyone understands that this is going to end very, very badly at some point.  The only real question is when it will happen.  Many believe that the current global debt super cycle began when the Federal Reserve was established in 1913.  Central banks are designed to create debt, and since 1913 the U.S. national debt has gotten more than 6800 times larger.  But of course it is not just the United States that is in this sort of predicament.  At this point more than 99 percent of the population of the entire planet lives in a nation that has a debt-creating central bank, and as a result the whole world is drowning in debt. ( Debt levels all over the world have been rising for more than a hundred years!)

When people say that things are going to “get better” in 2017 and beyond, they are engaging in nothing more than wishful thinking.  The truth is that the only way we can even continue to maintain our current ridiculously high debt-fueled standard of living is to grow debt at a much faster pace than the economy is growing.  We may be able to do that for a brief period of time, but giant financial bubbles like this always end; we will not be an exception.

Barack Obama and his financial team understood what was happening, and they were able to keep us out of a horrifying economic depression by stealing more than nine trillion dollars from future generations of Americans and pumping that money into the U.S. economy.  As a result, the federal government is now 20 trillion dollars in debt, and that means that the eventual crash is going to be far, far worse than it would have been without Obama’s temporary “fix.”

Corporations and households have been going into absolutely enormous amounts of debt as well.  Corporate debt has approximately doubled since the last financial crisis, and U.S. consumers are now more than 12 trillion dollars in debt.

When you add all forms of debt together, America’s debt to GDP ratio is now about 352 percent.  The following illustration does a pretty good job of showing how absolutely insane that is

If your brother earns $100,000 in annual income and borrowed $10,000 on his credit card, he could consume $110,000 worth of stuff.  In this example, his debt to his personal GDP is just 10%.  But what if he could get more credit year after year and reached a point where his total debt reached $352,000 but his income remained the same.  His personal debt-to-GDP ratio would now be 352%.

If he could borrow at super low interest rates, maybe he could sustain the monthly loan payments. Maybe.  But how much more could he possibly borrow?  What lender would lend him more money?  And what if those low rates began to rise?  How much debt can his $100,000 income cover?  Essentially, he has reached the end of his own debt cycle.

The United States is certainly not alone in this regard.  When you look all over the industrialized world, you see similar triple digit debt to GDP figures.

When this current debt super cycle ultimately ends, it is going to create economic pain on a scale that will be unlike anything that we have ever seen before.  The following comes from King World News

That is the inevitable consequence of 100 years of credit expansion from virtually nothing to $250 trillion, plus global unfunded liabilities of roughly $500 trillion, plus derivatives of $1.5 quadrillion. This is a staggering total of $2.25 quadrillion. Therefore, the question is not what could go wrong since it is guaranteed that all these liabilities will implode at some point.  When they do, it will bring misery to the world of a magnitude that no one could ever imagine. It is of course very difficult to forecast the end of a major cycle, as this is unlikely to be a mere 100-year cycle but possibly a 2000-year cycle. It is also impossible to forecast how long the decline will take. Will it be gradual like the Dark Ages, which took 500 years after the fall of the Roman Empire? Or will the fall be much faster this time due to the implosion of the biggest credit bubble in world history? The latter is more likely, especially since the bubble will become a lot bigger before it implodes.

And there are certainly lots of signs that a global slowdown is already beginning.  For example, global trade growth has fallen below 2 percent for only the third time since the year 2000.  On each of the other occasions, we witnessed a horrible recession take place.

Of course much of the globe is already in the midst of a horrible economic crisis.  Brazil is in the middle of their worst recession ever, and people are literally starving in Venezuela.  A new round of debt problems has erupted in Europe, with Greece, Portugal and Italy being the latest flashpoints.

Just like in 2007, many are mocking the idea that the a major economic downturn is coming to the United States.  They believe that the ridiculously high stock market valuations of today can stick around indefinitely, and they are putting their faith in politicians.

But it won’t be too long before a new economic crisis begins in America, accompanied by unimagined levels of civil unrest.

Government debt, corporate debt and consumer debt have all been growing much, much faster than the overall economy.  How could that possibly be sustainable in the long-term?

The light at the end of the tunnel is really a massive oncoming, runaway freight train, and it will obliterate everything in its path.

 

[From an article published by The Economic Collapse Blog]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

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The bankruptcy of planet Earth: 24 nations are now facing a debt crisis…

Bankruptcy of planet Earth, illustrated...There has been so much attention on Greece in recent weeks, but the truth is that Greece represents only a very tiny fraction of an unprecedented global debt bomb which threatens to explode at any moment.

As you are about to see, there are 24 nations that are currently facing a full-blown debt crisis, and there are 14 more that are rapidly heading toward one.  Right now, the debt to GDP ratio for the entire planet is up to an all-time record high of 286 percent, and globally there is approximately 200 TRILLION dollars of debt on the books.  That breaks down to about $28,000 of debt for every man, woman and child on the entire planet.  And since close to half of the population of the world lives on less than 10 dollars a day, there is no way that all of this debt can ever be repaid.  The only “solution” under our current system is to kick the can down the road for as long as we can until this colossal debt pyramid finally collapses in upon itself.

As we are seeing in Greece, you can eventually accumulate so much debt that there is literally no way out.  The other European nations are attempting to find a way to give Greece a third bailout, but that is like paying one credit card with another credit card because virtually everyone in Europe is absolutely drowning in debt.

Even if some “permanent solution” could be crafted for Greece, that would only solve a very small fraction of the overall problem that we are facing.  The nations of the world have never been in this much debt before, and it gets worse with each passing day.

According to a new report from the Jubilee Debt Campaign, there are currently 24 countries in the world that are facing a full-blown debt crisis

■ Armenia

■ Belize

■ Costa Rica

■ Croatia

■ Cyprus

■ Dominican Republic

■ El Salvador

■ The Gambia

■ Greece

■ Grenada

■ Ireland

■ Jamaica

■ Lebanon

■ Macedonia

■ Marshall Islands

■ Montenegro

■ Portugal

■ Spain

■ Sri Lanka

■ St Vincent and the Grenadines

■ Tunisia

■ Ukraine

■ Sudan

■ Zimbabwe

And there are another 14 nations that are right on the verge of one…

■ Bhutan

■ Cape Verde

■ Dominica

■ Ethiopia

■ Ghana

■ Laos

■ Mauritania

■ Mongolia

■ Mozambique

■ Samoa

■ Sao Tome e Principe

■ Senegal

■ Tanzania

■ Uganda

So what should be done about this?

Should we have the “wealthy” countries bail all of them out?

Well, the truth is that the “wealthy” countries are some of the biggest debt offenders of all.  Just consider the United States.  Our national debt has more than doubled since 2007, and at this point it has gotten so large that it is mathematically impossible to pay it off.

Europe is in similar shape.  Members of the eurozone are trying to cobble together a “bailout package” for Greece, but the truth is that most of them will soon need bailouts too

All of those countries will come knocking asking for help at some point. The fact is that their Debt to GDP levels have soared since the EU nearly collapsed in 2012.

Spain’s Debt to GDP has risen from 69% to 98%. Italy’s Debt to GDP has risen from 116% to 132%. France’s has risen from 85% to 95%.

In addition to Spain, Italy and France, let us not forget Belgium (106 percent debt to GDP), Ireland (109 debt to GDP) and Portugal (130 debt to GDP).

Once all of these dominoes start falling, the consequences for our massively overleveraged global financial system will be absolutely catastrophic

Spain has over $1.0 trillion in debt outstanding… and Italy has €2.6 trillion. These bonds are backstopping tens of trillions of Euros’ worth of derivatives trades. A haircut or debt forgiveness for them would trigger systemic failure in Europe.

EU banks as a whole are leveraged at 26-to-1. At these leverage levels, even a 4% drop in asset prices wipes out ALL of your capital. And any haircut of Greek, Spanish, Italian and French debt would be a lot more than 4%.

Things in Asia look quite ominous as well.

According to Bloomberg, debt levels in China have risen to levels never recorded before…

While China’s economic expansion beat analysts’ forecasts in the second quarter, the country’s debt levels increased at an even faster pace.

Outstanding loans for companies and households stood at a record 207 percent of gross domestic product at the end of June, up from 125 percent in 2008, data compiled by Bloomberg show.

And remember, that doesn’t even include government debt.  When you throw all forms of debt into the mix, the overall debt to GDP number for China is rapidly approaching 300 percent.

In Japan, things are even worse.  The government debt to GDP ratio in Japan is now up to an astounding 230 percent.  That number has gotten so high that it is hard to believe that it could possibly be true.  At some point an implosion is coming in Japan which is going to shock the world.

Of course the same thing could be said about the entire planet.  Yes, national governments and central banks have been attempting to kick the can down the road for as long as possible, but everyone knows that this is not going to end well.

And when things do really start falling apart, it will be unlike anything that we have ever seen before.  Just consider what Egon von Greyerz recently told King World News

Eric, there are now more problem areas in the world, rather than stable situations. No major nation in the West can repay its debts. The same is true for Japan and most of the emerging markets. Europe is a failed experiment for socialism and deficit spending. China is a massive bubble, in terms of its stock markets, property markets and shadow banking system. Japan is also a basket case and the U.S. is the most indebted country in the world and has lived above its means for over 50 years.

So we will see twin $200 trillion debt and $1.5 quadrillion derivatives implosions. That will lead to the most historic wealth destruction ever in global stock, with bond and property markets declining at least 75 – 95 percent. World trade will also contract dramatically and we will see massive hardship across the globe.

How bad will things ultimately get once this global debt crisis finally spins totally out of control?

 

[by Michael Snyder, writing for The Economic Collapse Blog]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

 

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The same people who said “sign up or pay a fine” when they brought you their wonderful Obamacare program are now insisting they should control your Internet, too…

If you like your Internet, you can keep your Internet. Sounds uncomfortably familiar…

FCC Chairman Wheeler would only release a four-page summary of the plan. Under the guise of something dubiously called “net neutrality,” Barack Obama’s FCC is promising to use its heavy hand to “regulate” the Internet so that its use is “fair.”

We’re being told not to worry… nothing in the secret 332-page plan should be a cause for alarm and if you like your Internet, you can keep your Internet.

Fortunately, FCC Commissioner Ajit Pai has actually seen the 332-page edict and we’ll let his warning speak for itself:

First, President Obama’s plan marks a monumental shift toward government control of the Internet. It gives the FCC the power to micromanage virtually every aspect of how the Internet works. It’s an overreach that will let a Washington bureaucracy, and not the American people, decide the future of the online world.

       Second, President Obama’s plan to regulate the Internet will increase consumers’ monthly broadband bills. The plan explicitly opens the door to billions of dollars in new taxes on broadband. Indeed, states have already begun discussions on how they will spend the extra money.

       Third, President Obama’s plan to regulate the Internet will mean slower broadband for American consumers. The plan contains a host of new regulations that will reduce investment in broadband networks. That means slower Internet speeds.

       Fourth, President Obama’s plan to regulate the Internet will hurt competition and innovation and move us toward a broadband monopoly. The plan saddles small, independent businesses and entrepreneurs with heavy-handed regulations that will push them out of the market. As a result, Americans will have fewer broadband choices. This is no accident. Title II was designed to regulate a monopoly. If we impose that model on a vibrant broadband marketplace, a highly regulated monopoly is what we’ll get. We shouldn’t bring Ma Bell back to life in this dynamic, digital age.

       Fifth, President Obama’s plan to regulate the Internet is an unlawful power grab. Courts have twice thrown out the FCC’s attempts at Internet regulation. There’s no reason to think that the third time will be the charm. Even a cursory look at the plan reveals glaring legal flaws that are sure to mire the agency in the muck of litigation for a long, long time.

And sixth, the American people are being misled about what is in Obama’s plan to regulate the Internet. The rollout earlier in the week was obviously intended to downplay the plan’s massive intrusion into the Internet economy.

You read that right. New taxes… less choice… slower Internet speeds…and that’s just for starters.  Obama’s entire philosophy about government — because that’s all he’s ever done, is work at a government job — is very simple. In a nutshell, it’s this: “Government always knows best…and when I’m in charge of the government, I always know best.”

Socialism For The Internet

That’s what Seton Motley, the president of Less Government and an expert on the subject, calls it.  Motley adds: “It’s an assault on the industry to effect an ideological outcome” so “the government will be able to pick winners and losers.”

       Washington Times columnist and syndicated radio talk show host Tammy Bruce goes a step further and claims: “The Internet must be killed because it dares to keep turning on the light in a room that the left wants to remain dark.”   Bruce goes on: “This would be done to make the Internet more ‘fair,’ of course. But the truth of the matter is it’s an excuse to essentially nationalize the Internet. The moment that’s accepted, all bets are off….”

       Senator John Thune says: “It is a power grab for the federal government by the chairman of a supposedly independent agency who finally succumbed to the bullying tactics of political activists and the president.”

       But radio talk show host Rush Limbaugh may have said it best: “[D]o you want the people who gave you Obamacare running your Internet service? Do you want them in charge of what you can get and when you can get it and how much it’s gonna cost you?”

[from PATRIOT UPDATE]

 

NORM ‘n’ AL Note:  If you use the Internet, you already know how expensive it can be NOW.  The same liar who told you that his new healthcare plan was going to “save the average family $2500 a year” wants you to believe he has your best interests at heart as he takes over the Internet.  Once the US government controls the Internet, do you think it will possibly get cheaper? And better? And faster? Not a chance! As painful as it is to say, the US government does not know how to get out of its own way, even when it’s NOT lying!  So far, everything Obama has touched has gotten worse.  Huge budget deficits. The military situation in the Middle East. Astronomical increases to federal debt…which American citizens are legally responsible for paying. A healthcare program that individuals and businesses all hate because it takes away everyone’s ability to choose, and it costs lots more, not less. Obamacare was presented — sold — with malice and with lies.  Deliberate lies. We were just too stupid to be told the truth, remember? And you think that same White House is going to tell you the truth now about its plan to control the Internet? You don’t think there is probably a very good reason that Obama and his FCC have not released the text of his takeover plan?  Obamacare was all about controlling US citizens by controlling their health care options.  The Internet takeover plan is just more of the same.

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

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Obama legacy likely to be huge US financial collapse…

Just before Obama began his first term, and before the Financial Crisis of 2008, the national debt represented 62 cents of every dollar of this nation’s Gross Domestic Product, or GDP.

Simply put, GDP is the total amount of goods and services produced by a country. If you looked at a country like a business, their GDP would be their gross sales.

Last year – for the first time ever – the national debt exceeded the U.S. GDP.

This means that we, as a nation, owe more than we produce.

We are now part of a very “unique” group of countries in the world that have a debt-to-GDP ratio greater than 1. We now rank number 6, right behind Ireland, Portugal, Italy, Greece and Japan.

This is NOT a list the most prosperous nation on earth should be on.

US heading to third-world financial status

What is even more troubling is not only the size of the debt but how fast it’s been growing compared to the economy, and that is what’s keeping lots of us up at night.

If the economy grew faster than the rate the government borrowed money… the debt wouldn’t be as much of a problem.

But we are now on an unsustainable path. Under the ‘leadership’ of Barack Obama, our deficit is growing at eight to ten percent per year while the economy is growing at only two to three percent per year.  How is this economically sustainable?

We are now at the tipping point… when government debt is greater than its ability to repay that debt.

The next step in this debt disaster is even more terrifying.

That’s because the cost of paying the interest on this debt has become astronomical. In order to keep current on our interest payments right now…the cost is more than $415 billion!

This amount — $415 billion — is almost as much as the government spends on Medicare…and it’s the same percentage of the U.S. budget that is spent on education.

So we’re spending just as much to educate the nation’s children as we are simply to maintain our debt at its current level.

But here’s the dangerous part:

For the past few years, the Fed has maintained a near-zero interest rate policy…and for good reason: The U.S. currently pays an interest rate of just 2.4% on its $17.6 trillion in debt.

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

In other words, a simple 1% increase in the interest rate we have to pay on our debt would mean the total cost would climb to more than $600 billion – almost as much as the entire U.S. defense budget!

So far, the Fed has been able to “manage” the cost of this debt by keeping interest rates low.

But the Fed could have to raise interest rates – and soon – in order to help the U.S. economy avoid a crippling inflation that would resemble the 1970s or early ‘80s.

Or – even worse – the decision could be out of the Fed’s hands entirely…

Here’s where the situation goes from disappointing… to dire. Why? Because the United States is no longer in control of the interest rate it pays on its debt.

That’s because foreign investors now own a whopping 48% of U.S. debt…up from just 19% back in 1990.

US Debt Held by Foreigners

In other words – we’re now at the mercy of China and Japan – the two largest holders of U.S. debt.

If either of those nations demand higher interest rates…the U.S. will be forced to comply. And – as I just showed you…the impact on the U.S. budget will be devastating.

If rates go up by 1% — where will we get the more than $170 billion needed to finance a 1% rise in rates… the $255 billion needed to finance a 1.5% rise… or the $340 billion needed to finance a 2% increase?

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

We don’t have the money – that’s the point. So government spending will have to be cut…in a big way.

American citizens got a small taste of spending cuts when Obama shut down government services during the first two weeks of October 2013:

800,000 federal employees were furloughed 1.3 million were required to work without pay Government contractors such as United Technologies were preparing to lay off 2,000 workers, Lockheed Martin, 3,000.

Shelters for domestic abuse victims across America had trouble paying their bills and closed down.

More than 19,000 low income school children lost access to programs that provides nutritious meals and medical screening.

Even our nation’s brave heroes — individuals who fought for our freedom in Vietnam, Korea… even World War II — were denied access to the national memorials erected in honor of their fallen comrades.

Simply put — it was sickening to watch.

But it also shows you that if Obama and our government are willing to stoop so low as to treat the men and women who have protected our freedom so poorly during a short-term squabble over money…

They’ll do anything when a real crisis strikes.

The barricades put up around the World War II Memorial in Washington have become a symbol held up by both Democrats and Republicans as an example of what’s wrong with Washington.

If millions of Americans were impacted by the last, brief government shutdown…

How long would it take before there would be chaos and riots in our cities in the event of more drastic – and more prolonged – spending cuts?

Before looting and gangs roam the streets of our major cities?

The bottom line, folks, is this: Our beloved USA is no longer in control of its own destiny. Our future can easily be controlled by Russia and China…and these countries are already well on their way toward dictating that future.

[from a report prepared by Stealth Stocks Online]
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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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Unsustainable numbers: The entire world is running a huge pyramid scheme…

The numbers that you are about to see are likely to shock you.

They prove that the global financial Ponzi scheme is far more extensive than most people would ever dare to imagine.  As you will see below, the total amount of debt in the world is now more than three times greater than global GDP.  In other words, you could take every single good and service produced on the entire planet this year, next year and the year after that and it still would not be enough to pay off all the debt.

These numbers should shock all of us. Our bankers have burned us and buried us.

But even that number pales in comparison to the exposure that big global banks have to derivatives contracts.  It is hard to put into words how reckless they have been.  At the low end of the estimates, the total exposure that global banks have to derivatives contracts is 710 trillion dollars.  That is an amount of money that is almost unimaginable.  And the reality of the matter is that there is really not all that much actual “money” in circulation today.

In fact, as you will read about below, there is only a little more than a trillion dollars of U.S. currency (paper money and coin) in existence.  If we all went out and tried to close our bank accounts and investment portfolios all at once, that would create a major league crisis.  The truth is that our financial system is little more than a giant pyramid scheme based on debt and paper promises.  It is literally a miracle that it has survived for so long without collapsing already.

When Americans think about the financial crisis that we are facing, the largest number that they usually can think of is the size of the U.S. national debt.  And at over 17 trillion dollars, it truly is massive.  But it is actually the 2nd-smallest number on the list below.  The following 12 numbers about the global financial Ponzi scheme are real….

$1,280,000,000,000 – Most people are really surprised when they hear this number.  Right now, there is only 1.28 trillion dollars worth of U.S. currency floating around out there.

$17,555,165,805,212.27 – This is the size of the U.S. national debt.  It has grown by more than 10 trillion dollars over the past ten years.

$32,000,000,000,000 – This is the total amount of money that the global elite have stashed in offshore banks (that we know about).

$48,611,684,000,000 – This is the total exposure that Goldman Sachs has to derivatives contracts.

$59,398,590,000,000 – This is the total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.  40 years ago, this number was just a little bit above 2 trillion dollars.

$70,088,625,000,000 – This is the total exposure that JPMorgan Chase has to derivatives contracts.

$71,830,000,000,000 – This is the approximate size of the GDP of the entire world.

$75,000,000,000,000 – This is approximately the total exposure that German banking giant Deutsche Bank has to derivatives contracts.

$100,000,000,000,000 – This is the total amount of government debt in the entire world.  This amount has grown by $30 trillion just since mid-2007.

$223,300,000,000,000 – This is the approximate size of the total amount of debt in the entire world.

$236,637,271,000,000 – According to the U.S. government, this is the total exposure that the top 25 banks in the United States have to derivatives contracts.  But those banks only have total assets of about 9.4 trillion dollars combined.  In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 25 to 1.

$710,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives contracts generally fall within this range.  At the high end of the range, the ratio of derivatives exposure to global GDP is about 21 to 1.

Most people tend to assume that the “authorities” have fixed whatever caused the financial world to almost end back in 2008, but that is not the case at all.

In fact, the total amount of government debt around the globe has grown by about 40 percent since then, and the “too big to fail banks” have collectively gotten 37 percent larger since then.

Our “authorities” didn’t fix anything.  All they did was reinflate the bubble and kick the can down the road for a little while.

I don’t know how anyone can take an honest look at these numbers and not come to the conclusion that this pyramid scheme is completely and totally unsustainable.

How much debt can the global financial system take on before it utterly collapses?

How recklessly can the big banks behave before the house of cards that they have constructed implodes beneath them?

For the moment, everything seems fine.  Stock markets around the world have been setting record highs and credit is flowing like wine.

But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.

NORM ‘n’ AL Note: Terms like “asset protection” and “the gold standard” mean absolutely nothing in the face of such tremendously large obligations as we see above. When the top 25 banks in the US, with a combined asset value of only $9.4 trillion, can allow themselves to be exposed to more than $236 trillion of obligations, then we really have no hope of ever seeing financial daylight again. This truly sounds like the patients are in charge at the mental hospital, does it not?

[by Michael Snyder, writing for THE ECONOMIC COLLAPSE Blog]

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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