Real Wealth #255 02/04/2010
$112 Trillion Federal Debt, Europe Meltding Down and the Threat of a Complete Monetary Collapse
Dear Gold & Energy Advisor Subscribers,
President Obama and his economic gurus have discovered US$20 billion in spending cuts that can be made in 2011 which is a cruel joke, because initial reports in the media indicate his budget for 2011 will be a towering $3.8 trillion and will generate a $1.6 trillion, deficit -- much worse than I have been warning about in past issues and updates of the Gold & Energy Advisor.
Between the pending increase in the national debt and the de facto nationalization of Fannie Mae and Freddie Mac, the total federal debt is now close to $18 trillion.
This means, of course, that we will exceed $20 trillion in National Debt next year -- even before we consider the Federal Government’s financial obligation to cover Medicare that totaled to $57.3 trillion last year -- and appears conservatively to be set to increase by an additional $2+ trillion a year, over the next ten years.
This means in the next 10 years, the Federal Debt will spiral upwards to $112 Trillion - even assuming the current Federal Reserve’s target interest rates remain between zero and one quarter of one percent.
If $112 Trillion in Federal Debt sounds like a worrisome number, it should. The situation is much worse than even this dire towering number. The projection assumes no interest rate increases, which would only further compound the debt. But there's also another huge factor.
The credit and banking crises that hit Wall Street and the world's financial markets LITERALLY emasculated companies in the business of insuring the bond debt of state and local governments. MBIA for example, which traded for $76.07 on
This should give investors in any equity, bond or real estate investments VERY serious pause. The debt obligations tower when compared to the Gross Domestic Product of the
We know 2010 and 2011 are going to be rough revenue collection years for state and local governments. Given the still mounting foreclosure and REAL unemployment rate, big industrial states like California, Florida, Michigan, New York, New Jersey and Illinois are almost certainly going to need more money from the Federal Government to maintain services, much less fund bond issues.
Michael E. Lewitt of The HCM Market Letter (one of a handful of market intellegence letters I read) calls President Obama's 2011 budget ....
"A case study of how to bankrupt a nation"
This is exactly why we're seeing the emergence of the Tea Party movement. The mounting debt much catapulted into existence by decades of fraud on Wall Street and in
I often tell investors, reporters and contemporary economists that the
The last 8 plus years have been a case study of how to bankrupt a country, one that mirrors scores of governments that fill the trash bin of history --since the collapse of the Roman Empire. It’s ironic that despite his warning of understanding how to engineer the collapse of the greatest economy in world history, Osama bin Laden wasn't taken seriously by our government.
My greatest fear has not been inflation, but instead the outright destruction of the fiat money system, precisely because the collective net debt of the
The higher the debt grows, the higher the risk of rising interest rates or currency devaluations. I took no pleasure in seeing
Today as I write this issue of Real Wealth, the U.S. Stock Market is being hammered by concerns of higher than expected unemployment numbers and fears over the sovereign debt in
The financial markets are toxic, literally from one end of the planet to the other. Yet, less than 1 percent of all global funds under management are invested in gold. Most investment advisors from
The day of reckoning may be months, even a few years away, but I can tell you it’s coming; and when it does, it will make October of 2008 and March of 2009 look like minor bumps in the road.
When the collapse of the U.S. Dollar finally takes place, your life insurance, 401K, IRA savings invested in T-Bills, Equities, and Annuities will be all but worthless. Those of us relying on Social Security and Medicare will be left abandoned.
The next bailout Social Security
Just today The Congressional Budget Office announces for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, another taxpayer bailout.
This year's Social Security cash shortfall is a watershed event. Until this year, Social Security has been billed by the politicians and beurcrats in
Social Security currently provides more than half the income for a majority of retirees.
The social implications of a collpase of the fiat money system, the U.S. Dollar and meltdown of entitlement programs are VERY important.
Many governments will fall, collapse, and vanish in the next few years.
They will first give way to opposing political parties, then as economic system continues to decline we will seee jobless, desperate people riotin major cities around the world. Economically driven wars will grow in frequency; then we may well face the rise of a fascist and socialist government in many places around the world that each suspends many human rights taken for granted under the guise of necessity of restoring law and order.
In the days and weeks ahead, as the reality of the failure of the economic boom and bust cycle we have lived with since the industrial revolution becomes evident, you will look back on my begging you to swap at least 15% and as much as 25% of your investments and net worth to gold and platinum as prophetic.
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