The Sovereign Debt Disaster

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Wherever we look at the world economy today, we see a wall of risk…and potential financial catastrophe. We see a large number of virtually bankrupt major sovereign states (US, UK, Spain, Italy, Greece, Japan and many more) teetering atop a financial system that is bankrupt, but is temporarily kept alive with phony valuations and unlimited money printing. Increasingly, therefore, investors will want to exchange this funny money for gold.

Governments like the US and the UK are committed to printing increasing amounts of worthless paper money in order to finance their growing deficits. The consequence of this rescue mission will be a hyperinflationary depression in many countries, due to many currencies becoming worthless.

The list of countries at risk of bankruptcy is increasing by the day. The acronym used to be PIGS (Portugal, Ireland, Greece and Spain). It is now PIIGSJUKUS and growing. The main contenders are currently: USA, UK, Japan, Spain, Italy, Greece, Ireland, France, Portugal, Baltic States, Eastern Europe and many more. On a proper accounting basis all of these countries are already bankrupt, but since many nations can either print money, like the US and the UK, or increase their already high borrowings, like Greece and the Baltic States, they have technically avoided bankruptcy.

The problem is not just the current debt levels of these nations, because the deficits in all the countries are rising. Tax revenues are collapsing at the same time, while the governments’ expenses for social charges are soaring. In the US for example the federal deficit in 2009 was $1.5 trillion (10.7% of GDP) and is forecast to stay around that level for many years. The plight of the US states is just as bad. Out of 50 states only four are expected to have a balanced budget in 2010.

It took almost 200 years for US Federal debt to reach $1 trillion, which it did in 1981. In 2009 the debt increased by $1.9 trillion in just that year to $12.4 trillion. In the next ten years the US debt is forecast to reach $25 trillion. And this doubling of the debt does not include any funds to continue propping up a bankrupt financial system. The forecast also assumes optimistic growth in GDP, which is extremely unlikely. Currently, US Federal debt is six times what it collects in tax revenue every year. With debt exploding and tax revenues collapsing, there is no chance that the debt can ever be repaid with normal money. Also, with debt out of control, interest rates will rise substantially to 10-20% per annum. Applying a 15% interest rate to a $25 trillion debt would give an annual interest bill of $3.75 trillion, which is the same size as this year’s ENTIRE budget.

another article of numerous stacks of articles that proves that the west is heading for the brink of ruin. it isnt a matter of if.. its a matter of when.. when i get a job, if i can find one, then im stocking up...

The Gubmn't is accepting online donations to help solve the debt problem. If you're unemployed and broke, I'm sure they'll accept your children's piggy bank money.

Pay.gov

Welcome to the United States Treasury's site for making donations to help reduce the public debt. If you would like to make a donation, please fill in the required fields and click the Submit Data button when completed. - Link

Let's see now; do I buy a couple Silver rounds with my next "extra" $40 , or contribute to Pelosi's new 200-seat "commuter" jet ?

Decisions

The final result will probably be socialism of some flavor or another. They almost certainly won't call it that, but that's what it will be. Or perhaps "national socialism" as literally construed. I expect a reboot of the economy with new currency or "credits" of some sort to be doled out to the masses, with a small elite (either governmental, large-scale-corporatist, and/or a mixture of both; doesn't really matter) at the center.

I long ago stopped believing that people act rationally; eventually I stopped believing that rule of law or principle means anything at all to 99% of the people. They just want their food and board and they will howl until they have it by hook or by crook; if this means a centralized command economy or microchips in every forehead, most people won't blink twice. They crowed and howled about the virtues of "free markets" for the last 30 years; now watch a 180-degree-turn from "four legs good two legs bad" to "four legs good two legs better" in the blink of an eye.

Those that will suffer the most will be anyone who played by the rules, anyone who acted rationally, any savers rather than debtors, any small business owners, any small-scale entrepreneurs, those who invested in gold, and so on. The "winners" will be the elite and the masses who will accept a scaled-down but more stable standard of living.


[edit on 5/2/10 by silent thunder]

The mathematical destiny of fiat money systems is "CRASH" ! Always has been always will be. The dumbing down that has gone on is epic and will catch hundreds of millions off guard. There will be a great die off. This may sound extreme to some but it is the only logical conclusion.

The best chance of surviving is to get self sufficient get out of the cities and have sustainable food water and shelter. Not a guarantee but hell of a lot better chance.

We are like maggots living off the dead carcass of the society we grew up in. It cannot sustain us much longer as it crumbles into the dust...

reply to post by hawkiye


A mass dieoff/chaos is possible, but I think before it comes to that, the more likely outcome is that they will reboot the system and just start everyone over on a lower standard of living with more controlled lives.

It seems logical and prudent to prepare for the worst and head for the hills, but I'm betting the masses will accept centralized, high-tech mediated mass-control and shoddy living standards. In such a situation, those who have prepared "prudently" will simply be cut down, ruby-ridge-style. There may be some sort of mass "culling" before the centralized control starts, but I doubt we'll see full-blown anarchy/collapse and a survivalism paradigm. The technology for mass control is almost in place and most people won't put up a fight.