(By Chris Hamilton)
By any objective measure Reserve Currencies — particularly the US dollar — are dying. The question most analysts get when discussing the reality of the US and world economic/financial situations is, if things are so dire, why doesn’t it feel like it? (***see dire links below ) If all the facts stated about $6 trillion annual (GAAP basis) US budget deficits or US government total debt and obligations in excess of $90 trillion are true, why does the system still “function”??? Social Security recipients receive checks, the military is still paid, the garbage gets picked up, and stores still have stocked shelves. Life seems hectic but generally “normal”. So, is there a problem at all and if so, when and how will it go from theoretical to reality?
US is Bankrupt: $89.5 Trillion in US Liabilities vs. $82 Trillion in Household Net Worth & The Gap is Growing. We Now Await the Nature of the Cramdown. – See more at: http://charlesbiderman.com/2014/08/04/us-is-bankrupt-89-5-trillion-in-us-liabilities-vs-82-trillion-in-household-net-worth-the-gap-is-growing-we-now-await-the-nature-of-the-cramdown/#sthash.RkY8CKFZ.dpufUS is Bankrupt: $89.5 Trillion in US Liabilities vs. $82 Trillion in Household Net Worth & The Gap is Growing. We Now Await the Nature of the Cramdown. – See more at: http://charlesbiderman.com/2014/08/04/us-is-bankrupt-89-5-trillion-in-us-liabilities-vs-82-trillion-in-household-net-worth-the-gap-is-growing-we-now-await-the-nature-of-the-cramdown/#sthash.RkY8CKFZ.dpuf
***US is Bankrupt: $89.5 Trillion in US Liabilities vs. $82 Trillion in Household Net Worth & The Gap is Growing. We Now Await the Nature of the Cramdown
***America Has Adopted The Sclerotic European / Japanese Model
***The Story of America’s Economic Illiteracy – Truth hidden in Plain Sight…Yet We Choose to be Blind?
Commit to about 5 to 10 minutes of reading and maybe we can have a very plausible answer.
A LITTLE BACKGROUND
Following WWII, a new monetary system for international commerce and finance was implemented. This agreement known as Bretton Woods (the location in New Jersey where the conference was held) gave the expected Allied victors the spoils and represented the World as of 1945.
CHIEF FEATURES OF THE BRETTON WOODS SYSTEM:
• An obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar
• The ability of the IMF (created by the Bretton Woods agreement along with many other current day acronyms) to bridge temporary imbalances of payments (IMF would loan money to nations in trouble with strings attached to ideally resolve these imbalances and keep the system functioning).
• Address the lack of cooperation among other countries and to prevent competitive devaluation of the currencies as well (avoid countries printing money to cheapen their exports and gain advantage in trading)
• To ensure the US did not abuse it’s privilege as the world’s de-facto currency, the US dollar would be freely convertible into gold (if the US printed an excess quantity of $’s, nations accumulating too many dollars from US trade/budget deficits could convert and retire these dollar’s into gold (gold representing a relatively fixed quantity and storage of value).
As they say, you can always judge a society by how they treat their weakest members. So I shudder to think of how future generations will judge our society. We’ve become a nation that discards our poor like they are trash, and anyone who doesn’t “fit in” is segregated from the herd.
The police are now fining homeless folks for any arbitrary offense they can think of, and city councils across the country are making it illegal to sleep in public. They’ve gone so far as to make it illegal to camp, or even sit or lay down in certain public areas. Worst of all, many cities are making it illegal, or prohibitively expensive to give food to the homeless. According to an interview from The Independent, with a former police chief involved in a charity dedicated to feeding the poor:
The homeless are an embarrassment for the town, said Arnold Abbott, a 90-year-old former police chief from Pennsylvania and director of Love Thy Neighbor, an organization that has been feeding homeless here for over 20 years. Five times the city has tried and failed in court to stop him serving meals each Wednesday on the beach beneath the tourist strip.
The town, he said, really wants the homeless to go away. “They would like to put them in a bus and send them to Miami or Palm Beach. It’s very close to ethnic cleansing. But they are not going to succeed.”
Thank God there are still some people willing to do the right thing, even if it means breaking the law.
In other cities, you now need a $500 permit from the health department to give away food, or perhaps you’ll have to spend $800 to rent the park every time you try to hand out food there. On the surface, it’s bad enough that they are making it so difficult to help out those in need, but when you take the homeless out of the equation, it starts to sound really asinine. To the city councils out there that are perpetuating these laws, are you really going to make it illegal for one consenting adult to buy a sandwich, and voluntarily give it away for free to another adult who wants it? When it’s phrased that way, doesn’t it just sound utterly contemptible and insane?
By Greg Hunter
August 4, 2014
Analyst/trader Gregory Mannarino says the recent Argentina bond default is a big deal and is a symptom of a much bigger global problem—debt. Mannarino explains, “I’ve been talking about the insurmountable debt problem for years now. It is the greatest threat to humankind—period. What really needs to be understood here is that it is not just a financial issue, but also a resource issue. We have been allowed through this mechanism of failing monetary system that pulls cash out of the future to acquire resources that we would not normally have. We have created an alternative universe.” Mannarino goes on to say, “Yes, Argentina is in default now, and we have at least 10 of 11 more that we know of. As an analyst, I look for common themes. What is the common theme here between all of these nations, including the United States of America? It’s very simple. It’s their debt to GDP ratio. Whenever you have a debt that exceeds your gross domestic product (GDP), the country begins a terminal decline. That’s it, period, the end.”
Think this economy can last? Think again, as Mannarino says, “We have all been hearing that the global debt is not sustainable. What does that mean that it is not sustainable? That means that we cannot continue this mechanism of pulling cash out of the future to live in this alternative universe. Mannarino says what makes this situation so “dangerous” is exponential leverage of derivative bets that are hidden in the system. Mannarino contends, “It’s in the quadrillions, and the thing about this is they are all off-the-books. No one knows what this number actually is when we are talking about derivatives.”
So, with the help of derivatives, can a big bond default, like Argentina, cause a daisy chain of default in the future? Mannarino says, “This is what we saw in 2008; but this time, it’s much, much worse because nothing was fixed back then. This issue with Argentina is going to trigger a credit default swap event. A credit default swap is an insurance policy that is purchased by another entity to insure the debt of another institution or, in this case, country. So, we just found out that the issue with Argentina is, in fact, going to trigger a credit default swap event. What that means is whatever debt is owed is the problem of another entity. And, if that entity can’t pay it back, it becomes the problem of another entity, and another entity, on and on. So, absolutely, boom, boom, boom, a cascade of events that will happen. This is not a maybe. We are going to watch this sweep the globe. We are going to see, at one point, an absolute failure and collapse of the financial system. 2008 was when the music stopped, and this is the terminal side effect. They are not done yet because they are going to do some more things to keep this whole system propped up. That’s really all they can do because the system is dead.”
The world added more debt to a debt problem in 2008, and Mannarino says, “That’s like pouring water on a drowning Man.”
Join Greg Hunter as he goes One-on-One with Gregory Mannarino of TradersChoice.net.