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Market Alarm As Us Fails To Control Biggest Debt In History

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http://www.telegraph.co.uk/finance/comment/liamhalligan/8196283/Market-alarm-as-US-fails-to-control-biggest-debt-in-history.html

Such a sharp rise in US benchmark market interest rates matters a lot – and it matters way beyond America. The US government is now servicing $13.8 trillion (£8.7 trilion) in declared liabilities – making it, by a long way, the world’s largest debtor. Around $414bn of US taxpayers’ money went on sovereign interest payments last year – around 4.5 times the budget of America’s Department of Education.

Debt service costs have reached such astronomical levels even though, over the past year and more, yields have been kept historically and artificially low by “quantitative easing (QE)” – in other words, Federal Reserve Chairman Ben Bernanke’s virtual printing press. Now borrowing costs are 28pc higher than a month ago, with the 10-year Treasury yield reaching 3.33pc last week, an already eye-watering debt service burden can only go up.

Few on this side of the Atlantic should feel smug. The eurozone’s ongoing sovereign debt debacle has pushed up Germany’s borrowing costs by 27pc over the last month – to 3.03pc. The market has judged that if Europe’s Teutonic powerhouse wants the single currency to survive, it will ultimately need to raise wads of cash to absorb the mess caused by other member states’ fiscal incontinence.

......

Lower taxes, and the certainty of lower taxes, may bolster business investment and growth. That’s the logic employed by those painting last week’s global yield spike in a positive light. Government borrowing costs rose in America and elsewhere, they say, as a re-bounding US economy is now drawing investors’ cash away from sovereign bonds and towards more productive uses.

The reality is, though, that the market is increasingly alarmed at the rate of increase of the US government’s already massive liabilities. America’s government debt is set to expand by a jaw-dropping 42pc over the next few years, reaching $19.6 trillion by 2015 according to Treasury Department estimates presented (amid very little fanfare) to Congress back in June. Since then, government spending has risen even more. So US debt service costs, like those of many other Western nations, are expanding rapidly in terms of both the volumes of sovereign instruments outstanding, and the yields on each bond.

The figures are just mind-boggling huge. Jefferson must be proud of what his political descendants have achieved.

It's hard to see how America can avoid the debt compound problem.

Thank god the US is the worlds reserve currency.

As the US is borrowing around $1.5tr a year currently nearly a 3rd of that is to merely pay the interest on the money already borrowed.

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None of this debt will ever be paid back legitimately, not in the US, not in the UK and not in half of Europe.

There is simply too much of it now, the tail isn't just wagging the dog, it's beating the dog to death.

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None of this debt will ever be paid back legitimately, not in the US, not in the UK and not in half of Europe.

There is simply too much of it now, the tail isn't just wagging the dog, it's beating the dog to death.

Printy printy * infinity * infinity +1

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http://www.telegraph.co.uk/finance/comment/liamhalligan/8196283/Market-alarm-as-US-fails-to-control-biggest-debt-in-history.html

It's hard to see how America can avoid the debt compound problem.

Thank god the US is the worlds reserve currency.

Thank god indeed. When the dollar finally collapses under the weight of all the debt it'll take every other sorry @rse fiat currency with it. Mountains of wealth will instantly be transferred from paper to metal.

GOD BLESS THE USA!!! :lol::lol::lol:

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None of this debt will ever be paid back legitimately, not in the US, not in the UK and not in half of Europe.

Sovereign debt is not meant to be paid back (but rather rolled forward forever) as it forms a large part of the monetary supply, that's simply how a debt based monetary system works.

So the issue isn't the debt but the cost of the debt. The US will have a problem when the cost of servicing the debt (interest payments) becomes to high to service with taxation. Japan is still able to cope simply because of the really low interest rate on it's debt.

This really shows why a debt based monetary system is inherently flawed and we will only get out of this mess by changing the monetary system itself.

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"Mountains of wealth will instantly be transferred from paper to metal."

Hmmmm .... I suspect the interests of everyone else are likely to outweigh the interests of a few self-righteous, hubristic gold bugs.

This isn't about interests, it's about reality.

For example, the majority of people gambling on a horse race will lose and they won't be happy about it, but that is that. However, by your logic, it seems that because the majority don't want to lose their horse race bet, it will be them that win and not the few individuals with the actual winning tickets.

I suggest the hubris belongs to those holding fiat currency and carrying on as normal with the blinkers on, expecting tomorrow to be the same as yesterday, as they blindly march off the debt cliff into oblivion.

Edited by General Congreve

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So what are the chances of sudden shock Black Wednesday style where the global economies are forced to raise interest rates rapidly and sharply?

I think Bernanke would need to be six feet under - not that I am wishing for that - before he allows IRs to rise or, more importantly, for there to be a change of tact.

He has bet his place in history on being right.

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So what are the chances of sudden shock Black Wednesday style where the global economies are forced to raise interest rates rapidly and sharply?

I think Bernanke would need to be six feet under - not that I am wishing for that - before he allows IRs to rise or, more importantly, for there to be a change of tact.

He has bet his place in history on being right.

But the bond markets are getting jittery, a bond sell off will push up interest rates (this is already happening and is in real danger of snowballing). There isn't a whole lot Bernanke could do, other than monetise all US debt, i.e. print trillions of dollars, which would be highly inflationary and cause the death of the dollar.

They do not have control of the situation. Reality will win in the end, you can't get something for nothing.

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But the bond markets are getting jittery, a bond sell off will push up interest rates (this is already happening and is in real danger of snowballing). There isn't a whole lot Bernanke could do, other than monetise all US debt, i.e. print trillions of dollars, which would be highly inflationary and cause the death of the dollar.

They do not have control of the situation. Reality will win in the end, you can't get something for nothing.

Driving up IRs for the bonds will or will not have an affect on central bank IRs? Bond rates have been going up for a couple of months now ever since Greece, and later Eire, kicked off. Those increase in rates paid on bonds have had no affect on what is happening in the 'retail' market.

It should but it hasn't which just shows the determination of the likes of King and Bernanke to inflate whilst keeping IRs to savers artifically low.

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http://www.telegraph.co.uk/finance/comment/liamhalligan/8196283/Market-alarm-as-US-fails-to-control-biggest-debt-in-history.html

The figures are just mind-boggling huge. Jefferson must be proud of what his political descendants have achieved.

It's hard to see how America can avoid the debt compound problem.

Thank god the US is the worlds reserve currency.

As the US is borrowing around $1.5tr a year currently nearly a 3rd of that is to merely pay the interest on the money already borrowed.

All this debt is really nothing new. If you look at our debt after world war 2 it was 250% of GDP which amounted to £21 Billion. We now borrow that on a monthly basis. As long as debt is issued in a currency controlled by the sovereign I don't see a long term problem. It can be inflated away / printed.

In short, inflation will be let rip over the next few decades and by 2050 we will all wonder what the fuss was about. Will anyone really be surprised if we are borrowing 1-2 trillion a month by 2050?

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Hmmmm .... I suspect the interests of everyone else are likely to outweigh the interests of a few self-righteous, hubristic gold bugs.

So do I. The interests of Russia, China etc. Both are buying gold/silver at an alarmingly high rate.

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All this debt is really nothing new. If you look at our debt after world war 2 it was 250% of GDP which amounted to £21 Billion. We now borrow that on a monthly basis. As long as debt is issued in a currency controlled by the sovereign I don't see a long term problem. It can be inflated away / printed.

In short, inflation will be let rip over the next few decades and by 2050 we will all wonder what the fuss was about. Will anyone really be surprised if we are borrowing 1-2 trillion a month by 2050?

I for one won't be surprised, and I also won't be surprised to see gold and silver at $5000/Oz and $100/Oz (respectively), although I think the time we'll see those figures will probably be more like 2015 than 2050.

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Driving up IRs for the bonds will or will not have an affect on central bank IRs? Bond rates have been going up for a couple of months now ever since Greece, and later Eire, kicked off. Those increase in rates paid on bonds have had no affect on what is happening in the 'retail' market.

It should but it hasn't which just shows the determination of the likes of King and Bernanke to inflate whilst keeping IRs to savers artifically low.

Actually rates tend to follow the base rate, that is the way the system works. Rigging the system won't keep on working when the bond market collapses. If banks have to pay a high base rate, they sure as hell can't pass on low rates to their debtors.

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All this debt is really nothing new. If you look at our debt after world war 2 it was 250% of GDP which amounted to £21 Billion. We now borrow that on a monthly basis. As long as debt is issued in a currency controlled by the sovereign I don't see a long term problem. It can be inflated away / printed.

In short, inflation will be let rip over the next few decades and by 2050 we will all wonder what the fuss was about. Will anyone really be surprised if we are borrowing 1-2 trillion a month by 2050?

Er we were fighting a war, the bond market would probably be quite forgiving in those circumstances, the borrowing only went on for the duration of the war and post war growth helped to bring down the debt to GDP ratio.

Perpetual debt has it's limits, if we don't have real productive economic growth it's game over. So far all what seems to be happening is the bankers appear to be creating ever more elaborate bits of paper which they claim has value but creates no real economic growth just ever larger numbers.

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"Mountains of wealth will instantly be transferred from paper to metal."

Hmmmm .... I suspect the interests of everyone else are likely to outweigh the interests of a few self-righteous, hubristic gold bugs.

If ever there was a classic example of cognitive dissonance.

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I bet that you are either too chicken to to try justify that statement or will fail if you do.

I have no need to justify it, however to make sweeping statements, to paraphrase "the powers that be won't let it happen", in the face of overwhelming evidence to the contrary, indeed overwhelming evidence that they are powerless to stop it, would suggest you have closed your eyes and are going la la la. Tell you what-you continue with your cash holding (I pressume that is the case) and I'll go on with gold, both physical and miners, and we'll let the market decide the prudence or otherwise of each route. You can come back and tell me who's right.

Edit: spellink

Edited by zebbedee

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Come on.

If you think, "the interests of everyone else," is synonymous with "the powers that be won't let it happen", you need to improve your English or your reading or both.

The cognitive dissonance seems to be between what you think I said and what I did say.

Gold's gone through the roof. We all know that. Congrats to anyone that rode that wave.

As for those of us who were surfing in a different bay, tant pis.

To decline to buy into the bubble at this stage of its inflation and to be of the view that gold will go through its cycle, falling in due course, just as it has risen, just as it did in the early eighties, seems to me a perfectly reasonable call.

The subtext that "fiat" money will collapse and there will be some return to some faux utopian gold standard seems rubbish to me because the gold standard has been tried in the past as much as possible and failed on each occasion.

As for your,

"You can come back and tell me who's right."

You patronising (probably insecure) git.

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Come on.

If you think, "the interests of everyone else," is synonymous with "the powers that be won't let it happen", you need to improve your English or your reading or both.

The cognitive dissonance seems to be between what you think I said and what I did say.

Gold's gone through the roof. We all know that. Congrats to anyone that rode that wave.

As for those of us who were surfing in a different bay, tant pis.

To decline to buy into the bubble at this stage of its inflation and to be of the view that gold will go through its cycle, falling in due course, just as it has risen, just as it did in the early eighties, seems to me a perfectly reasonable call.

The subtext that "fiat" money will collapse and there will be some return to some faux utopian gold standard seems rubbish to me because the gold standard has been tried in the past as much as possible and failed on each occasion.

As for your,

"You can come back and tell me who's right."

You patronising (probably insecure) git.

To decline to buy into the bubble at this stage of its inflation and to be of the view that gold will go through its cycle, falling in due course, just as it has risen, just as it did in the early eighties, seems to me a perfectly reasonable call.

Unless it is, rather than inflating, simply returning to its long term value?

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Unless it is, rather than inflating, simply returning to its long term value?

Indeed, who's got all the gold?

I think the paper dollar is on its way to collapse but that doesn’t mean the end of the United States or the United States power. What’s really, really interesting to me is that the United States is an awesome gold power. You know we never talk about it because nobody ever wants to talk about gold, I mean no one in an official capacity. But if you think of the world in terms of oil reserves, and people have done that a lot over the last thirty years. You know and the role of OPEC and so forth. You know you divide the world into those that produce oil, those who consume oil. An awful lot of concern has gone into the oil industry and the movement of oil around the world. Well, think of gold the same way. And very few people have ever done this. But when you start to think of the world in gold space instead of oil space, you very quickly realize that the United States is the Saudi Arabia of gold. We have over 8,000 tons. And that’s more than any other country. The euro system has 10,000 tons. These are metric tons, by the way. The euro system has 10,000 metric tons. But that’s a consortium of 16 members, 16 central banks, so it’s Spain and Italy and Germany and the Netherlands and a number of other countries. It’s not all on the books of the European Central Bank. In fact, relatively little is on the books of the ECB, most of it is in the national treasuries of those countries. But, collectively, if they wanted to act as a unit, under the one currency banner, the euro, they’ve got 10,000 tons, so they’re a gold power. Russia is desperately short of gold. China is short of gold. India, Brazil are kind of pathetic. Japan and the UK are kind of pathetic. None of these countries have anywhere near the gold that they need to support their money supply. So the US as we’re a military superpower, we’re also a gold superpower, we’re also one of the ten largest producing countries in the world, producing approximately 200 tons a year out of a total global output of a little over 2000 tons. So we’re producing almost 10% of the world’s output. So we’re a major producer, we’re a major hoarder of gold.

And, in addition to that, there is over 6000 tons of foreign official gold that is stored in the United States that we could always convert if we wanted to. If that gold is at the Federal Reserve Bank of New York, the United States could just secure it. We could send in a military convoy and move it to West Point or some secure US location and then just give the Europeans a receipt. So we could actually up our gold supply to over 14,000 tonnes very, very quickly. So we are a gold superpower.

In a way, the Fed could afford to trash the paper dollar, or at least experiment and risk trashing the paper dollar because if the paper dollar collapses, we could just go back to gold pretty easily. But the rest of the world can’t, especially if we take their gold.

excerpt form Jim Rickards talking here about a new gold backed USD$ again.

and before tfh gets thrown at me - JR is pretty mainstream (CNBC, Bloomberg, Newsnight et. al.), so a valid opinion, even if it is just an opinion nevertheless

his latest interview is also worth a listen

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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