The Bankruptcy of the United States is now Certain.

[Volitzer Profile]

The Bankruptcy of the United States is now Certain.

http://www.prisonplanet.com/the-bankrup ... rtain.html

Porter Stansberry
Silverbearcafe
Thursday, February 4th, 2010

It’s one of those numbers that’s so unbelievable you have to actually think about it for a while… Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that’s not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That’s an amount equal to nearly 30% of our entire GDP. And we’re the world’s biggest economy. Where will the money come from?

How did we end up with so much short-term debt? Like most entities that have far too much debt – whether subprime borrowers, GM, Fannie, or GE – the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then “rolling over” the loans when they come due. As they say on Wall Street, “a rolling debt collects no moss.” What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt… at ever shorter durations… at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that’s when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.

When governments go bankrupt it’s called “a default.” Currency speculators figured out how to accurately predict when a country would default. Two well-known economists – Alan Greenspan and Pablo Guidotti – published the secret formula in a 1999 academic paper. That’s why the formula is called the Greenspan-Guidotti rule. The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world’s largest money management firm, PIMCO, explains the rule this way: “The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support.”

The Bankruptcy of the United States is Now Certain 070110banner

The principle behind the rule is simple. If you can’t pay off all of your foreign debts in the next 12 months, you’re a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

So how does America rank on the Greenspan-Guidotti scale? It’s a guaranteed default. The U.S. holds gold, oil, and foreign currency in reserve. The U.S. has 8,133.5 metric tonnes of gold (it is the world’s largest holder). That’s 16,267,000 pounds. At current dollar values, it’s worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that’s roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether… that’s around $500 billion of reserves. Our short-term foreign debts are far bigger.

According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we’ve been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months – an amount far larger than our reserves.

Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months.

So… where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we’re still going to come up nearly $3 trillion short. That’s an annual funding requirement equal to roughly 40% of GDP. Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or the Russian central bank, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves.

So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet.

One thing they’re not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None own even 1% of their total reserves in gold.

I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry’s Investment Advisory, which we published last Friday. Coincidentally, the New York Times repeated our warnings – nearly word for word – in its paper today. (They didn’t mention Greenspan-Guidotti, however… It’s a real secret of international speculators.)

[Lighthouse Profile]

The whole world is in debt with the bankster families, check out the history of banks to understand how they create money out of nothing and then profit from the interests on these loans, they earn money for nothing, literally (great explanation in "the Gods of Eden" from William Bramley).

The only solution to this crisis is global debt forgiveness and the institution of a new asset based monetary system. Several initiatives are underway, and announcement of this is imminent

[Cricketine Profile]

The whole world is in debt with the bankster families, check out the history of banks to understand how they create money out of nothing and then profit from the interests on these loans, they earn money for nothing, literally (great explanation in "the Gods of Eden" from William Bramley).

The only solution to this crisis is global debt forgiveness and the institution of a new asset based monetary system. Several initiatives are underway, and announcement of this is imminent

No shit! As if any of this money will ever be repaid....by the taxpayers that is. Ridiculous amounts of money and a load of crap. I'm mad now. Grrrr

[Lighthouse Profile]

No shit! As if any of this money will ever be repaid....by the taxpayers that is. Ridiculous amounts of money and a load of crap. I'm mad now. Grrrr

Absolutely, the taxpayers repay these loans, and the loans themselves will NEVER be able to be repaid, that has always been the objective of the banksters !!!

The situation is so out of control that for a lot countries it has even become nearly impossible to even pay the INTEREST on the loans (Greece, Spain, Portugal, Belgium and even the USA !), this is the so called sovereign debt default that is looming over our heads.

After individual bankruptcies, corporate bankruptcies we are now talking about the bankruptcies of entire countries, think of what that will do to the value of our currencies...
Back to the value of the paper it is printed on !!!

[Ridee Profile Website]

this is the last monetary system you will ever see in the face of this earth
it is obselite and completely unnecessary for a long time now .

go view zeitgeist addendum in order to see why, and take a peak on the alternatives .

[Dtnelis Profile]

i actually cant wait till they get rid of it.

[Crunchy Profile Website]

go view zeitgeist addendum in order to see why, and take a peak on the alternatives .

hmm you really think the resourced based economy is the answer ?
and to let the world be ruled by a computer ? (who programs it huh ? )
how about if we dont want to go along with that idea ?
they say we will reeducate you ...... and we all know what that really means

you are being deceived. stand back and look at the whole picture .... its all part of the same nwo program.

[jetxvii]

go view zeitgeist addendum in order to see why, and take a peak on the alternatives .

hmm you really think the resourced based economy is the answer ?
and to let the world be ruled by a computer ? (who programs it huh ? )
how about if we dont want to go along with that idea ?
they say we will reeducate you ...... and we all know what that really means

you are being deceived. stand back and look at the whole picture .... its all part of the same nwo program.

I know it's hard to understand, putting the robots aside a resource based economy would potentially work better than a monetary society.

take away the tool of evil and you get equality through having to do your part.

I don't know I'm high leave me alone.

[Dstarmg123 Profile]

i actually cant wait till they get rid of it.

good luck with that, lol.

[Illuminated Profile]

resource based economy , hmmmm
your organs & tissues are 'resources' so's your labor.


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