T-Minus 30 Days Until
The US Begins Defaulting
http://albertpeia.com/americadefaulting.htm
‘We’ve now have just a little
over 30 days until US breaches its debt ceiling.
We would have already done so,
except Treasury Secretary Tim Geithner borrowed some $200 billion from
emergency funds to buy a few weeks’ time (announcing that he’d be leaving his
post before the actual ceiling was breached).
The “solutions” to the debt
ceiling discussions range from outright insane ($1 trillion coins) to just
staggeringly irresponsible (just get rid of any oversight and grow the debt
without restriction).
Let us consider the facts.
The only reason the US is even
having these discussions is because we’ve added $1+ trillion in debt to our balance
sheet every year since 2008. The reason we were able to get away with this was
because Congress hasn’t even implemented a budget since that time. Indeed, the
last time a budget was even proposed (by President Obama in that case) it was
rejected 97-0.
Let’s say a US family spent all
of its savings and income and so began using credit cards to fund its
purchases. Then, instead of implementing reforms and a budget, these folks
decide to abandon any kind of tracking of their expenses and start spending even
more. Eventually this family would begin to stop paying its bills.
What would you tell these folks
if their proposed solution to this situation was to stop opening their mail?
At the core of this entire
situation is a total lack of financial discipline. Indeed, at this point, the
only thing the political class in the developed world seems to pay attention to
is the bond markets: only when their bonds collapse and interest rates spike is
there any sense of urgency to do anything (with massive debt loads, any
increase in interest rates means hundreds of billions of dollars in more
interest expenses).
On that note, the US 30-year
Treasury appears to just have taken out its trendline:
Bear in mind, the US Federal
Reserve has been the primary buyer of US debt. So if the US bond market begins
to collapse at a time when the Fed is already buying this much, there isn’t a
whole lot the Fed can do to fix the situation (other than just buy more… which
inevitably leads to a debt implosion).
This situation has the potential
to get very ugly. Remember the impact the failed debt ceiling talks had on the
markets in July 2011?
At that time, the only thing
that pulled the market back from the edge was the Fed’s announcement of QE 2.
But the Fed has already just announced both QE 3 and QE 4. So this option wont
be around to fix the fallout if the US breaches its debt ceiling again now.
This is why, smart investors are
already taking advantage of the lull in the markets to position themselves
accordingly. While everyone else continues to believe the fairytale story spun
by the political class and mainstream media, our Private
Wealth Advisory
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subscribers have already been warned of these issues and are taking action
(just as they did in early 2008 when others were bullish, or in 2010 when the
EU crisis first began to take off).
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on the US debt ceiling talks that allow individual investors to profit when the
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Phoenix Capital Research