July 19, 2011

D Day Cometh For The USA

And it cometh right soon.













On August 3rd, millions of Americans are expecting their social security payments. The govt need to shell out $23 billion but they only have $12 billion, leaving an $11 billion shortfall. One way around it all is to increase the debt ceiling. The USA is in the hole for an incredible $14.3 Trillion but they need more.

Increasing the debt ceiling would not be good:

"But financial experts say hitting the debt ceiling or coming really close to it would destabilize the markets and the economy. Just how dire the consequences would be is difficult to predict, but many Americans could feel the impact almost immediately.

Stock markets are almost certain to drop sharply. Some analysts say interest rates for Treasury bills and private borrowing would rise abruptly. Others say the flight to safety might actually make investors dump stocks and buy Treasury securities in the short term."

 August 3rd is just the first hurdle. D Day Two arrives on August 15th when they have to pay out $29 billion in interest payments. They don't have that money:

"The next D-day is Aug. 15, when Treasury owes $29 billion in interest but will already have missed $54 billion in scheduled payments if the debt ceiling hasn’t been extended.

“I believe Treasury will always make sure, before all other government spending, [it has] enough cash to pay the interest on the bonds. That has to be the highest priority,” Powell said. “If we default on interest payments, we can sink the whole boat.”

The short story is that if the USA defaults, ordinary Americans are in for a world of pain.

Regular commenters here have said many times that piling debt upon debt will end in tears, or worse; when the money supply dries up, or hyper-inflates, a very real outcome is violence and possibly civil war.

When America came off the gold standard in 1931 their problems began. They created the Federal Reserve (in 1913) and that was their first mistake: allowing private bankers to control the money supply. We have the same problem here, before you start feeling too smug. We will follow the USA into bankruptcy very shortly after they hit the wall. When they sneeze, we catch a cold.

It will not be pretty.

Protect yourselves if you can by buying gold and/or silver. Gold will rocket to $5000 an ounce (currently $1600) and silver is massively under-priced at $40 per ounce. Their paper money is worthless but it won't stop either the Americans or the British pumping it out faster than Bob Mugabe. The presses will run night and day and each new note that rolls off devalues all existing notes by a fraction. The snowball effect will kick in within weeks.

Our economies are built on debt but those "experts" who brought it into being had to know that it could not continue forever. Ironically, it is the "developed" countries that will hurt the most. Emerging nations may owe a lot in loans but their citizens cannot access credit, at least not easily, so they are protected because they do not have debts bogging them down.

It is a mess. Like all messes, someone has to clean up.

I can't wait to see the size of the broom needed for this one.

CR.

20 comments:

Anonymous said...

I understand that gold/silver will be worth more than paper money WTSHTF, but - as I've pointed out before elsewhere - you can't eat either. If the worst happens people will be paying gold for cans of beans, so how is gold any better than bartering with food? Surely food will be the best currency to 'buy' anything with?

If I was hungry I'd give away any amount of gold to be able to eat.

Am I just being a bit thick?

Captain Ranty said...

Anon,

No, you are not being thick at all. I reckon that people would resort to bartering as the simplest method.

The gold or silver could be used for big purchases, as it would be hard to break down into "usable" lumps anyway. (Unless you were using Kruger Rands or similar coins).

It may not come to pass anyway. They may just print more notes and we will have to deal with paying £500 for a loaf of bread.

But that is just delaying the inevitable.....

CR.

westcoast2 said...

A couple of things
"August 3rd is just the first hurdle"

It seems it may be worse than that. Due to legislative requirements, short term/long term maturites the first hurdle could be July 22nd.

"When America came off the gold standard in 1931 their problems began. They created the Federal Reserve and that was their first mistake"

This gives the impression the US came off the Gold Standard and then created the Fed. The Federal Reserve was created in 1913 by the Fedral Reserve Act. You are right that this was a mistake.

The US defended the Gold Standard throughout the 30s and even passed the In 1934 the Gold Reserve Act was passed which effectively confiscated peoples gold. The possibility of this happening today is often raised.

The links between the US dollar and Gold were finaly broken by Nixon in 1971.

@anonn "I understand that gold/silver will be worth more than paper money WTSHTF, but - as I've pointed out before elsewhere - you can't eat either"

The 'you can't eat Gold or Silver' statement is made quite a lot. This is of course correct yet misses somethings.

It could be possible that there is a total breakdown and the need for barter, in which case Beans are better than Gold. What happens in the longer term though? Would it be better to have stored beans and gold? Beans short term, Gold longe term?

Just to add it seems attention is being turned to the UK and its problems. We could be in for a very bunpy ride very soon.

Captain Ranty said...

Westy,

You are quite right about the Fed. I knew it was created in 1913 and I should have said so.

No argument with your other points. The Talking Clock has a gloomy but realistic outlook:

http://talking-clock.blogspot.com/2011/07/and-while-hackgate-fire-rages-uk-banks.html

Bumpy ride indeed.

CR.

Gallovidian said...

When the US has to raise loans denominated in a currency other than $US, and the time is not far off, its superpower days are over. But we are a way from the Endlossung yet.

Captain Ranty said...

G,

There has been a lot of chatter about the Americans moving away from the $ as the reserve currency. The Chinese (very bright in this regard) saw it coming and they have dumped billions of $$$'s and bought (strangely) the euro amongst a basket of other currencies.

The shitstorm is coming, and coming soon.

We will not get beyond December 2011 without a major upheaval.

Mark my words.

CR.

Oldrightie said...

Precious metals for arms.Arms needed to protect home grown food. No gold, no arms. Invasion and pillage! Death and starvation. All civilisations end thus.

I am Stan said...

Ohhhh yes Capitan its a mess alright,

Someones gonna have to clean up the bodies when the social security checks stop and the empty bellied golden hoard goes on the rampage barbecuing the children, I`m not joking.

Stock up readers, fuel, batteries, beans, water, booze, band aids, weapons and yeah Gold n Silver, hunker down and prepare to repel the zombies at your door before it all goes Greek says I.or check out yer neighbours, how plump are they?

Dont forget the pet food and toilet paper!

ps I`ve emailed my latest post to them lot at The Liberty Orphanage, no response, very rude methinks!

Anonymous said...

Both Moody's and Warren Buffett have just called for the US debt ceiling to be removed altogether.

It has been increased almost constantly ever since it was introduced back in 1917. The original debt was, IIRC, around $11 billion or so, which is something like $190 billion in today's money. And yet it stands at $14 trillion. Such is the way of the private banking cartel. It pretty much trebled when Reagan, that supposed "fiscal conservative", was in charge. Dubya doubled it and Barry has added over $2 trillion to it all on his own.

Worked out well, hasn't it?

Baz's first budget proposal in '09 involved doubling the debt by 2020 (to around $20 trillion or so). So he's ahead of himself, really! They squabble over small percentages spread across a huge length of time, as if this will really make a difference. And there are mutterings of a "QE 3" as well, because the first two had such a beneficial effect.

Utter insanity.

Awfully nice of our Establishment over here to keep us occupied with other matters whilst this and all the Euro kerfuffle goes on behind the scenes. Some, however, are keeping an eye on the bigger picture.

Of course more money printed = crap exchange rate = higher food, energy and oil prices = more Americans driven into poverty and reliance on the state = more of the population able to being controlled when a "state of emergency" is declared. Nearly 45 million Americans are on food stamps, up by over 4 million in the last year alone, compared to around 30 million at the end of 2008. They're being thrown about like confetti.

Executive Order 10998 gives the Federal Govt the "right" to seize all food supplies and resources in times of "national emergency" - and that includes whatever's stored in your pantry. Individual states define "hoarding" differently but one example has it at just one week's worth of food in storage. Which is about what most people have, except for "survivalists". Expect your door to get broken down once FEMA takes over.

Study the Holodomor for what happens when the state cuts the food ration and requisitions the "hoards". (An extreme example, granted.)

More Americans are getting wise to all this though. And they still have their guns. Which of course explains Barry's latest attempt to begin the process of taking them away. Although it must be pointed out, if you're licensed, they know you have them...

Gold is of the ability of most to purchase. £1k an ounce FFS! Good work, Gordon. You owe us twenty billion dollars. One can get a load of supplies for £1k that will be of much more use if TS really does HTF, and maybe some silver to boot.

Not easily do empires fall.

Regards

TSL

Anonymous said...

Bah, meant to say "gold is out of the ability of most to purchase"...

Regards

TSL

Goodnight Vienna said...

My timing's lousy - just sold a property, money in bank - guess I shd think about getting it out then. Maybe I'll get myself some brown paper bags and one of those Tesco trolleys so I can wheel it around with me!

Michael Fowke said...

How can the "richest" nation in the world be so in debt? Surely it's one of the poorest nations?

Anonymous said...

I keep hoping and praying this day won't come but something keeps niggling away at me that suggests vain hope.

I've therefore added this to my reading list whilst the internet still works:

http://www.survivalblog.com/

Anonymous said...

Here is a question, I wonder how you think about this.

If I have cash money saved up, an asset, then it gets devalued thanks to the printing press and everything you clearly explained so well above, then of course the cash becomes worthless and of no value in purchasing goods, services. etc.

If I have debt still owed on, mortgage, credit cards, car payments, all liabilities, then when the money gets devalued, what I owe is then valued lower and thus less of a liability drag, since it will have been inflated away too - correct?

In other words, for as bad as losing the value of my savings and cash on hand will be, losing the liability of my indebtedness will be a positive factor.

Thus if I were to run up debt now, making it higher - new car, new home, credit cards to the max - then come the final currency failure, I could take a few small assets such as tins of beans around the house, barter them for large amounts of the worthless currency, then use the worthless currency, denominated in the same currency system as was the debt, then use that to pay off the debt - but I'd have the advantage of new car, new house, new clothes, etc. - having rushed to build up my debt load now, while it's still worth something.

That might sound lop-sided thinking, but isn't there another way around this conundrum by simply taking advantage of all avenues of credit now - while the credit can still be used for things of value, hard assets - then pay it off later on, when the currency it is denominated in becomes worthless?

Sorry, another stupid question, but curious how anyone might think on that idea and I'm only talking in theory, I'm not rushing to run up huge debts before the bust (yet, unless maybe that's a good idea).

Anonymous said...

Michael Fowke

The 'richest nations' are only rich in the same way that an idiot who has a Porsche, a yacht and a Belgravia mansion on tick is rich, i.e. it can all vanish in a nano second thereby relegating him to instant poverty. It's wealth built on sand. It's all been an illusion but so many have grown up under a global fiat currency system that they know nothing else. Hell, they don't even know what 'fiat currency' means and as for trying to explain anything to them - well, it's too hard and they're not interested, except they're going to be made to be interested when they're starving, freezing and terrified.

The only people that are 'rich' in any true sense of the word are those with even a small patch of garden with which they can grow food on, the knowledge of how to grow food, create clean drinking water, forage and generally survive in a Mad Max meets Chrysalids scenario.

Money and posessions are useless at a time like this. Cometh the hour knowledge is the only wealth worth having. Many people are about to learn a very hard lesson.

David

Captain Ranty said...

Anon,

You might want to take out a massive loan and then buy gold and silver with it.

Your debt will be enormous but you will have a viable "currency" when it all goes titsup. Hide the metal then enter into an IVA.*

Best of both worlds!!!

CR.

*Please note that this is NOT serious financial advice....

Anonymous said...

Anonymous - I like your thinking. It sounds plausible. What does the Captain think? Ah - I see he's answered you!

David

Stealthy said...

I had a nose at that survival blog anon posted and noticed this... http://www.survivalblog.com/2011/07/letter_re_coin_roll_hunting--a.html sign of the times, or wot :P I find it hard to comprehend where its all gona end :(

Anonymous said...

Anon,

The logic does seem sound, I have Cogitated along those very lines often, still do.

Thing is though, most folk I know are massively in debt, looks good mind, bigger house, nicer car & so on. But, that debt will only be accepted in fiat, not beans.

So your intended market will be shovelling all there fiat towards keeping a roof over them, thus you will likely get repossessed of the things you don't own anyways.

I'm with the good Captain on the gold and silver part, always seem to keep there value against other tangible things. No matter what the confetti money does.

But I would say Cap'n the IVA is a government backed scheme and as such will probably have its goal posts moved right when you need it most.

Just 2million cents worth.

Lost

Anonymous said...

Given the trouble that not raising the debt ceiling would cause (as you point out), they will therefore raise the debt ceiling by one means or another.

They're fucked, but it's going to be more drawn out than a short sharp shock.