Quote :

"Raising the Roof on Debt Today the U.S. government officially borrowed beyond its $14.29 trillion statutory debt limit. And even though the Obama administration has assured us that accounting gimmickry will allow the government to borrow for another few months, the breach has given seeming urgency to Congressional negotiations to raise the debt ceiling. Republicans are making a great show of acting tough by linking their “yes” votes with promises for future budget cuts (that could even slow the rate of debt increases at some uncertain point in the future). But as we go through the process, many novice observers may wonder why we have a debt ceiling at all when our government has never shown the slightest inclination to respect its prior self-imposed limits. The ceiling was first imposed in 1917 as part of a deal that passed the Liberty Bond Act that funded America’s entry into the First World War. To make it easy for the Treasury to sell those bonds, Congress also amended the Federal Reserve Act to allow the Fed to hold government bonds as collateral. But given the potential for unchecked Federal deficits, Congress sought to limit taxpayer exposure to $11.5 billion. The problem was that Congress never passed a law to prevent future Congresses from raising the ceiling. And even if it had, that law could have been rewritten by future legislation. Sure enough, when the Second World War rolled around the debt limit was raised frantically, leaving it at $300 billion by 1945. But believe it or not, after the War ended, the limit was actually reduced to $275 billion. Despite the costs associated with the Korean War, the next increase did not come until 1954. And over the ensuing eight years, the ceiling was raised seven times and reduced twice, finally getting back to $300 billion in 1962. Since then, Congress has voted to raise the ceiling 74 times without a single reduction. Practically speaking, a ceiling that is raised automatically is no ceiling at all. Given that, why not dispense with the pretense? The reason is politics. No Congressman wants to be on the record voting for unlimited debt, yet most are willing to rail against fiscal recklessness while raising the ceiling every time it’s reached. Any Congressman who gives lip service to a balanced budget Amendment but votes to raise the debt ceiling is a hypocrite. No one needs constitutional help to hold the line on the debt right now! But epic levels of Federal red ink and the approach of the 2012 elections have raised the stakes. Despite the newfound urgency, nearly all Democrats and a very large chunk of Republicans argue that failure to raise the ceiling will be tantamount to economic suicide. They argue that such a rash move will cause the U.S. to default on outstanding debt obligations, thereby sending interest rates sharply higher across the board. Higher interest rates they argue would cripple the economy and permanently increase debt service costs. As a result, they predict capping debt now will precipitate a far deeper economic contraction than what we have already seen in the last few years. Few see the inherent absurdity in the notion that taking on more debt improves the economic health and creditworthiness of the United States. I would argue for the much simpler idea that more debt weakens a nation’s financial position. More importantly, capping U.S. debt at current levels means bringing a future crisis into the present where it can be dealt with in practical terms. This is something that nobody in Washington actually wants. If we do today what we have failed to do in the past, we very may well default on a portion of our debt. No doubt our creditors will suffer. But such near term pain will lead to a quicker and healthier recovery. Out of control Federal spending will have to be dealt with now. A downgraded credit rating will make it harder for the United States to continue borrowing, and as a result should be viewed as a blessing in disguise. A reduction in debt levels is good economics. Remember, taxpayers will have to repay with interest anything the government borrows now. The more the government borrows, the larger it grows, and the larger it grows, the weaker the economy becomes. The less money the government borrows, the more that is available for the private sector to borrow to increase production and create jobs. Failing to raise the debt ceiling will force Congress and the President to tell the truth to Social Security and Medicare beneficiaries who have been promised more than taxpayers can deliver. They will have to concede that so-called government “trust funds” are mere accounting gimmicks, and that benefits will need to be cut if the programs are to be solvent. They will have to tell the truth to our creditors that the U.S government has borrowed beyond the ability of its citizens to repay. And lastly, the stark reality will force the government to tell the truth to Federal employees whose salaries and benefits are unsupportable given our fiscal weakness. But, on the other hand, if we raise the debt ceiling, we can postpone the crisis into an indefinite future. All of these tough choices could be avoided. Government pay and benefits will flow unabated, and our creditors will continue to get their interest payments now. But in the future, the value of principal repayments and government benefits and paychecks will lose purchasing power. That’s because if we keep raising the ceiling indefinitely, we risk destroying our currency. But the long slow death of a currency and the ebbing of a nation’s economic vitality doesn’t make for huge headlines. It is for that reason I am 100% confident that Congress will do the wrong thing and raise the debt ceiling for the 75th time in 50 years. In the end there will be some kind of phony compromise with each side claiming victory. But while the politicians celebrate another dodged bullet, the U.S. economy will continue to be shot full of holes."

Peter Schiff is truly the media authority on our currency crisis. Very noble work he is doing, it's a real shame he lost in his bid for senate because he has the ability to define the crisis in a way even average americans can understand.

6/4/2011 3:31:55 AM

China Has Divested 97 Percent of Its Holdings in U.S. Treasury Bills

Quote :

"China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury."

http://cnsnews.com/news/article/china-has-divested-97-percent-its-holdin

6/5/2011 11:02:51 PM

Did you read the article at all? Here is the piece you should have quoted

Quote :

"That number continued to escalate past May 2009-- when China started to reduce its holdings in short-term Treasury bills--and ultimately peaked at $1.1753 trillion last October."

Quote :

"As of March 2011, overall Chinese holdings of U.S. debt had decreased to 1.1449 trillion."

Down a crushing 2.5%. Doesn't seem as scary as 97% now does it?

[Edited on June 6, 2011 at 6:58 AM. Reason : .]

6/6/2011 6:57:55 AM

Wasn't it always expected for them to decrease t-bill holdings as QE 2 came to an end? I mean they didn't really own them in bulk until QE 1..

[Edited on June 6, 2011 at 10:04 AM. Reason : Comparatively in bulk]

6/6/2011 10:03:36 AM

Quote :

"Wasn't it always expected for them to decrease t-bill holdings as QE 2 came to an end? I mean they didn't really own them in bulk until QE 1.."

Sure. It was also always expected that we would be experiencing a "robust recovery" by now, which would mean higher federal revenue and lower deficits. Of course, the recovery never came, probably because the financial system of the past two years has been nothing but smoke and mirrors.

6/6/2011 1:21:48 PM

When it comes to the getting out of the dollar you can be too early or too late. China is already taking steps to diversify, are you?

6/6/2011 3:34:43 PM

I'm sorry, but I see no evidence that China is taking steps to divest itself of US Debt.

6/7/2011 7:29:43 AM

Well that's a pretty silly statement

6/7/2011 9:02:44 AM

The ECB could be insolvent any day now. That's one of the main reasons the dollar flee hasnt occured yet.


Once Europe defaults you'll see capital head there to be part of the restructure and the usa will bear the brunt of the outflows.

We don't really control the timing of it. But it looks like 2-5 years is still accurate although it could be quicker obviously

6/7/2011 10:16:03 AM

Quote :

"Well that's a pretty silly statement"

What is silly is saying China taking 15 years to get rid of all US debt (using your single data point) is "taking steps to diversify".

That's the silliest thing I've seen you post in the past 10 days...and you post a lot of ridiculous shit.

6/7/2011 5:35:04 PM

"In our opinion the united states has already been defaulting" - president of Chinese ratings house.


"Beijing cut its holdings of us treasury securities for the fifth month in a row"

6/10/2011 8:59:15 AM

"Bullets, canned goods, etc"

6/10/2011 11:03:17 AM

Right now I'm moving into cash because we are in a deflationary crash in assets.

Part 2 is the inflation tsunami when they print the money and devalue the currency

6/10/2011 4:28:35 PM

Bernanke is backed into a corner. He's saying the same stuff he's been saying for years, but he knows that the whole world is staring at him. When QE1 happened, a lot of people didn't know that it was actually money creation; when QE2 happened, people were starting to wake up. Now, people know exactly what QE is, and there's going to be a shit storm if QE3 is allowed to happen...which is why I think they'll find some way to do it by stealth.

6/10/2011 4:30:57 PM

Quote :

"Part 2 is the inflation tsunami when they print the money and devalue the currency "

Now just hold on a damn minute...


...

fuck it, anyone that is paying attention knows you full well look a clown right about now.

6/10/2011 4:53:38 PM

Chance I actually respect your knowledge of the market even though we seem to have a fundamental disagreement with the state of the economy.

I definitely think you're smart enough to comprehend what I'm saying, so I find your last post pretty surprising.

My position for the past three years has been that our economy is weak and getting weaker by the day. Seriously, check the post history. I think the economy stinks.

Now the government has unleashed all kinds of stimulus into nearly every sector of the economy to try to fool investors that the economy doesn't stink. Hence, my hugely profitable positions in commodities, commodity producers, growth stocks etc. Seriously, check the profits I made in my PKX, AAPL, GLD, POT, etc by following this strategy. I can bring the posts to the forefront from years ago if you need a reference.

Now, QE 2 is coming to an end and I positioned myself for the resuming deflationary asset crash. The stock market is overvalued by a good bit probably at least 20-25% if not more. In this environment the last fucking place I want to be is commodities which could drop twice that if left alone.

In a deflationary crash typically you want to be in cash and long term bonds. You want to be as far away from commodities, high beta stocks, etc as possible.

In this particular crash you want to be as far away from banks as possible also because they are likely insolvent and I don't know if the political will exists for another round of bailouts (though I certainly wouldn't put it past our government).

I don't want to fuck with long term treasuries because in this case we have a credit crisis and long term bonds won't perform well as credit deteriorates. (If you knew deflation was a certainty you wouldn't buy Greek bonds to protect yourself)

Now here comes the catch to all this advice. It is all dependent on government intervention. Right now government is taking the punchbowl away. I steadfastly believe that once assets begin crashing (we're at ~6% right now which is relatively minor compared to what's coming) they will step in with "QE3". Now it won't be called QE3 because everyone knows what a nightmare QE2 was and it would be politically damning to name it this.

"QE3" will probably consist of a combination of both money printing AND purchasing risky assets at inflated prices. This is similar to the strategy the European Central Banks enacted over the past few years which has now put them on the brink of insolvency.

When "QE3" begins you want to get the fuck out of dodge. Cash, bonds, etc are going to be destroyed at an unbelievable pace possibly (but not likely) as fast as it did in Belarus last week when their currency plunged 56% overnight.

That is when the food, water, liquor, gold, silver, ammo, etc is going to look awfully good in your closet.

Now the key to this is getting the timing right. Is it difficult for me to sleep with nearly all of my money in cash right now? A little. It's very uncomfortable I've got to admit. Essentially, I'm risking 100% of my investable assets (they could be devalued to zero theoretically) just trying to save myself from 20-40% short term losses in the stock/commodity markets.

I'm not going to try to pinpoint the exact date to get back into the inflation trade because it's just too risky and there's no way I can predict government intervention with any kind of precision regarding timing. I'm going to re-enter these markets when I'm comfortable that they've dropped to close to fair value. If oil drops to $80 and I buy back in and it goes to $60 before resuming its march to $100 I'm okay with that. What I don't want to do is hold it from $100 to $60 and back to $100 when it's obvious $80 will be in play soon.

Should you technically wait to hoard food, water, liquor, etc? Perhaps. I mean technically you should wait to buy life insurance until the day before you die. Perhaps you could buy those items slightly cheaper in a few weeks or months. However, prices are sticky on the way down so there's no guarantee those things will get any cheaper even as the deflation takes hold. Is it really worth taking the chance to be destitute without food, water, and the means to purchase either just to save 10-15% on your red beans and rice? I think not.





[Edited on June 11, 2011 at 3:40 PM. Reason : add]

6/11/2011 3:35:10 PM

Quote :

"Chance I actually respect your knowledge of the market even though we seem to have a fundamental disagreement with the state of the economy. "

Not at all, what you posted is verbatim what I've been saying for 10-12 months now...(*note, those ideas aren't really my own).

But this isn't what you've been posting. You just posted last week about how the Chinese were dumping dollars...but wait, now you are saying we should hold them? The Chinese were smart last week but now you've watched another Schiff video and he changed his tune so you're here to echo chamber it?

6/11/2011 9:51:26 PM

I've been posting that the economy is TERRIBLE for years now. And everyone said no it isn't we're in a recovery. And I've said no we aren't, this is an artificial recovery brought about by government intervention and that when that ends look out it's lights out.

If I could be guaranteed that there would be no future government intervention I'd be shorting the shit out of the market, believe me. Even still I may start taking a short position soon because this looks like an avalanche to me.


However, I think it's folly to think they won't begin QE3 soon in the form of risky assets purchases. I'm sure they wouldn't hesitate to just print more money without telling anyone or resume bond buying under smoke and mirrors so no one can tell who the buyer is (like they did last year).

This isn't a new position for me to take, I can dig the posts up if you'd like. I've said the economy is crashing, the government is panicking, we are in the middle of a currency collapse, our deficit is spiraling out of control, etc.

Markets don't go straight up or straight down. The long term trend is still intact, believe me. But that doesn't mean I want to own the risk assets during the crash that comes first. How long will the crash last? 6 weeks, 4 months? I'm not sure, it depends on how quickly it transpires and how quickly the government/fed reach a consensus on the best way to "solve" the problem i.e. make it worse and trigger hyperinflation.

6/12/2011 1:41:33 PM

Quote :

"How long will the crash last? 6 weeks, 4 months? I'm not sure, it depends on how quickly it transpires and how quickly the government/fed reach a consensus on the best way to "solve" the problem i.e. make it worse and trigger hyperinflation."

So there will be some kind of crash sometime of some size? What a prediction there Nostradamus.

6/12/2011 4:40:59 PM

Hey moron, read my post i said I think the crash will be 20-40% in the stock markets. I think the commodity markets will be more severe than stocks so if we get 20% losses in the stock markets then 40% in the commodities sounds about right.

I think the crash is beginning to unfold right now which is why i sold nearly all of my investable assets this week.

How much more specific do you really want me to be?

I can't tell you the duration of the crash because it depends on how quick and severe the markets crash. They could drop 20% in a few days, weeks, months, etc.

Who cares what the duration is if you get the amount right???

The thing is as soon as it looks like the Fed/Govt are ready to start QE3 (whatever form they take place in) I will be rushing back into assets that protect me from our currency collapse.

If the government doesn't act I'll stay on the sidelines to dodge the inevitable move down. If they do act (a near certainty), I'll be rushing to exit my cash positions, believe me. Is this really that hard to understand?


[Edited on June 12, 2011 at 5:23 PM. Reason : a]

6/12/2011 5:19:43 PM

So when? You seem to be able to use your clairvoyance to predict certain things, but not others, and you seem to surround it with copious amounts of CYA vagueness.

6/12/2011 7:30:18 PM

Given that I just sold nearly everything last week, I think it's fairly obvious that I think the crash is underway. It might not happen this week or next, but I don't want to be long in this market with QE2 ending.

You always try to make me state a date or a week. That stuff is unknowable because there are millions of market participants.

I believe the economy is getting weaker by the day, and at some point in the very near future other market participants will begin to price that into the market.

6/12/2011 7:38:11 PM

Quote :

"That stuff is unknowable because there are millions of market participants."

Oh, I agree, I also think that it's impossible to predict the depth of a crash, but you seem willing to make guesses on that.

6/12/2011 7:42:49 PM

It is impossible to say exactly how far it will fall you are right.

Right now its about 40% overvalued according to fair value so its safe to say the fall could be substantial.

6/13/2011 9:36:12 AM

"according to fair value"? Value is determined by the market, there are just as many factors at work to determine value as there are anything else, and it's just as silly to think you can predict one as it is for another.

6/13/2011 11:05:01 AM

Crying won't help you praying won't do you no good.
When the Levee breaks mama you got to move.

Going down. Going down now. Going down.



Just keep singing that in your head as you witness wealth destruction

6/13/2011 1:18:04 PM

This is so awesome. I've waited long and hard for the day when Led Zeppelin lyrics would be a valid argument in TSB.

Hear my song. People won't you listen now? Sing along.
You don't know what you're missing now.
Any little song that you know
Everything that's small has to grow.
And it has to grow!

6/13/2011 1:36:44 PM

I've already laid out what is happening in prior posts. Now it is time to sit back and watch the chaos. If you choose to sing as well I picked an applicable song for you.

6/13/2011 1:57:15 PM

I saw that, and believe me
When I read the letter you wrote me, it made me mah mah mad
When I read the words that it told me, it made me sah sah sad,
But I still love you so
I can't let you go
I love you, ooh baby I love you.

6/13/2011 2:05:01 PM

When it all falls down who you gone call now?

6/15/2011 2:26:20 PM

Ghostbusters!
[I ain't afraid of no ghost!]

6/15/2011 2:31:45 PM

Oh Christ I might be right.

The fed already has an emergency plan in the works to try to re-inflate the bubble when we crash in the next few months.

They are going to pin the ten year treasury to a lower rate, say 2% probably.

This is exactly what I was worried about, there's no political will for qe3 so they are skipping right ahead to much more drastic measures.

The gold and agriculture trade will be back on soon it looks like . God save us from the phenomenal bust that will inevitably result from this lunacy

6/17/2011 10:41:27 AM

What do you mean by "next few months"? Can we count on your crash happening by September?

6/17/2011 11:02:15 AM

Bill Gross thinks the Fed is going to try to cap short-term treasuries at 2-3%. If that happens, it will mean endless printing. Bernanke has gone insane at the wheel, and there's no one that can or will stop him. He will destroy the currency if he keeps trying to fulfill the Fed's "mandates."

6/17/2011 11:17:29 AM

^^ you are asking for the unknowable because I don't control the timing. Only the central bankers do.

Greece would likely collapse this weekend without a bailout which would take down France and Spain which would wreak havoc in China.

However they appear to be doing the bailout so now Greece is solvent until august when it will be on the verge of collapse again. Will they get another bailout then? Probably but how can I know? What I do know is that more chaos will ensue each time this happens until they finally pull the plug

6/17/2011 12:41:51 PM

You said "next few months". Obviously you think you know.

6/17/2011 1:22:54 PM

Okay allow me to explain something real quick.

Greece was supposed to go bankrupt either this weekend or early next week. When Greece goes down, the banks in France and Spain go down (likely taking them with them). Germany takes it on the chin hard. These bonds are worth less than 50 cents on the dollar probably and they've been doubling down on their bets for the past year or two.

The ECB goes insolvent in a hearbeat and has to raise capital from the countries. This causing all out bloodshed and the Euro crashes.

Guess who also gets roiled? Yep, you guessed it. China. They've been stupidly ponying up too.

No contagion? No contagion? Then why the fuck aren't they letting Greece just go down then? How come Greece keeps breaking the laws of their covenants yet still won't back down to the bailout demands for austerity? Because they've called their bluff. They know the banks will give in.


This is hysteria man. How can you not see this?

Greece is getting $12 billion and thats supposed to appease the markets. But $12 billion only buys them until August. At that point they go bankrupt again and the markets roll over yet again. Only this time it's a $12 billion bigger problem than it was today.

We just had Lehman Brothers go down not even 3 years ago. Do people not remember what happened?

No liquidity with massive leverage. Big things fall hard.

There's a reason American bank stocks are getting crushed, it's because ZERO isn't off the table yet for their stocks.

6/17/2011 6:39:50 PM

Quote :

"No contagion? No contagion? Then why the fuck aren't they letting Greece just go down then? "

Incorrect. This has nothing to do with the ECB worrying about contagion. This is the elites via their banks wanting their fucking money back and doing everything they can to make that happen. If the EU blows up and they don't get this chunk back they are still fantastically rich, they just have their egos hit because the power to domineer over people that they thought they have is gone...and when money means nothing to you because you have so damn much of it, you really don't like being told your power doesn't exist either.

6/18/2011 10:02:47 AM

^ Agreed, that does play a part. But you also have China doubling down on their bets over and over again. Classic example of good money chasing bad.

The Europacalypse is here. I don't want to be long when we hit that air pocket to S&p 1,000 (or below...)

6/19/2011 4:21:12 PM

That report yesterday that 50% of money market funds are comprised of European debt is one of the scariest thing's I've ever read. So just where the fuck are we supposed to keep our money in 401k's that don't have gold and silver funds.

This is seriously going to be epic.

6/22/2011 10:43:19 PM

Moody's Suggests US Eliminates Debt Ceiling

http://www.cnbc.com/id/43790768

Things are really getting absurd at this stage of the game. When Moody's is saying "borrow to infinity!", then it's confirmed that they are no longer a legitimate ratings agency.

7/18/2011 3:44:55 PM

I thought that was obvious after 2008.

Anyway, they have a good point:

Quote :

"In the United States, Moody's said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress."

[Edited on July 18, 2011 at 4:34 PM. Reason : asdfasdf]

7/18/2011 4:32:16 PM

It's a great point, but it speaks to a broader problem: there is no effective way, in our current system, to control spending. As "cooky" as the gold standard is purported to be, it served an important purpose: to prevent the government from creating money to pay the bills.

7/18/2011 4:38:06 PM

Quote :

"It's a great point, but it speaks to a broader problem: there is no effective way, in our current system, to control spending. As "cooky" as the gold standard is purported to be, it served an important purpose: to prevent the government from creating money to pay the bills."

You should send as much money to Ron Paul's campaign as you can afford.

d357r0y3r, which countries that are currently on the gold standard would you like to see the US emulate.

I look forward to the list.

7/21/2011 3:44:30 PM

pryderi, do you even understand why you are arguing against the Gold standard or are you just echo chambering the tripe you read on Daily Kos and Huffington Post?

7/21/2011 3:57:11 PM

Quote :

"You should send as much money to Ron Paul's campaign as you can afford. d357r0y3r, which countries that are currently on the gold standard would you like to see the US emulate. I look forward to the list."

It's an entirely debt based fiat currency system that's currently in the process of crumbling. No country could easily switch to a gold backed currency now.

Central banks everywhere (with the notable exception of the Fed) are amassing gold right now, though. I wonder why?

7/21/2011 4:07:34 PM

really?

7/21/2011 5:18:04 PM

No, not really. Everything's fine.

[Edited on July 21, 2011 at 6:17 PM. Reason : wealth doesn't come from labor, it's generated by central bankers bro]

7/21/2011 6:17:22 PM

LOL: http://www.theonion.com/articles/drunken-ben-bernanke-tells-everyone-at-neighborhoo,21059/

8/3/2011 1:08:26 PM

8/3/2011 1:10:27 PM