The US is bankrupt

Despite the wonderful emotion from the US elections yesterday, the fundamentals for the US and the global financial system do not change. The US is bankrupt. Unfortunately no new President, not even Barack Obama, can change this.

Because the US dollar is the worlds reserve currency, the US, the most indebted nation in the history of the world, is the world’s lender of last resort. How ironic. The US great exporter of debt is itself bankrupt and the world economy is in danger of collapse. The IMF (controlled by the US) has now been asked to bail out Iceland, Pakistan, Hungary and Ukraine. The US may very well be the next IMF client.

What has happened over the last 12 weeks has eclipsed everything that has gone before. What will happen next year will eclipse what is happening now. The crisis is growing as the end-game of capitalism approaches its end irrespective of what central banks try to do.

This time the bankers overstepped themselves in such a way they have brought destruction not only on society but on themselves as well. It is only right that they should suffer too—as, after all, it is they who caused our problems.

It is unfortunate that society is being forced to lessen the burden on bankers even as bankers continue to indebt society. This privatise profits, socialise losses philosophy is immoral and criminal. But, then again, that’s what government is for—to act as the bankers’ agents in the continuing indebting of nations, businesses, producers and savers.

Markets will only be free when the virus of bankers’ debt-based paper money is permanently removed from commerce and the present tyranny of banker-controlled government is ended. Unfortuantely the very institutions and people that got us into this mess are mandated to save us. What a joke.

Remember the mountain of debt is so great it can never be repaid. We are left with only two options: default ala Russia 1999 or Argentina 2003 or hyperinflation Zimbabwe style. The problem with default is that the US is the reserve currency of the world so all fiat currency (& therefore countries) go with it. it also means banks lose their power base. Default is not an option. Hyperinflation on the other hand can delay the outcome and ultimately be blamed on other factors, eg Peak oil, commodity prices, war etc. The banks retain control. Central banks have already declared their hand with the federal reserve alone doubling its balance sheet in the last 8 weeks.




We will see continued stock and house price declines in 2009 as banks continue to deleverage. This is not deflation as many financial experts claim, its asset delveraging. Inflation/deflation relates to the money supply change. As can be seen in the chart above money supply growth is out of control. Prices of things you need to live are going much higher. Governments controlled by banks will continue to inject unfathomable amounts of paper confetti to save the global banking system. With a wonderful technology called a printing press (or in these days of digital dollars a simple mouse click) they may delay the inevitable systemic collapse, but at what cost? It may take 6-12 months to work its way through but there is no doubt.......Hyperinflation is coming!

Got gold and silver?

"Argentum et aurum comparenda sunt"