Financial Trouble

Close up on This is one video you need to see no matter where you are from especially if you are American. It demonstrates the real potential for chaos in US society being really near, and the size of a world financial crisis it could create. Much greater than 2008 or the 1920s. The way of life in America could be about to change, major collapse in national monetary system, and normal way of life.
End of America 3: Investment Advisory
http://www.youtube.com/watch?v=9vFAvrv8srE
Another video that helps clarify is called;
The Ultimate American Dollar Collapse
http://www.youtube.com/watch?v=3RhnHo3RDfg
On the July 10 episode of the radio program Coast-To-Coast similar expectations were talked about.

The US government is borrowing so much money using short-term loans, soon no longer able to even afford the interest. Have to borrow money just to maintain the status quo. in 2008 all of the bad debts were absorbed by the world's governments. When several US companies were going to collapse the US government guaranteed their outstanding debts and have had to absorb their losses since (hundreds of billions). The costs associated are piling up at the U.S. Treasury. These losses and trillions in other private obligations are now the responsibility of the of the US government. Even before the financial crisis the government was deeply in debt. With each additional commitment they sink deeper into debt closing in upon the moment they can no longer afford the interest payments on obligations.

The total public debt outstanding is over 14.5 trillion, it is the sum of intergovernmental and public holdings. It is a measure of the obligations of the United States government. The federal government spending is roughly $3.6 trillion with a $1.4 trillion deficit. Deficit is the amount of spending more than tax revenue. Even if the government is able to reduce the deficit by $1 trillion like they are hoping to do the US will still be adding to the debt. The national debt is calculated by adding up all of the deficits throughout US history. There is also state that (almost $1.2 trillion), local debt (almost $1.8 trillion), and personal debt per person (over $51,000). Total debt is calculated by adding together household, business, state, local, federal, and financial institution debt. The federal government's financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis (June 13) shows. The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for (total debt).
http://www.usdebtclock.org/

Over $4.6 trillion is held by foreign countries. Roughly 65% of foreign reserves are still in US dollars, 25% Euro, 10% other. Foreign countries holding the debt are already starting to reduce their US dollar holdings as reserve as a US dollar loses value (32% in the last decade). As foreign diversification from one dollar accelerates they will cease or stop purchasing U.S. Treasuries. Which is used to float the 1.2 trillion deficit. If the US cannot borrow more money it will cause the US to default which would see prices for everything go up and the stock markets to go down severely. Reducing the deficit and government spending to only delay default without a raising of the debt ceiling. You can't really raise the debt ceiling without causing interest rates and inflation to increase. At least the debt wouldn't increase for at least a year.

Besides raising the debt ceiling they are also looking at some large spending cuts. They are discussing primarily cutting Medicare Medicaid over $820 billion, Social Security over $714 billion, income security is over $420 billion, as well as programs like food stamps. There is over $212 billion of interest on the debt which can't be cut. They are also ignoring defense/military over $700 billion, and federal pensions over $211 billion which they would look at if they were really serious. The tax cuts for the extra wealthy as well as tax benefits of companies who don't pay any tax should be revoked to increase finances. It would be useful if the country was less dependent on oil which costs over $446 billion. They could also go after those as possible for the 2008 crisis, the people going to jail, and the corporations paying fines. Instead of a people not be named, corporations getting deferred prosecution and handouts. Financial handouts that could be much more wisely spent. The US could easily begin to reduce the debt (national at total). Congress and the president should also demand to see into the Defense Department black budget, estimated at $32 billion 2008, $50 billion 2009, possibly around $85 billion now even though they say only 56.7 billion.

To deal with a debt countries can raise taxes, print money, sell off privatized national assets, repudiate the debt, or plunder wealth through warfare. We may see one of these options but it seems like the following is most possible. We need to hope for a turnaround to happen and prevent the chaos. There are total income assets of over $75.5 trillion in the US that they could nationalize, (corporate, small business, household).

Wednesday July 13 Moody's placed its U.S. Aaa government bond rating and related ratings, like those of Fannie Mae and Freddie Mac, on review for possible downgrade. Standard & Poor's late Thursday placed the United States on negative credit watch, saying there is a "one-in-two" chance it will cut the AAA/A-1+ sovereign rating within 90 days. Moody's cited the "rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations, possible as soon as mid July". S&P cited two "separate but related" issues, both the "continuing failure to raise the U.S. government debt ceiling" and "our current view of the likelihood that Congress and the administration will agree upon a credible, medium-term fiscal consolidation plan in the foreseeable future."

The U.S. Treasury, forewarned, reacted immediately, as it did after the similar announcement from Moody's. They said, "Today's action by S&P restates what the Obama administration has said for some time: that Congress mukst act expeditiously to avoid defaulting on the country's obligations and to enact a credible deficit reduction plan that commands bipartisan support".Negotiators seem torn between a short-term lifting of the borrowing ceiling without substantial deficit reduction -- and a much larger package extending that would shrink the accumulated deficits over that time by trillions of dollars. Treasury's borrowing limit must be raised by midnight Aug. 2 to avoid default of its obligations, from the refinancing of Treasuries to a vast array of government payments, including Social Security benefits.

To maintain the value of their currency countries must produce at least as much as they consume from around the world otherwise the value will begin to fall causing prices to rise and it's standard of living to decline. The only source the US can likely borrow from to overlay default is the IMF. The IMF will likely call for austerity measures as a requirement. The US could be forced to raise taxes, raise interest rates, reduce social services, privatize government properties, reduce the work week, freeze wages or devalue it's currency. The US credit rating would be reduced, T-bills dumped, and reserve status lost. If the credit rating is reduced you will see increased dumping of US holdings on the market. Huge foreign selling of US dollars will drive US interest rates and inflation through the roof.

After World War II, via the Marshall plan, the US gave billions to help the European countries rebuild, and the US was forced forced to prop up British economy with foreign aid. It would be quite similar, IMF and primarily European partners, would be technically giving the US aid after a global war. The British pursued a socialist national agenda, and the government took over all of the major industries to spread the wealth around like the communists. Pretty soon they were flat broke and the final straw was in 1967 when the Labour Party decided to devalue the currency overnight by 14%. They thought this would make it easier for people to pay off their debts but it only made everybody that amount poorer. And it made everything much much more expensive in the coming years.

Losing status as the world currency happens all the time when countries get to far in debt or they consume to much and produce to little, and it has major repercussions. If oil is no longer priced in dollars the price of oil for Americans to skyrocket. The US has been blessed with cheap oil which has made gas cheaper in the US than almost anywhere in the developed world. The US averages $2.80, while gasoline ranges from $7.40 in Norway, to $6 something throughout Europe, to $3.80 in Canada which is a major oil producer. Airline travel will get much more expensive, as well as the cost to ship goods by truck and rail to stores, farming, going to work, taxis, public transit, just about everything. For this to happen all that is needed is for other countries to start preferring payments in something besides US dollars. Commodity (oil, food, lumber...) prices would soar, most banks would close, credit cards would stop working, no longer be able to buy gold or foreign currencies, or food stamps would no longer valid. You could even see electrical and water restrictions. American citizens may experience higher gasoline prices, commodity prices, and taxes as well as lower wages, much more equal to the rest of the world. There may also be massive strikes, riots, and civil unrest such as never seen in the US before. I can imagine if Congress were to force through austerity measures we could see similar events as in Greece. Although the riots weren't real rough until a second round went through. I just hope it doesn't happen because the US is much more set for massive civil disobedience. You just have to look online about renovated empty prisons and FEMA camps, trains, and "coffin" hordes. There are also the reports of them purchasing huge amounts of MREs add the military training for domestic actions.

A debt default by the government would be inevitable if it were not for the anomaly of being able to print more money. It is the one thing that has saved the US so far. The US is the only debtor nation that can legally print US dollars. The US government can't go broke because it can simply print more money to pay for its bad debts. America is only country in the world that doesn't to pay for its imports in a foreign currency.

The US is able to consume as much as wanted without worrying about acquiring the money to pay for it because US dollars are accepted around the world. The US hasn't had to do anything except borrow the money to purchase imports. This is done by issuing treasury bills which they purchase. Today the US government owes more money to more people than anyone else in the world. With all of the bad debts piling up the US has had to begin repaying debts by printing trillions of new dollars. Once the creditors figure this out they are going to be angry and will either stop accepting dollars as repayment or greatly discount the value. It's already happening and that will make our consumption way of life impossible to afford. Countries are starting to purchase oil in Euros. Even the IMF, one of the most powerful institutions, is recommending countries peg their currency to the Euro. It is now big enough to become the world's reserve currency. Most of the world is already preparing for a new world currency. The IMF is calling for a new global currency called the Bancor. It will likely be backed by gold and precious metals, possibly silver.

People from other countries who want to buy oil for example have to convert their currency into dollars to buy because oil is priced in US dollars. The value of their currencies is very important to foreign countries. To maintain the value of their currency they must produce at least as much as they consume from around the world otherwise the value will begin to fall causing prices to rise and it's standard of living to decline. Basically they must produce things to export to make US dollars which they can use to purchase imports that require. Otherwise most of the money would have to be converted to US dollars reducing their own money supply causeing inflation. The most successful countries are those who do not need to import as much as others.

It happened to Great Britain in the 70s. British Sterling was the reserve currency for most of the world for nearly 200 years. It continued to play this role until after World War II when America was forced to prop up British economy with foreign aid. Just like the Marshall plan when the US gave billions to help the European countries rebuild. Unfortunately the British pursued a socialist national agenda, and the government took over all of the major industries to spread the wealth around like the communists. Pretty soon they were flat broke and the final straw was in 1967 when the Labour Party decided to devalue the currency overnight by 14%. They thought this would make it easier for people to pay off their debts but it only made everybody that amount poorer. And it made everything much much more expensive in the coming years. It created one of the worst decades in British modern history. In the 1970s the government put a freeze on wages and there were strikes in nearly every sector. In 1974 they imposet a three day work week. The businesses were limited to using electricity on only three specified days a week and were not allowed to work longer hours on those days. TV companies were required to cease broadcasting at 10:30 PM to save electricity. Things got so bad that many hospitals were only accepting emergency patients. In 1975 inflation skyrocketed 27%. The extreme problems gave Britain the nickname the sick man of Europe.
Power being turned off, candles for light and heat. Animal fat candles because the regular were sold out.