Can anyone envisage the likely ramifications of the failure to elevate the debt ceiling in the US? What's the future look like if they default?
http://www.the-privateer.com/gold6.html Now, we approach the end of the first calendar quarter of 2011 with QE 2 having been in operation throughout the period. It is a safe assumption that the Fed has bought an even larger percentage of the Treasury's debt than it did in the last quarter of 2010. On April 3, we will enter the second quarter of 2011 and the LAST scheduled three months of QE 2. Somewhere between then and the end of June, the Treasury is going to hit its debt limit. And if the Fed does NOT extend its Treasury debt monetisation into the third calendar quarter, "somebody" is going to have to be found to make up for the 60-75 percent of Treasury debt the Fed is now "buying". On March 25, Mr Charles Plosser, the head of the Federal Reserve Bank of Philadelphia, laid out a plan by which the Fed could begin to "withdraw" stimulus after the scheduled end of QE 2. Mr Plosser suggested that the Fed could get rid of $US 1.5 TRILLION of the "reserves" on its balance sheet by selling $US 125 Billion for each 0.25 percent rise in the benchmark rate. If you divide $US 1.5 TRILLION by $US 125 Billion you get a figure of 12. That translates to 12 consecutive 0.25 percent rises in the Fed Funds rate. Assuming that these rises coincide with regularly scheduled FOMC meetings - of which there are eight a year - we have a scenario in which the shrinking of the Fed's balance sheet under this plan would take 18 months. We also have a scenario where the Fed Funds rate at the end would be 3.25 percent. This is 2 percent less than the Fed Funds rate was at the start of the Fed's manic rate cutting exercise in September 2007. That exercise saw it fall to its present 0.00 - 0.25 percent level by December 2008. If we go back further, the Fed Funds rate was lowered from 6.50 percent to 1.00 percent in 2001-03. When the Fed began to raise rates in mid 2004, it did so in much the same way as Mr Plosser suggests. The Fed raised rates by 0.25 percent at each of seventeen FOMC meetings between June 2004 and June 2006. Then - the GFC hit. Mr Plosser blandly assumes the Fed can do this again. We don't think so. We don't think the markets will give him or his colleagues anything like the "leeway" they had then. The problem is, what else can the Fed do? Gold has now been kept inside a fairly tight trading range in US Dollar terms for almost five months. It's possible that Gold will still be trading at or about the $US 1435 level in August. But it's not likely.
Doesn't it depend on how quickly they (the banking cabal) can get in place a new global (reserve) currency? On the one hand, if they can keep control and confidence in their fiat money printing schemes, then we should expect a new international currency for settling trade. With business as usual, except of course the USA would be insolvent and without any manufacturing industry and would not continue to be the consumers of the world. On the other, if they fail to keep the lid on things and international trade reverts back to gold, then gold (and silver) will be revalued to cover the global money supply, the whole geo-political basis of the world will be upturned and those with gold reserves will suddenly find they are wealthy and those without will be very put out. This will be intolerable to the goons with guns and there will be global war, IMHO. For while they can steal the wealth of individuals through their fiat currency antics, they find themselves secured on top of the global power pyramid. If they loose their position of power they will fight to reclaim it. Given that the only world leading assets they have left are military, then you don't have to be Einstein to figure out how things will go from there. Then again, Gillard and Brown could go global with their Carbon Tax and we will all live happily ever after . . . albeit with less and less "wealth for toil".
We can never know exactly how that plays out on the end. For example if someone would tell you 6 months ago that in 6 months time GSR from 65 and silver price from $18 will reverse, and GSR will be a lower number than the silver price. Would you believe that?
They should change it to 'wealth for speculation' Wealth for actual work was put to the sword the moment the Keynesians rode into town, sadly, to a resounding applause by the hopelessly unenlightened 'Aussie Aussie Aussie Oi Oi Oi!' generation. Damn fools.
Other than a temporary political stunt, there is -0- chance that the debt ceiling won't be raised. You want to see all hell break loose in the US, just put us on a real budget with no advance notice. The earliest chance for real change is after the next presidential election. If Obama is reelected, then the real financial change will be confiscatory vs. budgetary. Follow Argentina if you want to see where the US is headed under a second Obama term.
The world has always had a leading economy that is typically also the leading military power. 1941 - Present - United States Industrial revolution (circa late 1700's) to World War 1 - United Kingdom Renaissance - Industrial Revolution - Europe with competing powers eg Spain, Italy, France.... 500AD - Renaissance - Dark Ages and little economic activity/growth 500BC - 500AD - Holy Roman Empire Prior to 500 BC - Egypt And so on.... Point is, there has always been a leading economic and military power and thats pretty unlikely to change. Difficult to see the US lose its mantle as economic leader while it is still the worlds military leader.
Maybe so, but I think you've got it the wrong way around. I think it will be difficult to stay the military superpower in the long run if they're not also an economic superpower. Look at what happened in the USSR when they collapsed economically.
Good point, although i reckon its the other way around... US will remain military leafer while its still the economic leader and then some years from the momentum built ... but after that, its China all the way, unless of course its economy tanks somewhere along the line, which is of course a distinct possibility
Certainly. China seems the most likely, but they're riding the speculative bandwagon for all it's worth at the moment as well. I wonder what the state of the world would be with no leading military super power to govern it? Let's fire up Civilisation V and find out...
China could very well have issues of it's own nest to deal with shortly " IF " a spread of the democracy contagion takes a hold there , The Government has been arresting and detaining a large amount of activist's in the last few weeks in an effort to stamp out an undercurrent of protest becoming more mainstream . If an event such as Tienanmen square were to happen in the current world climate and with the advance of technology since then allowing a near instant transmission of whats happening on the ground, China could have some serious destabilizing issues that could also have an effect on the Global economy.
Not to mention, crash the living crap out of the Australian markets. We're so dependent on Asian investment it should leave rational people lying awake in bed at night with worry.
Yes. It would be interesting to see some direct and investigative reporting on what the on-going Japanese disaster is doing to Oz. Floods, Cyclones, Largest Trading Partner burning up in a radioactive disaster . . . dare one ask "What's next?" Could be some of the economic wizardry has been lost already. "My! Economic partners, fiat currencies and crony prosperity comes and goes so quickly here" http://www.youtube.com/watch?v=31EydOVS4no Follow the yellow brick road . . . with shoes of silver. Edit: Just for fun - Find the correspondances between the Wizard of Oz and today's world. http://www.latrobe.edu.au/childlit/StWebPages/LaurenChilvers/webpages/glossary.htm
