General Stock Ideas

[gfp927z]

(cont) The US annual spending and deficits are taking quantum leaps higher as we speak. The Feb deficit was $215 bil, and the new tax cuts and spending haven't even started yet. The US Debt/GDP is already a whopping 105% on its way to Greece type levels. GDP growth has been low for decades, and a large part of the US GDP is from non-productive and parasitical areas like financial services and Wall Street casino activities that actually hurt the real economy. Not much real production coming from the US these days, our biggest export is 'entertainment' related, ie trashy movies and rap music.

The US debt is $21 trillion, on its way to $30 trillion. If GDP continues to stagnate, that would put the US Debt/GDP ratio at a monstrous 150% (Greece's is approx 179%). As the Fed raises interest rates, the interest on this debt balloons dramatically just as the usual Treasury buyers have been backing away (China, Japan, Arabs). The Federal Reserve has been stepping in by buying Treasury bonds for years now, but are scaling this activity way back (quantitative tightening).

Rickards describes how tenuous and fragile the current financial system is, and how a few missteps could blow things up worse than 2008, and this time the Fed can't ride to the rescue because they're already tapped out. That's why they're so desperate to 'normalize' interest rates and reduce their bloated balance sheet. As things stand now the Fed isn't capable of dealing with the next big financial crisis - the only entity with a clean balance sheet and the required liquidity is the IMF with their SDRs/Special Drawing Rights.

Above the US Fed is a bigger finance oligarchy, and the eventual plan is to permanently transition to SDRs during the next big crisis. The SDR will be the new world reserve currency, with the US dollar relegated to being just another local currency like the Mexican peso, ie used for transactions within a particular country. For global trade and settlement between central banks, the SDR will be used instead of the current dollar reserve system.

The transition to this SDR system will dramatically reduce the dollar's value, and the societal convulsions could be acute, as described by Rickards in his 'Ice-9' scenario -