Tag Archives: Massive Debt

Obama rejected tough options for countering Chinese cyber | Washington Free Beacon

Meanwhile, China recently issued a veiled threat to the United States about U.S. accusations of Chinese military cyber espionage. China told U.S. officials that continued U.S. public accusations of cyber espionage would render future bilateral discussions unproductive during recent U.S.-China talks following the release of a security firm’s report linking the Chinese military to cyber spying.

On plans to deter Chinese cyber attacks, senior administration officials turned down a series of tough options designed to dissuade China from further attacks that were developed over a three-month period beginning in August 2011.

Obama rejected tough options for countering Chinese cyber | Washington Free Beacon

Weak US leadership coupled with sequestration spells big trouble ahead. The US nuclear commander said he might not be able to defend the US by September, 2013 due to sequestration. Ignore these warnings at your own risk.

U.S. nuclear commander: Sequester may affect readiness in 6 months – Washington Times

The commander of the U.S. nuclear arsenal told lawmakers that the big across-the-board cuts to military spending mean that his forces might not be able to defend the United States in six months’ time.

U.S. nuclear commander: Sequester may affect readiness in 6 months – Washington Times

Does it appear that the US is in the process of getting its wings clipped? It certainly appears that way. Not a gradual decline, but a clipping. Due to massive debt and the rise of modern liberalism, the US has also become more unstable internally.

It is interesting that while the US is getting its wings clipped, Russia is making some noise. The Russian bear may be on its back, but it is making some angry noises. In particular implied threats of nuclear attack if the US doesn’t stop interferring in the affairs of other countries.

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If the US, Russia and China did go to war, do you think little Iran might be the facilitator somehow? Looking back after the war, could one see that Iran was the catalyst for this action?

Can you see events today in the following Bible verses? Take a look:

And four great beasts came up from the sea, diverse one from another.

The first was like a lion, and had eagle’s wings: I beheld till the wings thereof were plucked [clipped], and it was lifted up from the earth, and made stand upon the feet as a man [made unstable], and a man’s heart [The Bible says this is a bad sign] was given to it.

And behold another beast, a second, like to a bear, and it raised up itself on one side, and it had three ribs in the mouth of it between the teeth of it: and they said thus unto it, Arise, devour much flesh.

After this I beheld, and lo another, like a leopard, which had upon the back of it four wings of a fowl; the beast had also four heads; and dominion was given to it.

After this I saw in the night visions, and behold a fourth beast, dreadful and terrible, and strong exceedingly; and it had great iron teeth: it devoured and brake in pieces, and stamped the residue with the feet of it: and it was diverse from all the beasts that were before it; and it had ten horns.

I considered the horns, and, behold, there came up among them another little horn [Iran?], before whom there were three of the first horns plucked up by the roots: and, behold, in this horn were eyes like the eyes of man, and a mouth speaking great things.

Daniel 7 KJV – In the first year of Belshazzar king of – Bible Gateway

Why Russia’s leaders don’t respect the US anymore | Russia & India Report

Apart from a brief period in the early 1990s, Russia’s rulers never really liked the United States. But they always respected America. Not anymore. Tom Donilon, Obama’s national security advisor, is coming to Moscow to deliver a message to Vladimir Putin. In the wake of the expulsion of USAID from Russia, a wave of repressive legislative acts aimed at Russian civic society and, finally, the so-called “Anti-Magnitsky Law,” punishing Russian orphaned and sick children for the misdeeds of a few corrupt Russian civil servants, one would expect a frank exchange of views on the state of bilateral relations. But, if one believes the diplomatic rumour mill in Moscow, the message from the White House will seemingly be about a so-called “Reset-2” – an attempt to re-launch the relationship, after “Reset-1” largely failed to deliver. It seems that the main goal of “Reset-2” will be START-4 – yet another nuclear arms reduction treaty. Obama has a touching 1960s and 1970s attachment to nuclear disarmament, which increasingly looks to me like an honest attempt to earn his undeserved 2009 Nobel Peace Prize postfactum.

Why Russia’s leaders don’t respect the US anymore | Russia & India Report

Since Russia is a banana republic (Replace banana with oil) with nuclear weapons, it’s interesting that it has relative contempt for the US. This is what happens when you don’t lead or lead from behind, which is the same thing. When you have an empire go into decline due to massive debt, weak leadership and the willingness to disarm, then you are asking for trouble.

The lessons of the Byzantine empire:

I. Avoid war by every possible means, in all possible circumstances, but always act as if war might start at any time. Train intensively and be ready for battle at all times — but do not be eager to fight. The highest purpose of combat readiness is to reduce the probability of having to fight.

II. Gather intelligence on the enemy and his mentality, and monitor his actions continuously. Efforts to do so by all possible means might not be very productive, but they are seldom wasted.

III. Campaign vigorously, both offensively and defensively, but avoid battles, especially large-scale battles, except in very favorable circumstances. …

IV. Replace the battle of attrition and occupation of countries with maneuver warfare — lightning strikes and offensive raids to disrupt enemies, followed by rapid withdrawals.

V. Strive to end wars successfully by recruiting allies to change the balance of power. …

VI. Subversion is the cheapest path to victory. …

VII. When diplomacy and subversion are not enough and fighting is unavoidable, use methods and tactics that exploit enemy weaknesses, avoid consuming combat forces, and patiently whittle down the enemy’s strength. …

Take Me Back to Constantinople

Decline Of The Asian Family: Drop In Marriages, Births, Threatens Economic Ascendancy – Forbes

But these countries shared one common element: a strong Confucian family ethos. Three of Confucianism’s five key relationships are familial, led by the all-important father-son tie. In East Asia, business has often been driven by familial concerns. Hard-driving “tiger Moms” or workaholic Dads sacrificed all for the benefit of the next generation. But now that foundation is beginning to crumble, and if the trend is not reduced, the 50-year-long ascendency of the region could be threatened.

Decline Of The Asian Family: Drop In Marriages, Births, Threatens Economic Ascendancy – Forbes

Confucianism suffers from the good emperor problem. A good leader can take society to new heights. A poor leader can take society over a cliff. The West suffers less from the good emperor problem because society is less rigid and questions authority more.

Asian countries are good at catching up with the West, but then they blow up. That’s obviously a simplification, but the Asian economic model is unsustainable and bad for Asia and the West. It creates bubbles for both sides that blow up.

Consider two islands. The Asian island heavily exports to the other island. The western island imports heavily and borrows to pay for it. The Asian island gets a flood of money from the western island which the people use to drive up housing prices. The western island ends up in massive debt. At some point both sides will blow up.

Italy: “Mosques Springing Up like Mushrooms” :: Gatestone Institute

After it came to light that the majority of the mosques in Italy are controlled by the Muslim Brotherhood, Italian Interior Minister Roberto Maroni called for a moratorium on the building of new mosques until a new national law could be written to regulate the phenomenon.

According to Manes Bernardini, a politician with the Northern League in Bologna, “Mosques are springing up like mushrooms, and mayors can do nothing about it because there is no national law to regulate the proliferation of these structures.

Italy: “Mosques Springing Up like Mushrooms” :: Gatestone Institute

It would appear that Islam is an emerging problem – a descending dark cloud – on the western world. It turns out that Islam is more of a symptom for a much bigger problem. The real problem is the rise of modern liberalism. Modern liberalism is unable to recognize threats until it is too late. In this case, modern liberals are allowing Muslims to immigrate in large numbers, and is protective of them. The modern liberal cannot imagine losing his own country to Islam or other threats.

Massive debt, game changing immigration, military reductions, inability to confront threats (political correctness) and no concern for nuclear war all point to big problems ahead for the western world.

The Dynamics of Doom: Why the Eurozone Fix Will Fail

The only way out of the Eurozone end-game is massive debt forgiveness and a return to national currencies. The first will destroy the banks, the second will destabilize the German export economy. “Extend and pretend” is an endgame, not a fix.

Despite having described why the Eurozone is doomed on numerous occasions, I missed certain dynamics of the EU’s endgame. At the risk of overwhelming you, here are a few of my Eurozone-related stories over the past two years:

The European Model Is Also Doomed (February 7, 2009)
When Debt-Junkies Go Broke, So Do Mercantilist Pushers (March 1, 2010)
Why the Euro Might Devolve into Euro1 and Euro2 (March 2, 2010)
Why the Eurozone Is Doomed (May 10, 2010)
Ireland, Please Do the World a Favor and Default (November 29, 2010)
Why The European Union Is Doomed (March 28, 2011)
Greece, Please Do The Right Thing: Default Now (June 1, 2011)
Why the Eurozone and the Euro Are Both Doomed (June 23, 2011)
Greece Is a Kleptocracy (June 28, 2011)
500 Million Debt-Serfs: The European Union Is a Neo-Feudal Kleptocracy (July 22, 2011)

Let’s dig into the dynamics of doom:

charles hugh smith-Weblog and Essays

Japan is Out of Action: Who is going to buy US debt now?

Is the U.S. government on the verge of a massive debt problem? For years, the U.S. government has been able to borrow all the money that it has wanted to at extremely low interest rates. But now many of the lending sources that the U.S. government has been depending on are drying up. Even before this recent crisis in Japan, a number of big players were moving away from U.S. Treasuries and the U.S. Federal Reserve was having to step in to pick up the slack. But now this debt crunch is about to get a whole lot worse. For years, many had feared that it would be China that would start dumping U.S. government debt, but now it turns out that Japan is going to be the real problem. Right now, Japan is the second largest foreign holder of U.S. government debt. Japan currently holds about $882 billion in U.S. Treasury bonds and they are likely going to have to liquidate much of that in order to fund the rebuilding of their nation. So needless to say they won’t be accumulating any more U.S. government debt. But the U.S. government still needs to borrow a trillion and a half dollars from someone every single year. So where in the world are they going to get it?

This is called a debt problem. Have you ever gotten to the point where you are in debt up to your eyeballs and nobody wants to lend you any more money?

Debt Problem: Who In The World Is Going To Buy The Billions Of Dollars Of Debt The U.S. Government Is Constantly Pumping Out Now?

The EU Is Pushing Ireland to the Brink of Ruin – SPIEGEL ONLINE

The Irish government has just passed its fourth budget in two years. But the drastic savings measures it contains will not help the country’s massive debt problem. Some economists are now predicting it is only a matter of time before Ireland defaults.

Drastic Cuts and Punitive Interest Rates: The EU Is Pushing Ireland to the Brink of Ruin – SPIEGEL ONLINE – News – International

Three Key Markets Pointing to More Economic Pain Ahead

by Bryan Rich 07-03-10

Bryan Rich

In the past two weeks, we’ve seen China de-peg its currency from the dollar, the UK roll out historical fiscal austerity measures and Japan release details on a plan to tackle its massive debt load.

The knee-jerk market reaction to these events was positive … i.e. interpreted as a positive influence on economic growth and a bullish cue for risk appetite.

In fact, for a few weeks in June the markets embraced all suggestions of fiscal consolidation after:

  • Greece agreed to an aggressive austerity plan.
  • The rest of Europe followed vowing to slash budget deficits.
  • The UK announced its most severe tax hikes and spending cuts since the 1970s.
  • Japan followed with a plan to balance its books and cut debt.

However, make no mistake about it, all that austerity is not coming by choice but rather by market forces. When Greek bond yields skyrocketed to more than 19 percent in May, countries with bloated debt and deficits were put on notice:

“Get your fiscal houses in order, or you will be shut out of the public bond markets.”

All the while U.S. stocks, perhaps the best proxy of expectations for global economic health, screamed higher, gaining nearly 10 percent in 10 days.

Then, the big piece of the puzzle the world had been waiting for: China. China announced that it would end its 2-year peg to the dollar and adopt a new exchange rate policy for its yuan — in other words, a yuan revaluation.

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The stock market is acting like a toy balloon in a room full of razor blades. It’s down nearly 1,200 points in just two, short months. Equally troubling: Volatility is increasing — 200-point-plus down days are growing increasingly common.

Clearly, the stock market is trying to tell you something very important. If you listen, you stand a good chance of grabbing substantial gains this summer.

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All Good Things for the Global Economy, Right? Well, Not Exactly …

China moved off of the dollar peg to a trading band based on a basket of currencies. While many think this was a concession from China to strengthen its currency against the dollar, I see it differently …

Perhaps China’s policy change indicates a concern for the global economy. And thus, it was a move to diversify China’s exchange rate risk. As an export-oriented economy, what is China’s exchange risk? Obviously, it’s a stronger yuan.

As I’ve said in past Money and Market columns, historically, financial crises tend to breed sovereign debt crises. And sovereign debt crises tend to lead to currency crises.

If China foresees the possibility of a growing sovereign debt crisis, global currency devaluations and perhaps even a break-up of the euro, it doesn’t want its currency pegged to the dollar … a currency that will likely continue to strengthen as the world’s safe haven currency.

China is an ardent defender of its export market. And a continued decline in the euro and potential fall of the currencies of its other trade partners makes China’s exports less affordable — when pegged to a strengthening U.S. dollar.

The following three key markets are good proxies for what we might see coming for global economic performance and risk appetite. Take a look at what they are projecting:

Proxy #1— Key Reversal Signal in Stocks

After retracing nearly 10 percent from its June low, the S&P 500 topped out on the day China announced its new currency policy. That marked a bearish outside day (circled in red in the chart below), a key technical reversal indicator.

Now the stock market has formed a head and shoulders pattern that suggests a move down to 860 … 24 percent lower than the peak level seen just two weeks ago.

Chart 1

Proxy #2— Ten Year Yields Below 3 Percent

While many market followers have been forecasting higher interest rates, the ten-year Treasury market is responding with the exact opposite.

As risks of sovereign debt problems rise and the probability of a double-dip recession for the world increases, global investors are continuing to pile into the U.S. Treasury market for safe haven. And that’s driven 10-year yields back below 3 percent.

Chart 3

Proxy #3— Commodities Breaking Down

Lastly, there’s a famous historical study on sovereign debt crises by Harvard professor Kenneth Rogoff and University of Maryland professor Carmen Reinhart that suggests sovereign defaults are typically triggered by a collapse in commodity prices.

So what are commodities telling us?

Well, for one thing, the second quarter has been the worst quarter in more than a year for commodities. The total return index of 24 raw materials plunged 10 percent since the end of March.

If the following chart of crude oil is any indication, commodities could be headed much lower.

Chart 4

This week the price of crude oil broke through trendline support. Moreover, the technical pattern suggests crude could fall to the mid-50s, at minimum.

To sum it up, the key barometers of stocks, interest rates and commodities are all pointing to lower levels. And from a big-picture standpoint, the combination of these signals should concern anyone who is not prepared to weather another economic and financial market storm.



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So your bank account’s wiped out

Given our massive debt load, this fictional apocalyptic scenario’s not looking that bad

And this is before EMP hits.

So it wipes out your bank accounts. What’s in there? I mean, really. The average American household is carrying $121,953 in personal debt. What would be so bad if something goofy happened and all the meters got reset to zero? And Joe Schmoe’s credit card debt is as nothing compared to what the government’s signed him up for: USA Today recently calculated that the average American household is on the hook for $546,668 in federal debt—i.e., not including state and municipal. The Atlantic crunched the numbers further and reckoned that, to pay off the federal/personal debt over half a century at three per cent, the average household would have to write an annual cheque for $25,971. U.S. median household income is 50 grand, before taxes—and that $26,000 cheque assumes no further increase in federal or personal liabilities.

Read More…

Tipping Point for U.S. Treasuries, From China’s Perspective

The bottom line is that without China to fund our massive debt needs, either the US must raise rates significantly to find other sources or the electronic printing presses will be hard at work. Every signal from the US government is that they are dead set on using monetary means to restart growth. That means the Fed buying at least $4T – $8T in US Treasuries over the next two years and holding rates artificially low in the process. This level of money being printed by the Fed should lead to a dramatic decline (30%-50%+) in the value of the dollar. Commodity prices denominated in USDs should also rise significantly as long as world demand does not completely evaporate. Some argue the downward pressure on the USD may be counteracted by a continued flight to it as a safe haven, particularly when many European economies are in worse shape than ours.

Read More…