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EuropeInToilet

Fitch Ratings, a well-known ratings agency, has downgraded the U.S. credit rating to negative from stable. It’s about time. Let’s explain why.WASH, RINSE, REPEAT

Debt, no growth, debt, little growth, high unemployment with more debt  This is the United States recipe for its own disaster but one could easily be coaxed away from concern considering:

  • All sales records were broken last Black Friday with the early morning spend-a-holics American consumers.
  • The stock market is rallying again – up some 600 points in the past couple of days.
  • A large swath of cross industry U.S. companies are making extremely handsome, quarterly profits.
  • Central Banks are dollar swapping to keep the Euro afloat giving European lenders confidence and temporarily halting the downfall of the major banks in Europe.

Everything is cheery. American consumers should be brimming with confidence. Society is back on track for systematic global growth with all the major economies. Right?

Wrong. All of Europe, even Germany, is dependent upon the strength of the dollar to prop-up and solve the problem of the inefficient Euro vis-à-vis liquidity and austerity. This trend has become commonplace as central banks methodically manipulate currencies to maintain liquidity and protect their banking system.

ALL LOSERS NO WINNERS

A sound global investor is concerned with the fiscal solvency of a country and the strength of their currency. These variables share space with other primary concerns that gauge the health and wealth of an economy. The result acquired for the investor is simply confidence or skepticism with the foreign economy under review.

The major economies of the world are sheepishly in denial concerning the solvency of the U.S.A. Unfortunately, they have to be since the strength of their floating currency depends on the overall strength of the fiat dollar. Politics-as-usual will continue to kick the U.S.A.’s fiscal can down the road while the unrelenting debt toll continues to expand. Extrapolating major indices from the real-time debt clock, there are reasons to be seriously concerned:

  • The United States national debt is currently at 119% of its GDP – well past the economic significant milestone of 100% debt to GDP. Once the debt of a country surpasses its GDP, a compounding exponential growth of debt is normally experienced. History shows this to be true with both the  Zimbabwean Dollar and the German Mark under the Weimar Republic. This phenomenon is mainly due to the sharp, unyielding increases of interest payments on an expanding principle. Taking into consideration the United States’ GDP, CPI, real unemployment, compounding national debt, the aggregate debt of the United States, over 200 trillion of combined derivatives within the big six U.S. banks, and most importantly, the treasury holdings of foreign nations (+15 trillion), the United States’ dollar will lose significant strength when China and Russia liquidate more than fifty-percent of their U.S. treasury holdings. This will be the tipping point to a major downside within the United States economy.
  • The United States unfunded liabilities is a staggering 115 trillion dollars which equates to a staggering 7.6 times its GDP. Taking into consideration the United States debt-to-income ratio and adding in its unfunded liabilities and diminishing purchasing power of the dollar, the United States will never be able to pay what it owes to all future generations for Social Security, prescription drug coverage, and Medicare. It’s economically impossible.
  • Don’t forget about that old hag: inflation. Rates are expected to increase sometime in 2015/2016 due to the Federal Reserve expanding the base currency in the system while artificially holding interest rates at 0%.
  • Deflation is most likely to occur before an inflationary state presents itself mainly due to decreases in the velocity of money resulting from dwindling discretionary reserves of the Middle Class.
  • Every citizen of America owes $186,000 for the aggregate of all public debts owed by all federal and state governments. Chilling.
  • Fifty-one percent of Americans currently receive governmental benefits. Note that these benefits are only valid as long as the U.S. dollar maintains its dominance in the global fiat currency arena.

U.S. ONLY SALVATION

America’s light of prosperity is dimming and will, one day, go black. The only entity that gives it an edge over the rest of the civilized world are her governing documents: The Constitution of the United States and her Bill of Rights. If too many Americans turn their backs on the principles that allowed for their countries success, the United States will end up being nothing more than a loose knit, Balkanized society of renegade misfits.

CONSTITUTIONAL GLUE

The U.S. Constitution, Bill of Rights, Declaration of Independence, and the Federalist Papers (in their original form) are the only assets of intrinsic value left in America.

Americans continue to let a large conglomerate of elected Congressmen, at the hand of an absolute corrupt Executive Branch, alter the guiding document that granted its citizenry such basic gifts of freedom and liberty. For decades, cultures around the world aspired to adopt the cultural and political model of the United States. Today, these same cultures are realizing the massive failures of the United States and are adopting other avenues for cultural assent.

Make no mistake that the United States’ domestic policies and its foreign policies have put it on the road that ends in horrendous despotism. If we, the people of the United States, continue to let the hope, dreams, and desires of free men to be squandered at the hands of the few, we all lose in the end.

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