US defaults on its debt in summer 2009

[tama]

Predicts the LEAP/EURO2020 thinkthank which has been calling this systemic crisis since 2006 fairly accurately. If US public debt (now about 10,5 trillion) keeps increasing as fast as it has done for past few weeks, it would be by july about 14 trillion.

"In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US. The process will result from the following five factors studied in detail further in this GEAB:

• The recent upward trend of the US Dollar is a direct and temporary consequence of the collapse of stock markets

• Thanks to its recent « political baptism », the Euro becomes a credible « safe haven » value and therefore provides a « crisis » alternative to the US dollar

• The US public debt is now swelling uncontrollably

• The ongoing collapse of US real economy prevents from finding an alternative solution to the country's defaulting

• « Strong inflation or hyper-inflation in the US in 2009? », that is the only question.

Studying the case of Iceland can give an idea of the upcoming stages of the crisis. That is what our team has been doing ever since the beginning of 2006. This country indeed provides a good illustration of what the US and the UK should be expecting. It can be considered – and that is what most Icelandic people do today – that the collapse of Iceland's financial system came from the fact that it was disproportionate to the size of the country's economy."

More:
http://www.leap2020.eu/GEAB-N-28-is-available!-Global-systemic-crisis-Alert-Summer-2009-The-US-government-defaults-on-its-debt_a2250.html

[Warren Stupidity]

1. Constitutionally obligated to not default.

So we will simply print money to pretend otherwise. We actually have little choice.

[tama]

5. Constitution, what's that?

Federal Reserve is not constitutional, to begin with. So what's stopping TPTB dropping the old dollar and issuing the "new dollar"?

[Warren Stupidity]

7. Nothing would stop a currency change.

However the federal government has to go through the motions of paying its debt obligations. The Constitution does specify how that is done or what that really means. So, as I said, assuming the worst, we will inflate our way out of an impossible debt burden. If that is by printing 'new' dollars that devalue the old by 10x or 100x or whatever, then that is what they will do. We won't be the first to go down that road.

[tama]

13. If I understood correctly

that is what LEAP is predicting. Of course, the new dollar would end the status of old dollar as world's reserve currency, meaning that US would have to produce something of real value to be able to buy (barter) oil. As US can't do much of that, well, fill in the blanks...

[Neshanic]

2. "Hi GM here, we are WAITING!" tapping fingers on teller window.

[dysfunctional press]

3. that's why they want a black democrat in office...

to shoulder the white man's burden.

[Fumesucker]

23. Nicely put.

That's it in a nutshell, Obama really had best be able to walk on water or we are lost.

[tama]

25. Christ

(or Buddha-Nature or just plain Whole All aka Nature) is inside each part of the whole, but does Obama realize that or is he still blinded by the system of greed and selfishness and alianation from nature? Any bets that Obama will pay off his Karma debt in an instant and wakes up to "enlightemnt" before or during his precidency?

[Selatius]

4. The Federal Reserve would sooner abandon the US to hyperinflation Germany-style than default. nt

[tama]

8. More likely, both

The devil will be in the fine print.

[Neshanic]

9. We are SO going to have the BIG inflation after the 2008 money throw fest.

[Atman]

6. It was BushCo's endgame all along. Total economic chaos -- New World Order

It's time to face facts. Mr. Obama will provide a great spiritual uplift to some of the country, a deep hatred among others, but it won't change the complete chaos BushCo has set him up for. DELIBERATELY. "Drown the economy in a bathtub." "New World Order." Off-the-books wars. Endless tax cuts and an outright raid on the treasury. Social Security in the stock market. One way or another they were going to bankrupt the whole system so they could re-organize under a new structure. Whomever is in the Whitehouse will go along for the ride. He'll uplift us, give us hope, explain to us that the nice men in the expensive suits are just doing what's best for us.

He'll probably believe himself as much as we will. And when the serious shit hits the fan and a new, uh...more socialist-like system is emerging in its place, as it is intended to do, Barack Obama will be held to blame, as will his Democratic counterparts. It's going to be a crazy ride. We're entered totally uncharted waters.

Hmm...now do we want Barack to repeal all of the Patriot Act stuff, and the FISA decision, or should he use them against the GOP first? Wow. It's really going to be an interesting few years.

.

[tama]

11. Neither wing

of the Imperialistic Party of America will go against the military-industrial complex and dispand US military - the first thing of importance. First the two-party system will have to self-destruct. They will likely take down the whole federal governement with them.

[yodoobo]

10. Nope. Obama is sworn in as President in January

have a little faith.

Now if McCain steals it. All bets are off.

[tama]

12. I have more faith than you can comprehend

but the Saviour is not Obama. That is a false framing.

[yodoobo]

15. Worst case scenario - the US won't default

Anytime you can print your own money, you can't go bankrupt. No matter how bad it gets, the US can simply issue more funds

Now that would of course create a hyper inflation situation.

Hyperinflation, as bad as it is (and it is bad), does have one positive aspect, it wipes out debt. It wipes out debt at the personal level and the macro level.

If we suddenly experienced 1000% inflation this year and experienced evenly, everyone is essentially earning 10x what they were a year ago. Suddenly that $200,000 mortgage is not so bad now that you are earning $180,000 a year at Walmart.

Unfortunately, hyperinflation also wipes out savings. That huge 1 million dollar 401k isn't so comforting now that gas cost 40 dollars a gallon, a loaf of bread is 50 dollars and your property tax bill is $75,000 this year.

No. The US won't default on its debt as long as the printing presses are still running, but we might still be screwed.

[tama]

17. As has been pointed out

it's not the debt that US ownes, but the (MINDBOGGINGLY INSANE!!!) pace at which the debt has been accumulating since September. The norm for Bush years has been about half a trillion per fiscal year. FY 2008 shot up to 1 trillion. FY 2009, if current pace continues and does not keep increasing exponentially, goes somewhere between 6-10 trillion. Most simply put, the debt based economy cannot continue, the wall is coming against fast. When the wall is hit, inflation or hyperinflation is not the real issue, but where and how to get food and energy for the most basic needs. This is the end of the American Consumer.

[Selatius]

18. If inflation were at 1000 percent, your employer, if he is cheap, would give you a 500 percent raise

The rest he keeps as profit for his own sake.

[tama]

19. Real inflation

currently at 13% (?), how big raise did the employee get this year?

TPTB likes to define inflation as rise in salaries. What matters, only thing that matters, for the consumer is the purchasing power. How many potatoes for an hour of labor. But what about those without even lousiest of jobs? There is more and more famine in US and it is spreading. Everywhere else but in the consciousness of the news-makers who worry about banks and capitalism, not essentials.

[yodoobo]

21. true inflation is devaluation of the dollar

Price increases are the response to true inflation.

The two terms are widely confused for one another. Many times intentionally.

Ideally, if inflation is at 13%, your raise, your price should increase by 13%. We all know how that works out.

[yodoobo]

20. absolutely.

Thats why I threw in the qualifier. Its a simplistic example.

Real hyper inflation is messy and absolutely destructive.

[Selatius]

24. I know it. A good friend of mine's grandfather lived in Germany when hyperinflation hit.

The stories of people taking bag fulls of cash to the store to buy loaves of bread because prices went up hourly? They're true. It was a terrible time for his family. The funny part is they were in for loads more surprises in the form of a second world war and Hitler. Of course, he and many others think Hitler wouldn't have gotten in if it weren't for the economic situation and an unemployed workforce that was angry and looking for easy scapegoats.

[Robbien]

14. It needs more than faith. Take a look at our schedule of borrowing

Fiscal Year ends: Sep 30


Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 499,388,088,890.40 so far this fiscal year. Almost a milestone.

Heavy borrowing seems to start 10/18/2008.
US borrowed $859,481,182,543.73 in last 35 days.
That's 859B$ in 35 days.
More than any year ever, except last year, and it's 85% of that highest year ever only in 35 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 35 DAYS NOT 365.

Taken from DU's SMW thread
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3567295#3567654

We borrowed just a little shy of a trillion dollars in just over a month!

[Neshanic]

16. That's why my tinfoil hat theory of Bush propping up the economy

at all costs till after the election shows in your numbers. They just thought that they would be able to squeek by, then the whole house of cards would come down. But the economy tanked a bit early than they had hoped.

[yodoobo]

22. As tinfoil hat theories go, that one is pretty sound

One of the better uses of Reynolds wrap that I'm aware of :)