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The Debt Crisis: What it All Comes Down To
The thing I value the most in life is freedom- the freedom to do as I choose (as long as I don't infringe on anyone else's freedom) and the freedom to think independently. People often ask me why I don't want to work in the financial industry. My reply is that I relinquish my freedom as soon as I walk through those doors and don't be surprised if my analysis deteriorates to the level of the average analyst. Doing this is far more rewarding; I can say as I please and don't have to answer to anyone. I trade real money. I don't buy into a 401k program with a company match- then turn around and offer stock-specific investing advice. I have a conscience. When I say "buy the dips in gold and take a walk in the park", I mean it. This is something I literally do.
Sorry, but that was a long-winded way of saying most analysis is perverted by biases. Everyone has an agenda. How brazen do you think analysts will be in predicting a financial collapse if this implies they will lose their jobs and their hefty bonuses? Let's get real here. They have blind spots the size of planet earth, and I am exposing them in real-time.
I am currently reading a book about accounting (I know, I'm a nerd). One of the basic accounting games the book says companies play is capitalizing expenses. When I read this line I sat back and thought: "Jeez, our government does the same thing!" It's called Social Security. The government essentially robs the Social Security Trust Fund, exchanges in a liability (U.S. Treasuries), then carries the liability as an asset. Aggressive accounting that creates a false kind of solvency. I just wonder why more people don't call out the government on such a fraudulent accounting scheme.
People mistakenly believe the role of a citizen is to support their leaders at all costs. But our Founders said the exact opposite; our role is to act as a check against the government. I am acting as a one-man check against the government when it comes to economics. In the meantime, I am proving that you can make a killing in the market by exposing the truth.
These are serious times. What you will likely see is a demographic clash for scraps of money as our coffers run dry. Boomers will want rising Social Security benefits; younger people will want entitlements in all forms. Major trends are developing that will totally change paradigms. For example, the higher education bubble is popping. We are already seeing an oversupply of college graduates with degrees in Art History; you will now start seeing an oversupply of LLMs and MBAs. The job market for young people is a catastrophe. Remember when so many people flocked to the "safety" of graduate school 2-3 years ago? Well they're graduating now, and the economic picture is actually worse. This is something I predicted, and people thought I was crazy at the time. But I think saddling yourself with $150,000 in debt for a devalued degree in a Depression is, umm, a little bit crazier.
Unemployment Rate 16-24 year olds
As a young person who doesn't expect to see one penny from Social Security, I must say, I don't fault Baby Boomers for expecting payments; after all, they did pay into the system for years. I think most Baby Boomers genuinely believe the Social Security system as currently structured robs young people. But most Baby Boomers will look after themselves. Unfortunately, most are not adequately prepared for the debt crisis. So truthfully, I feel bad for them. We are coming off the sugar high known as debt-induced asset growth, and Baby Boomers are seeing their net worths vanish. The second leg down in housing is going to crush Boomers. Sales data lead housing prices, and sales are falling fast. Foreclosures are also rising. There's no other way to put it: this is going to get nasty.
The underlying problem in this debt crisis is that our leaders made promises they could not keep. They promised this and that to various constituencies to garner votes and no one asked: How will we fund these programs? Do people realize the vast majority of our national debt is composed of accrued interest? Let this sink in a second. This will develop into something major, and it will happen in the blink of an eye.
Now people will argue that the government can always pay its obligations. I agree, they will issue depreciating dollars. But the government will not play fair; they will block your escape routes. Gold is the go-to currency in times of crisis, so I'm not that surprised that a tax on gold was included in the recent Health Care Bill. Again, your government is a joke and I am trying to expose the putrid stench of corruption.
There will be a major collapse in confidence that is going to send gold to new heights. I know it. I feel it. This is what I've read about in history. Bread and circuses? How about food stamps and football? How about bailouts and Jersey Shore? So while Americans are watching Jersey Shore and President Obama makes asinine comments about Snooki, believe me, your country is collapsing.
Gold should not be at $1275 in a normal downturn. This crisis is going to be a game-changer. The big money is starting to find its way into gold, and they will continue to flood the gold market as currency volatility develops. Those who think a default on our debt is impossible need to open a book for a change. The second stage of the debt crisis will arrive soon, led by Greece. Greece guaranteed a prolonged Depression by taking IMF and EU money. They will need to break from the Euro and devalue eventually. This will have cascading effects on the global bond and currency markets- and most importantly, this will send gold through the roof. Trust me, this is what it all comes down to. Buy gold to hedge against governments gone mad. Everything else is noise.
Taken from Expected Returns
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Bingo! SS was instituted by FDR and benefits ramped up as noted by the silent generation and the Greatest Generation. Boomers have been paying for all of it and now that they are starting to collect it....it is insolvent.
Ireland may beat Greece to the start (not the finish) line in defaulting first.
http://www.irishtimes.com/newspaper/opinion/2010/0907/1224278367177.html
Once the 1st one defaults, then everyone lines up behind and its game over.
If not, I'll be sticking around ZH every hour or so, looking for any news about bond-bubble money sending commodities to the moon - then I'll make a quick trip to the bank, withdraw everything, and head on over to Costco to get anything remaining on the shelves, to fill up the last 10% of remaining free space in the garage.
In 1985 my dad warned me that this day would come - don't know how he knew, maybe because of what he lived thru and saw in the depression. But since then I've read and prepped. Saw the Ponzi scheme in SS early on and now have more in PMs than SS benes after 30 years of work - so if I never see a dime of SS, I wasn't expecting it in the 1st place, no loss.
The demographics of boomers is like a great herd of elephants, destroying forests as they move thru them. Housing now, later retirement housing/areas, old age homes, healthcare; everywhere they go, they drive prices up when they 1st arrive and when they leave, prices drop with not enough replacement customers.
There is going to be great chaos, but with it great opportunity. If you believe chaos is coming, maybe you want to learn how to make alcohol with a still (by David Blume "Alcohol can be a gas") or learn how to build stills, instead of storing just 100 cases of vodka in your garage. Or what medicines will be most needed that you can get OTC and get for not much $$ and store in a small place (ie aspirin, vitamins, etc) - could be a better investment than gold.
There's still a little bit of time left. Forget about fuming about SS and the lousy fucks in DC that did us with no vaseline. Think about what will be needed and can make you some Ag or Au in the next stage. And if you see your old CONgressman in line to buy some your medicines, take joy in the thought of telling him "sorry, just sold out".
Wishing all of you safe harbour, Semper Paratus!
Very succinct. Gold was the last, best store of value before the US went off the gold standard. I have thought to myself a number of times that gold (and silver too), might be the only thing that survives the upcoming mayhem.
spinone is absolutely right. Anybody who thinks the Social Security, Medicare or federal pension trust funds somehow protect their retirement is in for a rude awakening.
As federal retirement programs' payouts increasingly exceed their dedicated revenues, they have begun collecting the interest on their holdings of Treasuries in cash. Soon they will begin redeeming principal.
That means Treasury must come up with the cash to pay that interest, and soon, it will have to come up the cash to redeem that principal. Since it's already running a deficit, that means Treasury must borrow the cash by increasing its borrowing from the public.
Now, imagine what would happen if the federal retirement programs didn't own any Treasuries. They wouldn't be able to collect interest on their Treasuries. They wouldn't be able to redeem their Treasuries. The federal retirement programs would have to go to Treasury and say, "we've got a shortfall here, but since Congress obliges us to make these payments, you've got to pay for it somehow."
And Treasury would have to cover the shortfall. Since it's already running a deficit, that means Treasury would have to borrow the cash by increasing its borrowing from the public. By amounts exactly equal to the amounts of interest on intragovernmental debt that Treasury is paying in cash, and soon, by amounts exactly equal to the amounts of intragovernmental debt principal that Treasury will be redeeming.
It would make exactly no difference if all the federal intragovernmental debt were annulled tomorrow. Your contributions to federal retirement programs were spent providing current benefits and supporting the general deficit. Nothing was saved.
Actually, I think the federal railroads workers pension program might have a small amount of real savings. Social Security, Medicare, federal disability and the general federal pension programs all have zero.
if this SS (and medicare) bankruptcy is a foregone conclusion, why don't we just cut our losses? why am i still contributing to this black hole (fica tax)? i could sure use the extra few hundred dollars a month. i've contributed over 25 years myself, but i dont mind stopping payments and not collecting in the future since i know i'm not going to get it anyway... unless i die right now, then my family would benefit... oh wait i forgot we have to keep the ponzi going so that my dad can collect...
Social Security began as an immediate payout to folks who had never paid in (how could they; the program had just come into existance). Where did the money come from for those immediate payouts? From the wages of those currently working at the time of the first payouts. Today's Social Security payments are made from deductions taken from today's paychecks (give or take a bit of surplus/deficit in the SS current account).
If you stop paying into the SS system today, you affect someone's SS paycheck today, not your possible paycheck at some point in the future.
Otherwise known as a pay-as-you-go system.
If they were taking your money today under the pretext of providing a "security" in your old age, then fine. But they are not. They need the money, dude! If they cared about you or your retirement they would not have raped the fund in the first place.
fuck this government fuck this market fuck aapl fuck bernanke fuck greenspan fuck rubin fuck blankfein fuck dimon fuck geithner fuck paulson fuck the frauderal reserve fuck roubini fuck hft fuck goldman sachs fuck tbtf fuck "green shoots" fuck pimco fuck bill gross fuck mohamed el-erian fuck "the new normal" fuck cnbc fuck ppt fuck "stress tests" fuck democrats fuck republicans fuck the "tea party" fuck decoupling fuck frontrunning fuck quantitative easing fuck sec fuck summers fuck fomc fuck frbny fuck pomo fuck jp morgan fuck the rockefellers fuck the rothschilds fuck zionists fuck mossad fuck lbma fuck illuminati fuck bush fuck obama fuck blair fuck cheney fuck rumsfeld fuck fox fuck murdoch fuck bp fuck the saudis fuck these wars fuck this global ponzi scheme fuck all this bs!!
did i miss anyone? and don't say "you" since that would be LIA (lame in advance)
did i miss anyone?.....
fuck 'FUCK' itself
Is that an artist's rendering of Alex Jones' desktop, perhaps?
If so, it should be distributed as a default desktop with the next release of Windows.
.
Actually, most in the tea party would agree with you, so let's not fuck them.
Tell it, Rock! Hmmm. No, I think you've covered it.
Who gives a shit whether gold is a hedge against deflation or inflation? Really. It's a tangible object with value. Hair splittin' microscreen
I wished they'd cancel SS now. I paid 35 years. Just buy me the fuck out. I'd settle for a lump sum payment, 50 cents on the dollar. If our dipshit government would have offered SS buyouts back when the TBTF bailouts occurred we could have experienced win-win-win.
TBTF pricks would have went into receivership, like the law demands. Win
The people who pay taxes could have received lump sum payments if they chose. Win
Liabilities would have decreased, people could have bought homes. Win
But instead those greedy fucking pricks that comprise our FED, TBTF banking cartels, and those greedy fucking politicians...did exactly what we expected them to do.
SW,
Good idea, except they spend it before it even get's into the banks.
Thank LBJ for this.
You have absolutely no idea where to put your apostrophies, do you?
They can't buy you out. There is no SS Trust fund. They spent the money. THE MONEY ISN'T THERE. When they print new money to pay your entitlements, it will diminish your benefit's purchasing power. Sure, you'll get your $1000 a month from SS, but a loaf of bread will be $20.
SS is just a scam to buy votes. It works because 99% of the population don't understand what fiat money is. They determine the amount of your SS benefits, and they determine the purchasing power of the dollar that the SS benefits are paid in.
So what? They are paying everything else with newly printed notes. We all know there is no cash in the lockbox. Clinton saw to that, hence, the "budget surplus". What you've said is old news. Gimme my money now and you can discount the hell out of it. Future value of said asset sucks.
OK - here's your $0.00
The haircuts won't come soon enough and politicians will never do anything pre-emptive....it's too risky for them politically. When the world starts to fall apart they will point fingers of blame at 'the other guy' and then do as little as possible so as not to alienate voters. Translation: slow painful death of our economy.
With the current trajectory, in about 10-15 years those unemployed 20 somethings will be wiping baby boomer asses for silver dollars.
What is this:
I think I missed the details on that. Did you mean to refer to this:
If so, that is not a "tax on gold".
Fill me in on the details of a gold tax in the Health Care Bill.
Thank you in advance for your reply.
Technically no, practically yes. Why not kill small businesses AND gold dealers at the same time?
Don't sell to dealers.
As I suspected, the 1099 reporting was the kernel of the comment. Hey, I'm all in on the theme here. I'm a coin dealer and belong to the ANA to boot. I just like to see exactitude in the discussion. If it's a burden, call it a burden, not a tax.
Thank you very much for your contribution to the discussion.
RR,
This applies to EVERY transaction made in any product or industry.....all of them.They did not single PM's.
Thanks, DosZap, I'm all studied up on the "features" of the current legislation on the 1099 provision, including the moves to alter or delete it. My bone of contention was referring to a vague "tax" on coin/PM transactions. That was a bit sensational and not in keeping with rational reportage.
screw grad school - I'm learning mandarin!
I HAVE SAID IT FOR 2 YEARS NOW. GOLD IS NOT A HEDGE AGAINST INFLATION. IT IS A HEDGE AGAINST DEFLATION. IT IS A STORE OF VALUE IN INFLATION. WE ARE IN A DEFLATIONARY DEPRESSION, SINCE JANUARY 2009. HOW HAS GOLD ACTED SINCE THEN??
"Those who think a default on our debt is impossible need to open a book for a change."
I think he is talking to you, Mish.
At some place the economy is actually recovering and near 90% of the 2007. I say SOME place. But the scariest part is that the goods produced in those recovered industries are now already up 25% to 40%!
I think once DEMAND and not the economy but when demand recovers, prices will be going up overall 25 to 40% at least.
This reminds me of a study of the 1970's crisis where also salaries doubled, prices spiked....
It will be manageble and a good time to be in when you have a job, but hell for all the others.
And with others I mean: unemployed, retired people, handicap people...
Overall it will take about 2 to 3 years before the cycle is full but be honest: 2 to 3 years isn't a lot.
And this process is actually nothing more then a reset button on the economy.
Sudden Debt
Uh... Sorry... I pressed that reset button, but it was MADE IN CHINA. Goddamned thing broke.
So, you just keep on pressing that reset button until your fingers bleed. This ship is already on the bottom. The criminals paid themselves bonuses for the audacity of their crimes.
And you, sir, should know there is a reason your bum is so sore.
yep reset is coming one way or another....c'mon we have one more super bubble in us.
Lever up people, mortgage your house and buy gold....oh wait
yep reset is coming one way or another
Nothing new in this article.
This stuff is new to some people, and that makes it valuable.
"But most Baby Boomers will look after themselves."
Indeed they will. And we should look after ourselves, and our families. The Boomers must pay a price for their political and economic ignorance and apathy. If it means their pie-in-the-sky dream of living on the dole for 20+ years has to be shattered, so be it. Young people have to wake up and realize these miserable entitlement leeches are going to destroy us if we let them.
Nobody has the right to take the property of another by force; not me, not you, not the government, nobody. Just say NO to stupidity. NO Social Security, NO Medicare, NO ENTITLEMENTS.
Whining bitch,
You can, just quit your job.
Then you wan't have to pay dick.You will have defeated the system.
Good Luck.
Thats OK with me asshole. Just mail me a check for the 50 years worth of payments I made to these programs. You can compound the interest at about 6%, that seems about fair.
Since when did medicare and social security become entitlements? I paid for this shit and now your just going to wipe it out, I don't think so. FUCK YOU!!!
It's not my fault you let your parents' generation take your money instead of saving. Why I owe you money because a previous generation robbed you is beyond me.
Folks here are railing against what they perceive, not against what is. Solutions developed for what is perceived rarely work against what is.
fearsomepirate - the words you and Conrad choose to use in your posts tell me you do not yet understand what is actually happening in the system. Unless you choose to live the life of the hermit, you will have constraints placed upon your life by the powers that be. You will be powerless to change that.
So - how do hundreds of millions of people live as hermits, each one surviving outside of the system? History tells us this won't happen. If you happen to be one of the few who can actually survive in such a circumstance, what you have will soon be confiscated by the masses who cannot survive in such a circumstance. To think you, or anyone else, can create an effective defense against such a crowd is naive.
Do you mean they are NOT entitlements?
+1000... comic relief...
boomer,
Talking logic to Conad asswipe is a waste of time,er', he just doesn't get it.
It's ok for us to PAY, but he get's a feebie.
Entitlement means essentially a GIFT, a gift, is free.
What we laid up, was damn sure not free, nor negotiable.
EXPECTED RETURNS,
"As a young person who doesn't expect to see one penny from Social Security, I must say, I don't fault Baby Boomers for expecting payments; after all, they did pay into the system for years"
May surprise you, those of us close to age, don't think we will either.......and at least your young enough, you haven't invested multiples of thousands into something you won't get.
We already have been milked............jars full, and we're too far along to be a workforce commodity, IF there were a need for ONE.
Spelling and grammar would go a long way in aiding your feeble attempts to muster a point.
It is okay for you to pay, that was your choice. I, and many others my age, do not see this as a good deal. Expecting us to exchange our labor for the possibility of being paid back in what will probably be severely devalued currency(if it even still is at that point), is ridiculous. You failed to see the inherent stupidity in the system, too bad. You failed to stop the treasonous acts of the Federal Reserve, too bad. You failed to hold government accountable, too bad. It's our turn now.
I don't want a freebie. I want the choice of what to do with the product of my labor, my property. Such is my right. Like I said, you folks can squabble with the politicians you kept in office all these years over who gets what out of the "trust fund". Maybe you can hit each other with canes to see who gets the last box of Depends while you whine about how unfair it is...that your generation let them rob the motherfucker blind.
And if you think SS is not negotiable, well, you are right...to an extent. You have zero negotiating power outside of your vote, see Flemming v Nestor. I may not get the outcome I'm after, but I sure as hell will fight for it unlike your pathetic lot all these years. See you at the polls, asshole.
Asswipe,
Ok, let's assume your points were all valid.(not, but let's play).
You WILL pay, if you do not want to be forced to do so, QUIT your job, and start a Revolution, take over, and be POTUS.
Then you have a say, you do not get it, NO ONE gave a shit what we thought, anymore than they will YOU.
Playing the blame game on people who played by the rules, or go to jail,or live under a bridge,wasn't a hell of a lot of choice.
I think my points are getting through loud and clear......
I will not pay. I will continue to work off the grid as much as I can and prepare for my retirement the way I see fit. I will work to get the candidates and policies I believe in elected and enacted. You had the same choice. Your generation should have put an end to the financial/economic/political nonsense. You did not.
From your reply, I detect the air of a quitter and a defeatist. Your soul is damaged. Probably a result of knowing you were fucked all along, but feeling too weak or ineffectual to resist ("What can one person do?", "Voting outside of D or R is a waste of a vote.", "I'd rather watch Monday Night Football than attend a council meeting") Yes, you've saddled your progeny with unimaginable obstacles to overcome. Yes, your generation failed miserably, soaking up and squandering the excesses created by your parents instead of insuring there would be ample opportunity for us to be even greater yet. And for that, you should have a heavy heart. You should be punished for your misdeeds. Expecting US to cover your gambling debts is immoral to say the least. But, such is the norm for a generation that has sucked at the teat of others it's entire life.
+1. Go hard, dude! You're making too much sense for him.
If just 20% of the population could be as awake as you, the problems would get solved. Vote all incumbents out and pressure those coming in to live up to their promises and oaths.
You didn't pay into it. There is no social security security trust fund. You gave the government money to pay off current retirees. Its a pay as you go system.
So you all voted yourself massive entitlements. Voted to tax your children and those yet to be born to fund your retirement homes in Flordia. Now you want me to pay your entitlements. Thats taxation without representation.
FUCK YOU - I'm not paying.