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Bill Gross: The US Is A Debt Meth Addict - Unless The Fiscal Gap Is Closed Soon "The Damage Will Be Beyond Repair"

Tyler Durden's picture




 

The highlights from Bill Gross' latest monthly piece:

  • Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them.
  • The U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
  • What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
  • To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year!
  • To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million.
  • We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. It just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
  • Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
  • If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. The damage would likely be beyond repair.
  • The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.

Full letter:

Damages

From Bill Gross

  • The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
  • Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. 
  • Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.

I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.

I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”

My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.

For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.

The ring of fire

In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?

Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.

What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.

I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.

To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.

And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.


As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.

Investment conclusions

So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”

If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.

William H. Gross
Managing Director 

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Tue, 10/02/2012 - 07:56 | 2847750 GetZeeGold
GetZeeGold's picture

 

 

 

Bill still thinks this can be fixed......I'm all ears.

 

I hope he's had his morning dose of speed. Get'em tiger.

Tue, 10/02/2012 - 08:00 | 2847765 Landotfree
Landotfree's picture

He's an idiot or worse a liar trying to continue the lie.   It's basic Math, the system has always been unsustainable long-term.   

If the US government did what he is suggested and stopped spending, the ATMs would stop working tomorrow.  There is no solution the hairless monkeys want to hear.... the solution to the equation has always been collapse.

"How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns"

Billy is looking for a return on capital ie interest for his investment, sorry Billy but humans have no ability to produce expoential growth long-term... usually about a generation.

Tue, 10/02/2012 - 08:15 | 2847804 Badabing
Badabing's picture

BANG ahhhhhh happiness is a warm gun.

 

got gold?

Tue, 10/02/2012 - 08:19 | 2847810 malikai
Tue, 10/02/2012 - 08:26 | 2847829 GetZeeGold
GetZeeGold's picture

 

 

Only a problem if you're trying to smuggle dope.......German Shepherds can't smell PMs.

 

Just don't act nervous.....and you'll be fine.

Tue, 10/02/2012 - 08:58 | 2847928 LouisDega
LouisDega's picture

I don't handle money. It's dirty

Tue, 10/02/2012 - 09:01 | 2847934 GetZeeGold
GetZeeGold's picture

 

 

It's a bad habit......don't start.

 

Tue, 10/02/2012 - 09:17 | 2847977 markmotive
markmotive's picture

Some interesting commentary coming out of such a mainstream shop. I'm glad these guys don't feel constrained to the 'glass half full' argument.

Debt control depends on growth. And growth is a phenomenon that didn't really exist before 1750. So if the world trends back to normal (after all, 250 years is a blip in human history) the entire system fails.

Watch and learn...(Documentary on money and banking - Zeitgeist 2: Addendum)

http://www.planbeconomics.com/2012/10/01/documentary-on-money-and-bankin...

Tue, 10/02/2012 - 09:47 | 2848101 Big Slick
Big Slick's picture

RUMOR IS that Bernanke will be selling short term Public Sector Deficit to purchase long term Structural Fiscal Gap.  This is known as Operation SOCKITT TWIST: ‘Screw Our Children Kindly In The Tuckus as they TWIST'

(media and other users should credit Big Slick)

 

 

Tue, 10/02/2012 - 08:14 | 2847800 knukles
knukles's picture

The math is astounding.

Here's a simple mental exercise.
Assume 50% of all expenditures are borrowed at the Federal level.  So to pay down the debt, without tax increases (revenue as per the gubamint to make investments ... horseshit) at least 50% of expenditures must be curtailed.
OK, now hold on, stay here with me.
So then add in the unimaginable off budget (what budget expenditures and the number becomes even greater than 50% to be cut) but let's use 50% for starters.

That means that we take 50% of current expenditures as baseline... that which can be spent.

Now, start the argument over what and how much gets cut.
Use it alongside your friends and neighbors, both lefties and righties...
You'll soon find out that they couldn't give a fuck because they can't even fathom the magnitude of the changes necessitated.

Success!  You can declare success and go home a winner in the intellectual exercise, for they're not even prepared for reality... and moreover, I'll betcha that they'll immediately revert back to the old cut this, that, what policy, horseshit... right back into the Hegelian Dialectic Product of Nothing New But teh Argument.

To put this in perspective:

Top panel, the US "budget"

Federal tax reciepts:        $2,170,000,000,000
Federal expenditures:      $3,820,000,000,000
New debt:                            $1,650,000,000,000
Total outstanding debt: $14,271,000,000,000

Recent budget cuts:       $38,500,000,000

Make it into your and my manageable graspable numbers and assume the following is a regular household doing the same degree of budget reparation:

Gross (before tax) family income:$21,700
Cash expenditures:                          $38,200
New debt added to credit card:     $16,500
Outstanding credit card balance: $142,710

Total family budget cuts:                       $385

Sure looks like a winner to me...

And betcha your buds will argue the same shit till the budget comes home

Tue, 10/02/2012 - 08:14 | 2847803 Landotfree
Landotfree's picture

Irrelevant to the problem at hand.

Tue, 10/02/2012 - 08:26 | 2847831 malikai
malikai's picture

Hello Dr. Krugman.

Tue, 10/02/2012 - 08:57 | 2847925 kridkrid
kridkrid's picture

No... not Krugman... kind of the opposite of Krugman.  Krugman wants you to believe that there is a solution.  landotfree will call you an idiot for suggesting that there is.  He's not a big "how to win friends and influence people" sort of a poster, but he's correct.  The budget deficit is a symptom, not a cause.  Focusing attention on it is a distraction... by design.

Tue, 10/02/2012 - 09:21 | 2848007 ATM
ATM's picture

Krugman doesn't believe there is a solution. Far from it! He is the leading prponent of creating the collapse. He wants a power vacuum so that his communist friends have a free run at taking control.

Tue, 10/02/2012 - 09:31 | 2848043 MiltonFriedmans...
MiltonFriedmansNightmare's picture

We at the point the bansters have been striving for the past 100 years. Their goal can now be attained....a totalitarian state controlled by *they*...as long as *they* don't fumble the ball, and there's the rub.

Tue, 10/02/2012 - 09:52 | 2848122 Big Slick
Big Slick's picture

I'm taking my ball and going home!! 

 

(i.e. exiting the system and loading up on AU, AG, PB)

Tue, 10/02/2012 - 09:53 | 2848126 MachoMan
MachoMan's picture

Hi Mako.  Love your work.

Tue, 10/02/2012 - 11:30 | 2848458 malikai
malikai's picture

Mine was a joke about how Krugman likes to debate.

Totally agree with you here and your post below.

Spot on.

Tue, 10/02/2012 - 08:28 | 2847838 machineh
machineh's picture

'the problem at hand' -- what's that, a small, limp penis?

Tue, 10/02/2012 - 08:46 | 2847859 kridkrid
kridkrid's picture

The problem at hand is a monetary system where virtually all money is loaned into existence with interest attached.  There isn't enough "money" in the system to pay back both principle and interest, so the system must issue more debt... at all times, or face cascading defaults - Collapse.  It's how the system was designed.  Government debt is just one piece of connected equation that requires that aggregate debt grow at all times.  The exponential function tells us that this can't be sustained.  That which can't be sustained will collapse. 

The gov't debt is a red herring... it's 3-card monte.  Our focus is trained on it so that the banking oligarch can pin the blame on something other than the system itself. 

Tue, 10/02/2012 - 09:12 | 2847970 new game
new game's picture

yup-spot on-backed by blind faith and not backed by anything except more usery debt and more blind faith.

fast approaching the point(or there and not acknowledged) of no return and "loss of faith"

got proVISIONS, gold, guns and a plan?

Tue, 10/02/2012 - 09:15 | 2847982 RiverRoad
RiverRoad's picture

kridkrid:

Yup, as long as the Fed and the banksters keep putting money to work instead of people....

Tue, 10/02/2012 - 09:34 | 2848050 Landotfree
Landotfree's picture

It's the same system that existed when things such as banks and central banks did not exist.   Nothing has changed.  The system will collapse, the only questions are, 1.) exactly when and 2.) how many of the unfunded liabilties will be have to taken off the books... my guess 1-3 billion this time... if nukes are used then 100% is not out of the question.

Tue, 10/02/2012 - 09:11 | 2847965 Offthebeach
Offthebeach's picture

Those aren't debts, they're "investments in our future ".
It's for the children.
We'll get incredible efficiencies from the PC and paperless office.
A college edkamakated work force will bring higher incomes.
You don't understand Modern Crony Keynesian Policy
.

Tue, 10/02/2012 - 09:22 | 2848012 centerline
centerline's picture

http://www.youtube.com/watch?v=Li0no7O9zmE

 

A must see on this subject Knukles

Tue, 10/02/2012 - 11:21 | 2848429 blunderdog
blunderdog's picture

There are plenty of ways to "solve" things, but they're not palatable.  It's not at all that we lack the ABILITY to solve the problems.  We lack the MOTIVATION to solve them.

You could ditch social security and medicare and welfare and foodstamps and disability by having government operations actually PROVIDE the materials and services rather than shuffling tax-dollars around.

You could cap "money" aggregation in the hands of fictitious legal entities to prevent the problem of "liquidity traps" at big companies requiring massive artificial dollar creation.

You could "bill for services" for all public-provided resources/utilities.

You could means-test every government payout.

The problem isn't with constructing a better world, the problem is with expecting POLITICIANS to be able to navigate the conflicting interests of a huge and varied electorate.

Tue, 10/02/2012 - 12:14 | 2848624 Landotfree
Landotfree's picture

Wrong.  Eliminating those programs does nothing.  You are still have a system that can't expand exponentially forever. 

It's pure basic Math and common sense.

Tue, 10/02/2012 - 12:43 | 2848745 blunderdog
blunderdog's picture

The system doesn't have to expand exponentially forever UNLESS you continue to believe that all debts must be paid in full with interest.

That's obviously not true, though.  "All debts" have NEVER been paid in full with interest.

You're right about the problem, but you're wrong that the existence of a logical flaw at the basis of the system means that the system cannot be maintained.  We're people, not computer programs.  Debtors have defaulted throughout history. 

How can you rationalize the CURRENT existence of the debt-system in light of those historical facts?  We've been doing this for thousands of years.

Tue, 10/02/2012 - 08:14 | 2847802 kridkrid
kridkrid's picture

I wrote this in a thread yesterday... makes as much sense to post here.  I suppose it makes sense in any conversation that I have with any person... but people "ain't wanting to hear none of that"....

Recognizing that there is "no solution"... That the system was going to collapse because it was/is created to collapse is the mental realignment that people MUST have in order to ask the right questions and to seek logical answers. ALL conversations that start with the premise that "something can be done" retards our understanding of the world around us, by design.

Tue, 10/02/2012 - 09:31 | 2848040 FEDbuster
FEDbuster's picture

I guess the question for me isn't will it collapse, but  when will it collapse?  How long can the printing/debt Ponzi continue?  What role does "reserve currency" play in keeping the scam going?  Do you have a timeline for collapse, will it be slow or overnight?  How do you see the system going down?

Tue, 10/02/2012 - 09:48 | 2848103 Calmyourself
Calmyourself's picture

FB, not a popular subject around here.  Some have tried to predict or list a set of triggering events but it comes to nought.  One of the reasons I have backed off ZH, lots of complaining about the Ponzi but no real efforts to predict and deal with its supposed collapse.  When the supply chain starts to change and become unstable manifesting as late deliveries, Winter zones of the country not seeing fresh fuits and veggies for example.  This is one of the signs I am alert too.  At that point start preparing for some sort of end game as scarcity builds from bidding to hyperinflation.

Tue, 10/02/2012 - 10:08 | 2848178 Big Slick
Big Slick's picture

FB - Lots of bright people out there attempting to time the collapse, however NO ONE has a clue.  Because the status quo "must be sustained" and the system is run by human beings who have accomplished things like landing on the moon, IMAGINE the effort and ingenuity into sustaining the status quo!

My experience tells me YOU CANNOT TIME THIS.  YOU CAN ONLY PREPARE FOR IT AS BEST YOU CAN.

My guess is that this is a boilling frog model and rather than some huge collapse (a la 1987 or 2000 or even 2008), this will be a long process (begun in a more acute phase in 2008) and we will wake up one day and say "how did the value of my home, retirement, & purchasing power erode by 90%?"

However under the boiling frog scenario, that will be 2 seconds before some 20-year-old with an AR-15 shoots you in the head for your five American Eagles.

Every self-invested individual should own a firearm.  If you own gold and no means of defense, I pray for you when the first trash can comes through the living room window.  Remember, you can own a shotgun by lunch today ($200 at the local sporting good store - 12 guage Remington 870).  Think they'll be in stock when you're the 1,000th person in line?

"Everyone has a plan until they get punched in the face." - Mike Tyson

(Sorry this evolved into a sermon on home/personal defense.  I just think everyone should think about it)

 

Tue, 10/02/2012 - 10:46 | 2848309 Overfed
Overfed's picture

If you can't personally defend it, you don't own it.

Tue, 10/02/2012 - 12:09 | 2848595 FEDbuster
FEDbuster's picture

I am WELL aware of prepping for the collapse (look at a collection of my prior posts).  I have been investing in beans, bullets and bullion for several years.

I am trying to answer the question of "how long can they kick the can down the road?"  Will it be an overnight event with the urgency of the 2008 financial/swaps markets collapsing?  Riots in urban areas, when EBT cards fail?  Or just a continuation of our current fall to third world living conditions?  Does the petro dollar reserve currency status buy us extra time? 

I see WW3 prior to complete economic collapse.  These crazies in D.C. aren't going to go down without a fight.  WW3 puts people to work, thins the herd and joins most of the Country in a "shared sacrifice" mentality.  If the choice is blow up the Middle East or let our metro areas burn to the ground and impose martial law everywhere (creating Civil War 2), I would think TPTB would choose to fight the "Big One" in the Middle East.

Tue, 10/02/2012 - 19:42 | 2850161 Big Slick
Big Slick's picture

The Fed can print to eternity - literally - so the answer is that the can can be kicked quite far down the road.  

(Didn't mean to imply you weren't prepped FB - my post got away from me :)

Tue, 10/02/2012 - 08:41 | 2847871 Gully Foyle
Gully Foyle's picture

GetZeeGold

Why yes it can Blinky.

See all those large sums are illusionary money, numbers on a server somewhere. Do you think pallets of cash are transported from place to place?

TPTB understands that. They created the problem. All those European nations looked solvent and worked until TPTB decided to break them down for spare parts.

TPTB can and at some point will merely switch to a digital currency. That devalues everyones savings and pm supplies.

Everything will still be relatively priced, but now they have much more control over the flow of monies.

They will also require real world assets in exchange for the digital. like Warcraft or Diablo 3. Those are test cases.

If they truly wish to be creative and tap into hipster angst, they will base everything on carbon debt. This is being tested already in either Australia or New Zealand, a small island community.

Rich still remain rich, poor poor. But now everything is much simpler to control.

The fly in the ointment is that Russia and China don't want to be controlled by those western powers. Neither  do all those small nations rich in rescources but kept technologically poor by western powers.

The next quarter century will be about this battle.

remember it takes a single generation and the new paradigm is accepted.


Tue, 10/02/2012 - 08:52 | 2847910 GetZeeGold
GetZeeGold's picture

 

 

Dude....please use caps.

 

I'm old.......my hearing isn't so good these daze.

Tue, 10/02/2012 - 09:27 | 2848029 centerline
centerline's picture

Very plausible argument.  Is one of the nagging thoughts in the back of my mind.  Certainly I can see immediate and serious obstacles to implementation.  But, general public acceptance is really already in place.  And the technology exists now.

 

 

Tue, 10/02/2012 - 11:49 | 2848511 Biosci
Biosci's picture

It devalues no one's pm supplies.  Maybe at the official rate, but the more the official rate diverges from the supply/demand of physical goods, the greater the size of the parallel (aka black market) economy.

Tue, 10/02/2012 - 08:47 | 2847893 azzhatter
azzhatter's picture

interesting that the #1 and #2 economy of world are in the upper right hand quad. China belongs in there too, they just structure debt differently. Basically all the big guys just been buying growth at very high cost

Tue, 10/02/2012 - 11:49 | 2848516 Biosci
Biosci's picture

All depends on how you measure "growth," doesn't it?

Tue, 10/02/2012 - 12:58 | 2848817 Panafrican Funk...
Panafrican Funktron Robot's picture

"Bill still thinks this can be fixed......I'm all ears."

I think in the way he laid it out, he's actually telling us that there is no way in hell this is going to get fixed, the US is basically in the final stages of drug addiction prior to death or a long ass prison sentance, and to run the fuck away from everything that isn't physical. 

Tue, 10/02/2012 - 07:58 | 2847760 blindfaith
blindfaith's picture

Stock investment consultants are often failed investor themselves.  Mr. Gross is laughing all the way to the bank.

Tue, 10/02/2012 - 09:49 | 2848098 Big Slick
Big Slick's picture

 ... and BOOM goes the dynamite!

 

 

Tue, 10/02/2012 - 07:40 | 2847724 q99x2
q99x2's picture

Guess this means the US should be more like China before it is too late eh?

Ole Billy Boy knows its too late.

Whoopie we're all gonna die.

Tue, 10/02/2012 - 08:19 | 2847813 NewWorldOrange
NewWorldOrange's picture

Spot on.

"Unless we begin to close this gap..." yada yada

Suddenly I'm thinking about deck chairs on a certain ship...

There's not a snowball chance in hell that there isn't a global financial and probably military conflagration long before there's any significant closing of the enormous "gap." Does any sober person really believe America will make serious progress in lowering the debt in the next few decades, or that in that time, a conflagration will not occur?

Hopium is a helluva drug.

 

Tue, 10/02/2012 - 08:31 | 2847843 machineh
machineh's picture

And anyone can make hopium crystals in their own bathtub using common household ingredients!

Tue, 10/02/2012 - 09:22 | 2848010 Jethro
Jethro's picture

Economists see this as a monetary policy problem (not enough cash flow).

Politicians see this as a funding/debt problem (social programs/votes).

Central planners see this as an excess population problem (even the Nazis werent six sigma...).

Tue, 10/02/2012 - 09:26 | 2848018 TuesdayBen
TuesdayBen's picture

" Does any sober person really believe America will make serious progress in lowering the debt in the next few decades?"

No. We Americans are too soft to do anything hard. See the physical softness all around you, and perhaps in the mirror. See the intellectual softness in TV viewing habits and programming, in the masses who will hand over their votes for trinkets.

We're soft and stupid and nothing good is deserved or destined for us.

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