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The Simple Problems Of Too Much US Debt

Tyler Durden's picture


In a succinct and chart-laden presentation, Professor Antony Davies, of Duquesne, offers a simple perspective on just how bad things are for the US (in terms of debt or obligations). Putting the interest cost in the context of war-spending, his analysis is interesting given the recent and dramatic rise in interest rates. Current interest payments, given the US Government's lowest ever 3% interest cost, are $440 billion, or three times the annual operating expenses of the Iraq and Afghanistan wars. While his discussion of a market-set interest rate is perhaps a little off-the-mark given the extent of QE programs and their reach-around prime-dealer duration-reducing effects, it is nevertheless true that the more money the government is spending on interest, the less money is available to provide services and his punchline on what happens should rates rise even modestly from here sums the real problem the US faces (even as a currency issuer as opposed to a currency user - given the inherent instability that making totalitarian use of the reserve status would incur).


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Tue, 03/20/2012 - 20:26 | 2275344 SolidSnake961
SolidSnake961's picture

if the fed owns most of the bonds, and they turn the interest payments back to the treasury, then why do interest payments matter?

ps: dont hate if this sounds stupid, college student still learning

Tue, 03/20/2012 - 20:36 | 2275380 Hedgetard55
Hedgetard55's picture

Not a dumb question at all. It means that only the FED is buying the debt, and to do that they need to print money, debasing the currency. Since there is no free lunch, all holders of cash and it's equivalents are in essence buying the debt indirectly through loss of purchasing power.

Tue, 03/20/2012 - 20:44 | 2275397 Pladizow
Pladizow's picture

It also means the treasury wants the debt as high as possible, as they are the recipents of the interest payments.

                             "It is difficult to get a man to understand something, when his salary depends on him not understanding it." - Upton Sinclair


Tue, 03/20/2012 - 20:46 | 2275403 SolidSnake961
SolidSnake961's picture

so this is the "secret inflation tax" that ron paul talks about

Tue, 03/20/2012 - 21:15 | 2275432 Cheesy Bastard
Cheesy Bastard's picture

It is always easier for me to understand when cartoon bears explain stuff.  Here:

Tue, 03/20/2012 - 22:02 | 2275584 Pinto Currency
Pinto Currency's picture


Too much debt?

The Fed says we need more and more debt until things get better.

That will be covered in Thursday's lecture.

Tue, 03/20/2012 - 22:09 | 2275594 comrade pravda
comrade pravda's picture

Now that Ben Shitter is telling all the little people about the benefits of feudalism, I wonder if he might...

Visit some unemployed college graduates (a.k.a. debt peons) for his next  whistle stop.

While he is doing that perhaps he can explain how keeping the same fools who bankrupted Wall St in 2008 in charge of the economy today is helping restore America's economic health.  Oops, silly me, Ben Shitter made them billionaires all over again with the money of us little people.  Hey, they are are rich.  They must be right.

Thanks Ben Shitter, I feel better already.

Tue, 03/20/2012 - 23:51 | 2275780 Pairadimes
Pairadimes's picture

Sounds like his name should be Ben Dover.

Tue, 03/20/2012 - 21:02 | 2275436 ndotken
ndotken's picture

"The government needs to take advantage of the low interest rate environment and pay down as much of the debt as it can."


Bwahahahahahahahahahahahaha ... pay down the debt??? .... the government is ADDING $1.3 Trillion a year to the debt .... and a major aisle fight broke out over cutting $30 Billion from the budget ... this country is soooooo FAWKED

Tue, 03/20/2012 - 22:23 | 2275616 true brain
true brain's picture

Fucked. This country is fucked. Just say it. You don't have to be polite or camoflaged its true nature. When it comes to the truth, let the truth rings free.

Wed, 03/21/2012 - 09:00 | 2276284 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"and pay down as much of the debt"

With what? This is what happens when one fails to define debt and money.

Debt can only be "payed down" with money. Money is purchasing media with no interest owed.

All of our currency (including computer entries) is debt as it is encumbered by interest.

The real problem is that we have no money so it is impossible to pay down the debt (any and all of it)!

Tue, 03/20/2012 - 21:28 | 2275510 buckethead
buckethead's picture

If debt is an asset, how can one hold/owe too much?


Assets are good, right?



Tue, 03/20/2012 - 21:47 | 2275549 Stax Edwards
Stax Edwards's picture

You have the right idea, may I interest you in a job?


Wed, 03/21/2012 - 06:01 | 2276090 Harlequin001
Harlequin001's picture

I am willing to exchange as many assets as you can handle in exchange for your gold...

I have an unlimited supply...

Does that explain it?

Wed, 03/21/2012 - 00:59 | 2275869 Koffieshop
Koffieshop's picture

so this is the "secret inflation tax" that ron paul talks about


It's not just that, its a tool to spread influence and tax the global economy.

Just watch this little 4 part series:

Wed, 03/21/2012 - 07:37 | 2276162 Belarusian Bull
Belarusian Bull's picture

This is outstanding. Thank you for the link, i had no idea about that ESF monstrosity.


Tue, 03/20/2012 - 22:00 | 2275581 JohnKozac
JohnKozac's picture

The Fed crowds out other buyers and distorts markets by interfering with mis-pricing risk since it is artifically holding interest rates too low.

You might enjoy this previous ZH article that makes another point:

"Private investors are crowded out of the market when the Fed shows up as a large and powerful bidder. As a result, the administration and Congress make tax and spending decisions—with huge implications for our standard of living—with heightened risks around future funding costs."

Wed, 03/21/2012 - 09:59 | 2276432 smb12321
smb12321's picture

The FED's role has changed dramatically since I was a kid a thousand years ago. It was not uncommon to give treasuries as gifts for birthdays or graduation.  Plus everyone has some as investments.  Of course, this was pre-runaway welfare, SS, Medicare, Medicaid, tax give back, etc.    Now, a government instrument (Fed) is buying debt and "lending" it to the Treasury who (somehow) will pay it back with interest - a Ponzi scheme of the first order.

Tue, 03/20/2012 - 22:41 | 2275644 Kegfreak
Kegfreak's picture

Can you please switch back to your old avatar?  It was the only thing worth looking at on the internet at work.

Wed, 03/21/2012 - 00:06 | 2275794 bilbao
bilbao's picture

False. This is a common misconception. Treasuries are already one of the most liquid markets in the world. Your ability to spend is not constrained whether you have all of your money in Treasuries no more than having your money in a Savings Account (rather than a Checking Account).

So, if the Fed were to gradually replace every Treasury Bond in the world with Cash it would not cause inflation since the net financial assets in the private sector would still be the same.

The only thing that would change would be the liquidity, but people's desires to save would still be the same.

Tue, 03/20/2012 - 20:38 | 2275383 Pladizow
Pladizow's picture

I don't understand, how many I-Pads is that?

Tue, 03/20/2012 - 23:46 | 2275760 Taint Boil
Taint Boil's picture



$50,000,000,000,000 / $500 = 100,000,000,000 iPads

6,840,507,003 people on earth – about 14 iPads for every person on earth

Pounding down the brewskis and went to public schools so the math might be off





Tue, 03/20/2012 - 20:45 | 2275401 traderjoe
traderjoe's picture

Even if the Fed is buying 'most' of the currently issued bonds, they don't own 'most' of the current stock of outstanding bonds.

The more important topic is - why is a sovereign nation paying interest at all? Why has a sovereign country delegated its money creation powers to private, commercial banks? Under fractional reserve banking, the commercial banks can create money out thin air - for free - and then lend this 'money' back to the sovereign, at interest and with the collateral of future tax receipts (i.e. your productivity). 

See the United States Note - issued without interest or debt, straight from the Treasury. Sure it was fiat currency (backed by nothing), but at least it was the people's currency. 

Interest on sovereign debt is the scam of the century. 

Tue, 03/20/2012 - 20:59 | 2275431 Bunga Bunga
Bunga Bunga's picture

As long as United States Notes are backed by gold, no problem. And the gold in a federal building's basement is not useless as Bernake suggests, because it circulates as hard currency in paper notes.

Wed, 03/21/2012 - 01:32 | 2275914 Joseph Aguirre
Joseph Aguirre's picture

... The dollar is a fiat currency, it hasn't been backed by gold since the 70s.

Wed, 03/21/2012 - 20:03 | 2278393 Jake88
Jake88's picture


Tue, 03/20/2012 - 23:04 | 2275694 Matt
Matt's picture

I suspect that auctioning off bonds to create new money, the debt ceiling, etc are mechanisms designed to at least slow the rate of currency debasement. If the government could just print money, imagine how fast it would devalue?

Wed, 03/21/2012 - 00:01 | 2275788 traderjoe
traderjoe's picture

In Modern Monetary Mechanics, printed by the Chicago Fed, the paper admits that the vast majority of 'money' in the system is created by commercial banks (when they make loans). Sure, government printing debt-free money has issues - but its still the people's currency and not the bankers [fraudulent] currency.

Wed, 03/21/2012 - 10:30 | 2276534 MachoMan
MachoMan's picture

They're not meant to slow the rate of currency debasement...  that can be accomplished through rudimentary discipline.  They're there to further entrench and pay the hungry hippos and all the unnecessary middle men.

Tue, 03/20/2012 - 20:51 | 2275419 goforgin
goforgin's picture

Foreigners collect 40% of interest payments on US Government Debt. Martin Armstrong calculated that 80% of current debt outstanding is due to interest compounding?

If the FED owned or purchased all the government debt then as you say interest rates rates wouldn't matter. But, this not the case. When sovereign governments can print debt free money, that's REAL money. Banks issue credit money.

More from Armstrong: he is forecasting that interest rates payments will increase by 2 1/2 x to 10 billion dollars per week from current 4 billion by 2015. That's why all this propaganda against social spending--they're just making room for interest.

Tue, 03/20/2012 - 21:07 | 2275447 Dr. Engali
Dr. Engali's picture

The fed only owns 1.3 trillion of the 16 trillion in debt. All the other debt is owned by foreign governments, money market funds, mutual funds , pensions and do on. So the treasury isn't getting all that interest back. But the real problem is that the fed continues to print to buy said debt, thus killing the buying power of the dollar and of the existing bond holders. If the fed wasn't printing and squeezing the poor and middle class bond rates would be much higher.

Tue, 03/20/2012 - 21:27 | 2275505 jerry_theking_lawler
jerry_theking_lawler's picture

you are doesn't matter. now come back and see me in 20 years "Dr. who gives a fuck" and lets have the same conversation....

Tue, 03/20/2012 - 23:05 | 2275697 Carp Flounderson
Carp Flounderson's picture

Trying to learn about economics on zerohedge is about as smart of a move as trying to learn about... well, anything... by listening to alex jones.  Zerohedge articles on economics are fantastic contrarian indicators.

Wed, 03/21/2012 - 01:48 | 2275941 alexwest
alexwest's picture

good question.. you gonna make AAA student..


WHERE DID FED GET MONEY TO BUY INTEREST BEARING INSTRUMENTS? it doesnt have taxation authority.. how did Fed balance sheet grow from 800 bln to 3 trln in a few short years...

asnwer : THEY MADE MONEY UP... its ponzi scheme..


Wed, 03/21/2012 - 07:07 | 2276140 Ghordius
Ghordius's picture

they print tokens. those tokens used to be exchangeble for gold, yes. until 1933 for US residents and until 1971 for foreign governments and central banks. those tokens are the government approved accounting method for taxes. technically, it's not a ponzi scheme, just another fiat currency. of course, if you "print" every year much more than what you expect to gather in more in taxes, this gives more currency going somewhere else.

Wed, 03/21/2012 - 07:47 | 2276174 Debt-Is-Not-Money
Debt-Is-Not-Money's picture


Einstein reportedly said:

"The Federal Government can issue money directly.

Why do they need a middleman?"

Wed, 03/21/2012 - 06:51 | 2276122 tjp
tjp's picture

"if the fed owns most of the bonds, and they turn the interest payments back to the treasury, then why do interest payments matter?"

My understanding is that the Federal Reserve -- a private banking cartel -- does not turn the interest over to the U.S. Treasury, but to its shareholders, comprised of member banks.

Thus, the wealth of the U.S. is systematically transferred from its citizens to an elite group of wealthy bankers.

Wed, 03/21/2012 - 06:59 | 2276135 Ghordius
Ghordius's picture

no, nothing as crass as this. the fact that the FED is a "private" organisation is irrelevant - the profits of the banking cartel are not given directly in form of dividends (in fact it's the US Treasury that receives "excess profits" from the FED), they are by virtue of being allowed to partecipate in the "largesse" of the FED in form of liquidity, bailouts, UST transactions, the "mother hen" function of the central bank, etc.

Congress could nationalize the FED by a law this very day in exchange for one USD and it would change nothing.

Tue, 03/20/2012 - 20:27 | 2275358 Corn1945
Corn1945's picture

The end game is in sight here. Debt is a poison when a slight rise in interest rates bankrupts you immediately. 

There is no way out except default, either by printing or outright default. 

How many times has this exact same game played out through human history yet we keep having the same arguments over and over again?

Tue, 03/20/2012 - 22:55 | 2275674 Seer
Seer's picture

Thank you so very much for reaching out beyond the trite, petty politics of today.

People don't want to identify the REAL truth as to why this keeps repeating- perpetuation of the growth lie.  EVERYWHERE all you hear is that we MUST protect "growth," we MUST GROW!  This centrally planned GROWTH is what allows our slave masters to control everything.

Whenever you see the word "interest" substitute "rate of growth."

Most here clamor for backing currency with something tangible/physical, like gold.  This is good, but it's still missing the bigger picture: it's got the right elements (no pun intended), but it doesn't really hit the root of the problem.  "Rate of growth" really means "rate of increases to consumption levels" IS the problem, the physical world isn't the same as a virtual printing press.

Tue, 03/20/2012 - 23:44 | 2275770 Incubus
Incubus's picture

humanity doesn't necessarily "progress."


What you have is a large labor-class that retains the same basic mass psychology through-out the history of civilization.


Their operating environment may change through innovations of exceptional minds, but it matters not.  The ignorant masses will claim "genius" as their own and attribute it to their own ability when they do nothing but provide the labor and consume and fuck.


If "we" last the next 10,000 years, we'll be debating the same old shit, in a different tongue.

Wed, 03/21/2012 - 00:04 | 2275792 Seer
Seer's picture

EVERYTHING is based on the "promise" of tomorrow's prosperity.  That is what "growth" is all about, it's an illusion/lie perpetuated by the ruling classes.  Growth, however (someone junked me for stating a mathematical fact, WTF? [grow up, people!]), canNOT continue in perpetuity.

We're not going to see another 10,000 years.  The earth's inter-glacial period is roughly 12,000 years, and we've just about run out of That clock.  Next cycle, glacial period, here we come!  And, well, it's not going to be all warm and fuzzy like this here inter-glacial period.  From iPads to iCaves...

Wed, 03/21/2012 - 04:57 | 2276050 Hot Shakedown
Hot Shakedown's picture

That is profound.

Tue, 03/20/2012 - 20:28 | 2275359 Beam Me Up Scotty
Beam Me Up Scotty's picture

Why would they turn the interest payments back to the treasury?  That sounds like a big happy circle jerk.  And thats probably what it is.

Tue, 03/20/2012 - 23:10 | 2275709 r00t61
r00t61's picture

The Fed is required by law to turn over their interest payments back to the Treasury.

Not that laws matter much more in amerika, anyhoo.

Wed, 03/21/2012 - 03:26 | 2275996 SoundMoney45
SoundMoney45's picture

90% of interest to the treasury, 10% to Federal Reserve Corporation stockholders.

Tue, 03/20/2012 - 20:33 | 2275371 Pancho Villa
Pancho Villa's picture

Bond vigilantes still sleeping soundly. But when they wake up, boy are they going to be pissed!

Tue, 03/20/2012 - 21:25 | 2275500 Uchtdorf
Uchtdorf's picture

Angry perhaps, but what are they going to do about it? GM bondholders & Hellenic Republic bondholders got shafted, but no shots fired yet. Docile as lambs, if you ask me. Why is that? Nihilism? Fatalism? Too Big To Do Anything About It-ism?

Tue, 03/20/2012 - 21:46 | 2275545 Pancho Villa
Pancho Villa's picture

The private sector stopped loaning money to Greece (except at huge interest rates) forcing the government cut spending and beg money from the ECB. Which caused Greece's economy to go into a depression.

In the US things will be different. Interest rates will rise as they did in Greece, but the US government will print dollars and shrink the debt via inflation. The people who will be hurt most will be the ones who are silly enough to be holding dollar-based debt just before the "Great Reset". Holders of physical PM's should come out OK (as long as the US gov doesn't confiscate them). And PM prices might even skyrocket as everyone scrambles to get out of bonds and into physical assets.

Tue, 03/20/2012 - 22:05 | 2275588 JohnKozac
JohnKozac's picture

I agree w/ you Poncho, printing and devaluing the debt is the only realistic way out of this mess. Same as in the past .

Wed, 03/21/2012 - 00:10 | 2275801 Seer
Seer's picture

Using reality to escape non-reality, hoping to reach reality through leaders who ONLY only know (and can ONLY stay in power via) non-reality...  It's looking like this might end up being a tad difficult...

Tue, 03/20/2012 - 20:35 | 2275377 Cursive
Cursive's picture

Uh...where was the part where he explained the Ponzi of it all?

Tue, 03/20/2012 - 20:37 | 2275378 steve from virginia
steve from virginia's picture


Just about everthing out of this dude's mouth is wrong. WTF?

Who made Mr. Dude the debt nazi, anyway?

The prob w/ debt is what it is used for: whores, drugs and gold plated faucets for the 1%ers.

There is no such thng as 'too much debt' because finance debt is never repaid (unless you stop being a country or are dependent upon external sources of credit).

Debt is used to industrialize/ruin the entire world. How is that working out?


Tue, 03/20/2012 - 23:09 | 2275706 sun tzu
sun tzu's picture

Who made you an idiot

Wed, 03/21/2012 - 04:38 | 2276042 AnAnonymous
AnAnonymous's picture

Debt is used to industrialize/ruin the entire world. How is that working out?


Quite well for those on the good side of the process (an ever to shrink number) and not that well for the other side.

US world order.

Wed, 03/21/2012 - 06:00 | 2276088 akak
akak's picture

Matrix Algebraic Coconutism

Make me laugh!

Tue, 03/20/2012 - 20:36 | 2275379 Hot Shakedown
Hot Shakedown's picture

Praying that someone shoots the Hemaroid with ears and takes him out. He simply crossed the line this week. The man is evil and I pray that is he is shot- soon.

Tue, 03/20/2012 - 20:39 | 2275385 bob_dabolina
bob_dabolina's picture

Fuck that, just double the debt ceiling, have Bernanke print money to buy Treausuries and keep interest rates at historical low levels.

Oh, shit, that's what we just did.

Tue, 03/20/2012 - 20:40 | 2275391 yogibear
yogibear's picture

Bernanke and the Federal Reserve just keep on monetizing. The Chinese and Saudi's holdings of treasuries become worthless.

Many more suckers like Saudi  Prince Al-Waleed bin Talal and his holding Citibank are needed. Multiply the Saudi Prince Al-Waleed bin Talal suckers holding US treasuries!


Tue, 03/20/2012 - 21:42 | 2275534 taxpayer102
taxpayer102's picture


We, the taxpayers and citizens, end up being the suckers.  Foreign investors of U.S. treasuries will be given an option by our government and the Fed of payment, not in dollars, but land (acreage), buildings, resources and access to markets.  If China wants land to build a manufacturing facility or needs water for an agriculture project in the U.S. our government will make it happen in exchange for redeeming treasuries.


Tue, 03/20/2012 - 20:41 | 2275393 Winston Churchill
Winston Churchill's picture

Pay down the Debt.

This guy should be on the comedy channel !

I nearly choked I laughed so much.

Tue, 03/20/2012 - 21:02 | 2275439 shuckster
shuckster's picture

I know right, I almost fell off my dinosaur 

Tue, 03/20/2012 - 20:42 | 2275394 azzhatter
azzhatter's picture

All this debt talk is confusing. Will there be an Ipad 4

Tue, 03/20/2012 - 21:03 | 2275443 shuckster
shuckster's picture

Yes, next week - and this one won't overheat

Tue, 03/20/2012 - 21:04 | 2275444 GenXer
GenXer's picture

The Ipad 4 will actually run hotter than any previous model, and in a world first be able to singe your nuts while surfing the net when positioned on your lap. Can't wait.

Tue, 03/20/2012 - 23:58 | 2275787 Seer
Seer's picture

Ha!  And here we thought that it was Hummers and the like that were the causes of global warming!

Wed, 03/21/2012 - 00:31 | 2275827 Hangfire
Hangfire's picture

Yes, actually Apple is joining up with George Foreman to create the Foreman Ipad, revolutionizing not only personal computing but grilling as well.   

Tue, 03/20/2012 - 20:43 | 2275398 Seasmoke
Seasmoke's picture

while there is still time ????

Tue, 03/20/2012 - 20:46 | 2275406 fonzannoon
fonzannoon's picture

Everyone on here is too excited about the bump in rates. There will be some fear that creeps in and when it does the market and especially commodities will drop. People will again flock to bonds and give cover for more QE. At some point it will change course but not yet.

Tue, 03/20/2012 - 20:47 | 2275407 Bunga Bunga
Bunga Bunga's picture

Debt is not the problem because there is not enough gold anyway. Go figure!

Tue, 03/20/2012 - 20:47 | 2275408 Pretorian
Pretorian's picture

US can afford any interest rate if it is in $ . Poor guy who is lending.

Wed, 03/21/2012 - 00:14 | 2275809 Seer
Seer's picture

"US can afford any interest rate if it is in $ . Poor guy who is lending."

Quite trenchant!

Lending is basically borrowing against future returns.  When it's clear that there aren't any future returns to be had it will all then cease. The future won't be what it used to be...

Tue, 03/20/2012 - 20:52 | 2275422 FromGaltsGulch
FromGaltsGulch's picture

It's not 145B per 1% until the debt resets..there's 5.6 trillion coming due in the next 4 there's the 5 trillion in intergovernmental holdings that would reset to higher rates should that all it's fair to say that over the course  of ten years there would be 1trillion+ in additional interest costs..but if rates were to rise 1%  this year it's the current years deficits funding, the  1 triiion in notes and bonds  and whatever in bills thats subject to increased costs.

Tue, 03/20/2012 - 20:52 | 2275424 Racer
Racer's picture

and give thanks to the manipulators who give us this cheap gold prices

Tue, 03/20/2012 - 21:01 | 2275435 Watts_D_Matter
Watts_D_Matter's picture

I am going to teach a class of college business students tomorrow like uncle Ben....So here is my dilemma....When I define what the acronym FRB stands for, do I say

FRB- stands for Fractional Reserve Banking....or...Finally Reaching Bankruptcy...



Tue, 03/20/2012 - 21:11 | 2275456 ndotken
ndotken's picture

Technically, you're never bankrupt if you have the ability to print money to make your payments. The solution to this debt crisis (and any debt crisis) was provided by Greece. Exchange your debt that is held by other countries for new debt ... and tell the private holders to go fuck themselves ... woolah!!! ... instant paydown

Tue, 03/20/2012 - 21:32 | 2275514 hairball48
hairball48's picture

And after you tell the private holders to fuck off...How do you pay for imports and  the "stuff" you cannot produce within your own borders?

I've always believed that a major part of the debt problem is way too many people don't understand the difference between fiat money and "real wealth"....but they're gonna learn....and it'll be a very hard lesson.

Tue, 03/20/2012 - 21:26 | 2275504 goforgin
goforgin's picture

We actually don't have fractional reserve banking, bankers lend out out whatever they want first and worry about reserves later.

Tue, 03/20/2012 - 21:11 | 2275455 nmewn
nmewn's picture

"Current interest payments, given the US Government's lowest ever 3% interest cost, are $440 billion, or three times the annual operating expenses of the Iraq and Afghanistan wars."

Ummm, whaaa...what happened to the peace dividend?

Furthermore, why has Greece been proven to be insolvent? Did the ghost of Xerxes launch another invasion I'm not aware of?

Tue, 03/20/2012 - 21:12 | 2275458 hairball48
hairball48's picture

What happens when a sufficient number (whatever the number is) of US dollar holders decide they aren't going to hold dollars anymore?

I realize they have few alternatives given the size of the outstanding debt, but isn't that going to happen at some point?

Tue, 03/20/2012 - 21:21 | 2275496 hairball48
hairball48's picture

To answer my own question.

Aren't dollar holders going to have to pile into "real stuff" like commodities? PMs , real estate, etc. driving prices of "real stuff" to the moon?

Where else can they go? What market(s) are big enough to absorb all those dollars?

All the fiat currencies are headed towards worthlessness.

Just askin...

Wed, 03/21/2012 - 00:04 | 2275793 jimmyjames
jimmyjames's picture

What market(s) are big enough to absorb all those dollars?


There is only one-

The gold market could easily sop all of them up-but if what you describe happens-gold will decide how many pieces of paper it will take to walk away with a piece-

Wed, 03/21/2012 - 00:22 | 2275814 Seer
Seer's picture

Aren't dollar holders going to have to pile into "real stuff" like commodities? PMs , real estate, etc. driving prices of "real stuff" to the moon?

And then people will understand the difference between the virtual world and the physical world...  No more "free money," no more unicorns, no more "American Dream" (Mr. Cheney was right, the "American Dream" isn't negotiable [given that it's based on FRNs, it's got no value to negotiate with- see! he wasn't lying, it was just that people didn't get his REAL meaning!]).

Wed, 03/21/2012 - 00:46 | 2275846 Essential Nexus
Essential Nexus's picture

The currencies of developing nations will spike, as well as gold.  The CNY will likely be the next reserve currency, as the Euro probably will have gone away by the time people decide they don't want dollars.  That's my best guess.

Tue, 03/20/2012 - 21:37 | 2275522 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

...does the denomination of debt matter. If the US borrowed Euros 1 trillion for 10 years would it just not do a sell/buy EURO 10 year semiannual paymennts swap. How to buy the Euros for settlement...sell freshly printed dollars. All central banks with a press can do this. Of course this would normally kill the domestic currency. But nowadays, not so much perhaps. Probably be USD bullish in this bullshit market.

Tue, 03/20/2012 - 21:51 | 2275561 hairball48
hairball48's picture

I don't think it matters which currency.

Envision a great circle of down escalators, each representing a different currency. The escalators are all moving down at different speeds (different rates of money printing) But they're all headed for the same "black hole" in the middle of the circle.... Monetary Collapse.

It's just as Mises predicted. The result of this expansion of credit will be a complete collapse of the currencies...just  a matter of when, not if.

Wed, 03/21/2012 - 00:12 | 2275806 bilbao
bilbao's picture

Of course the denomination of debt matters. The US debt is denominated in a currency in which the US is the sole issuer of that currency. The US can never run out of its own money. It's impossible.

Wed, 03/21/2012 - 01:18 | 2275897 Seer
Seer's picture

"The US can never run out of its own money. It's impossible."

Sure as hell CAN happen.  One day the "printing presses" will be smashed, any existing USD (either physical or virtual) will be junked (deemed worthless; whether there'll be confiscations I haven't a clue).

The ONLY thing that you can say can NEVER happen is perpetual growth (on a finite planet).

Wed, 03/21/2012 - 04:40 | 2276044 AnAnonymous
AnAnonymous's picture

Still a long run from that. Scenario for nearing depletion of resources on the world scale.

For the moment, USD retains value as it buys any kind of commodities.

Tue, 03/20/2012 - 21:38 | 2275527 non_anon
non_anon's picture

reserve currency, shitting on the world

Tue, 03/20/2012 - 21:38 | 2275528 spekulatn
spekulatn's picture

Great stuff ZH. Nice video Prof. Davies. On point.

Tue, 03/20/2012 - 21:44 | 2275538 dark pools of soros
dark pools of soros's picture

simple answer... bomb the central banks

Tue, 03/20/2012 - 21:46 | 2275542 Eric L. Prentis
Eric L. Prentis's picture

I am tired of scar mongers using unfunded social security and Medicare liabilities to frighten the public. This is a disingenuous talking point, trumpeted by the right so they can attack social security and privatized it.

The total worrisome number relies on many assumptions and does not include any social security withholding taxes to offset these costs. Social security is solvent until approximately 2037, if the banksters do not continue to mismanage the credit crisis.

Tue, 03/20/2012 - 21:59 | 2275575 hairball48
hairball48's picture

"...Social security is solvent until approximately 2037,..."

Yeah sure it is. Are you fucking nuts?

Wed, 03/21/2012 - 01:24 | 2275900 Seer
Seer's picture

It's "solvent" until the printing presses are destroyed!  That people won't be able to live a day on the hyper-inflated "promises" is another issue.

Toss it all out and just ask this simple question: Where are the "replacement" workers coming from?  Demographics say that there won't be enough of them to meet our PHYSICAL needs.

I don't even know whether the US govt will be able to toss "numbers" out through 2037, let alone anything that resembles a redemption of any physical value.

Wed, 03/21/2012 - 01:44 | 2275933 alexwest
alexwest's picture

yeah.. he is an idiot..

there is no money in SS funds.. its all paper, masked as some kind of lock - box..

for 2 eyars in row SS outlays are bigger than intake.. so its already broken..


Tue, 03/20/2012 - 21:49 | 2275552 Stackers
Stackers's picture

U.S. Mint needs to issue a $1 Billion Dollar coin and use it to pay off all financial institutions, banks, foreign governments and the Federal Reserve with it. Mint these coins free of debt and use them to pay off the debt.


God Bless Bill Still

Tue, 03/20/2012 - 23:04 | 2275693 Clashfan
Clashfan's picture

Bill Still rocks!

Wed, 03/21/2012 - 00:06 | 2275796 akak
akak's picture

Bill Still is a monetary wolf in sheep's clothing --- a disingenuous, raging statist who HATES gold and has repeatedly misrepresented the gold standard and hard money in general, and who firmly believes in fiat currency and in the DUTY of government to control and issue the money supply, instead of the free market. 

It is a sign of the final and complete degeneration of the US Libertarian Party that this malicious, lying bastard is even being considered for their presidential candidate.

Wed, 03/21/2012 - 08:06 | 2276184 i-dog
i-dog's picture

+1. I'd have put it more strongly, but your portrait of that disingenuous reptile will do.

Dog smite Bill Shill !!

(Why doesn't Dog do smiting any more? Dog knows, there are many deserving of a good smiting!).

Wed, 03/21/2012 - 12:51 | 2276985 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"Mint these coins free of debt"

Mint these coins free of interest...

That's more accurate.

Tue, 03/20/2012 - 22:21 | 2275614 jonjon831983
Tue, 03/20/2012 - 22:31 | 2275627 akak
akak's picture

What the Hell is going on here on ZeroHedge --- I suddenly just lost my ability to see the "tracking" list in my user profile.  Has this happened to others here as well?

If that is some permanent change here, I have to say that it is going to radically and negatively affect our ablility to follow new posts to threads, and will greatly diminish (if not eliminate) my desire to participate in this forum.

Tue, 03/20/2012 - 22:41 | 2275645 Schmuck Raker
Schmuck Raker's picture

"Has this happened to others here as well?" Yes, myself and at least one or two others.

Let's hope it's temp in nature, a glitch with the new feature set.

Tue, 03/20/2012 - 22:42 | 2275647 akak
akak's picture

Thank you SR for letting me know --- it was like suddenly going blind!


Tue, 03/20/2012 - 22:57 | 2275678 mess nonster
mess nonster's picture

Whats a tracking list? Have i been blind all this time and didn't know it???

Tue, 03/20/2012 - 23:15 | 2275719 Schmuck Raker
Schmuck Raker's picture

Right side of screen,

you see "Welcome, mess nonster", next to it "My Account" - click on it.

There WAS a tab labeled "Track". You could track others by clicking on their names, as well.

Pretty damn handy, shame if we lost it to a RSS feature.

Tue, 03/20/2012 - 23:19 | 2275731 pavman
pavman's picture

This would all be really really relevant and interesting if it weren't for the fact that the administration basically doubled our debt in its 4 years.  I have a feeling their motto is "Dam the consequences, let's bankrupt these bitchez!"

Tue, 03/20/2012 - 23:33 | 2275749 Carp Flounderson
Carp Flounderson's picture

Yes yes, damn the consequences of paying negative real interest on as much money as we care to borrow!  Ron Paul save us! lol

Wed, 03/21/2012 - 00:13 | 2275808 bilbao
bilbao's picture

Wed, 03/21/2012 - 00:18 | 2275811 PrintPressPimpin
PrintPressPimpin's picture

 had a high school US history teacher that had a us debt clock on the wall in his classroom back in 1996 or so i think it was like 4 trillion.  He always said  this was going to be the defining issue for our generation.  I really wish i knew then what i know now.. I wish I could have chatted more with him and that he would have taught me the importance of gold.  so i would say he failed because it was so easy to teach us a quick lesson on usury, compound interest, the federal reserve, gold and silver..  but he was part way there..  RIP Pullis AHS

Wed, 03/21/2012 - 01:33 | 2275918 Seer
Seer's picture

"I really wish i knew then what i know now.."

You'd have been subjected to being able to see craziness much SOONER!  It really is hard to stay sane in all of this.

Wed, 03/21/2012 - 00:22 | 2275816 Luxy
Luxy's picture

Really like the video.  My only question is are the historic war costs in nominal or real dollar terms?  I understand this video is directed at all the blind sheeple and that a basic ECON 101 discussion on nominal versus real historic valuations is a bit much, but I'm sure some of the zero hedge ppls know this off the top of their pretty/schizophrenic/erudite heads.

Wed, 03/21/2012 - 00:49 | 2275852 dbomb12
dbomb12's picture

Only 67 trillion in unfunded liabilities??  Not even close more like 114 trillion, TIMES UP

Wed, 03/21/2012 - 01:05 | 2275873 hidingfromhelis
hidingfromhelis's picture

Hmmm..."The market sets interest rates."  Yup, we'll get right on that debt paydown thingy.  Maybe we can borrow some money to do that?  He's an econ professor; go figure.

Wed, 03/21/2012 - 01:33 | 2275916 AndrewCostello
AndrewCostello's picture

The baby boomers are blatantly using everything they can and causing as much damage as they can before they expire.  If we want to survive what is coming, we need to stop funding all the people who do the wrong things.

Wed, 03/21/2012 - 01:40 | 2275925 Seer
Seer's picture

"The baby boomers are blatantly using everything they can and causing as much damage as they can before they expire."

Yeah, blaming others works!

This is the SYSTEM, it's been in place for a LONG time.  The current paradigm [next version] pretty much started with the invention of the Fed.  Then came BIG world wars.  These created the State in its current form, creating the "patriotic" propaganda that enabled people to pour more and more of their labor and allegiance toward TPTB: warfare+welfare state.

The Greatest Generation is the last one to rake in the bennies.  Baby Boomers are going to start seeing the cracks, and start falling into them...

Wed, 03/21/2012 - 01:42 | 2275924 q99x2
q99x2's picture

Look the banksters don't have any expectations that any debt is ever going to be paid back. Fact: They know it is over. That is why executive orders are being signed to allow the banksters to instead wage WAR against the citizens. They are building up and funding all the agencies necessary to kill as many Americans as they choose and they have given control of the US military to the UN and Nato. Those are the facts. The banksters are going to attack us with the US Federally controlled military and various nefarious agencies. So stop talking about debt and instead start talking about the creation of a judicial process, whether it takes place at the state level or wherever,  that will have these criminals locked up and prosecuted. Time is running out. None of these old economic ideas address the real current issues.

Wed, 03/21/2012 - 01:48 | 2275939 Seer
Seer's picture

"They are building up and funding all the agencies necessary to kill as many Americans as they choose and they have given control of the US military to the UN and Nato."

That's the cart before the horse.  The UN and NATO are under the control of the bankers!

I don't believe that the "plan" is to kill a bunch of citizens as much as it's about protecting the wealthy.  But, yeah, "protection" almost always comes down to killing...  Just don't think that it's going to be some sort of big FEMA roundup (not like TPTB wouldn't prefer this over what WILL occur).

Wed, 03/21/2012 - 08:24 | 2276214 i-dog
i-dog's picture

You are right that they know it is over and are preparing the agencies and mock "legal" framework to impose martial law on a whim. But it's not for war against the people ... simple starvation will be far more effective.

It will only take a couple of days for the shelves to be emptied after some unfortunate event disrupts the supply chain. Then, 300 million sheep will be bleating at the gates of the FEMA camps to be let IN for a feed.

Surprisingly, only "loyal" troopers of the Criminal Occupation Government will be guaranteed food from the commandeered "national emergency" stockpiles. The rest of the country will get the leftovers--if any. Just look at African states after military coups to see how it works.

Wed, 03/21/2012 - 01:41 | 2275927 alexwest
alexwest's picture

#or three times the annual operating expenses of the Iraq and Afghanistan wars

only idiot compare interest expexnse to cost of war.. well what would you expect from some kind bearded heck?

here's true analysis:

US FED gov collects about 1.6-7 trln $ per year(rest of of revenues is debt, masked as revenues), so each 100 basis points (1%) increase in interest rates will drain additional ~10% of revenues... 2% more - 20%..

WE WILL NEVER SEE 5% FOR 10YY EVER AGAIN, w/out somekind of default/restructure/etc.. its MATHEMATICALLY IMPOSSIBLE.. 5% ON 15+ TLN OF DEBT is 750-800 bln, so its half of real revenues..

SO YOU MUST BRAVELY BUY ANY DIP IN 10 yy BOND.. it wont last.. i guess its best strategy for next 3-5 years..


forgot to add.. principal is up too.. in short 3-4 years, its gonna be 20 trln, so 3.5% interest rate on 20 trln, is same as 5% on 15 trln, more or less

Wed, 03/21/2012 - 14:24 | 2277292 Currency is Debt
Currency is Debt's picture

I share your view on low rates. Not neccassirly as a trade though. Bit too close to the end of the trend to try and be a friend.

Wed, 03/21/2012 - 03:53 | 2276007 Tom Green Swedish
Tom Green Swedish's picture

It's not illegal if the government does it.

Wed, 03/21/2012 - 08:38 | 2276223 i-dog
i-dog's picture

It is illegal if the government acts against the Constitution. That's what the Supreme Court is supposed to determine.

Just about everything the Federal Government has done in the past 144 years has been unconstitutional and therefore illegal ... but, they have an exceptionally gifted PR department and, as of a few years ago, a Supreme Court stacked with Luciferians that will never act to stop them now.

Wed, 03/21/2012 - 04:03 | 2276013 cnhedge
cnhedge's picture


so how much more interest us will pay if interest rate rises.

Wed, 03/21/2012 - 04:43 | 2276046 AnAnonymous
AnAnonymous's picture

The usual US citizen trick.

Actually, it is not about repaying debt but consuming as much as possible through debt.

The highest level of consumption is always achieved when one can issue debt that will not be repaid.

That is what US citizens are working at.

No matter what, less is less. So less resources mean less resources, debt paid or not.

US citizens have chosen the path of the unsustainable debt for a purpose.

A purpose this US citizen narrator is trying to offuscate.

Wed, 03/21/2012 - 11:07 | 2276650 DavosSherman
DavosSherman's picture

The Fed is the bong vigilante, interest will never rise, we'll print into banana republic status.

The wars are off balance sheet and a hell of a lot more costly.  I've seen estimates of $4 trillion to date.

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