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research24
28th October 2008, 10:29
From Jesse's Cafe Americain:

"We have seen estimates that next year the US will have to finance a $2 Trillion annual deficit.

"It should be obvious to anyone that we are approaching the apogee of the Treasury bubble, with the credit bubble having broken already.

"When the Treasury says they are facing unprecedented challenges in financing the US public debt next year that is an understatement.

"Once the deleveraging of the markets subsides, the dollar and Treasuries will drop, perhaps with some momentum, as the rest of the world realizes that the US has no choice but to default. This can be resolved in several ways, including continued subsidies from foreign sources in the form of virtual debt forgiveness, devaluation of the dollar, raising of taxes, and higher interest rates on debt.

"The problem now is that the US has breached the point where it can service its debt out of real cashflows, and turning this around will require a severe devaluation of the US dollar.

Devaluation and selective default are the only forseeable systemic alternatives. There are other exogenous options of a more political nature such as consolidation and war. Everything else is commentary."

MY SENTIMENTS EXACTLY. How do I know this will happen? Because it is inevitable, because there isn't enough real money in the whole world to pay off this mountain of debt. Especially not when the nation is in the midst of economic collapse.

WallStreetTiger
28th October 2008, 10:32
The worst part is that 1 new dollar now produces zero GDP. This is disastrous.