4 Dec

The Debt Dam Bursts In Two to Four Years

Doug Ross:

Economic writer Robert Wiedemer’s assessment matches those of former House Ways and Means chief Chris Carter and Paul Ryan: we have two years — four years at the outside — before the federal government’s Ponzi scheme implodes.

…this dollar bubble and this government debt bubble – will burst. It is not as if it will not burst for 15 or 20 years. We say it is somewhere in two to four years. You need to be prepared for it.

The debt will always be funded as long as the Federal Reserve stands willing to buy all the bonds that the government sells. At some point, that creates inflation: that pushes up interest rates. The Fed will fight those interest rates going up. At first, they can do it. They just print more money. That keeps interest rates down, but ultimately that inflation will force them up. We cannot just pull the money out and raise interest rates now; it’s going to pop the real estate and stock bubbles.

What is going to happen is the Fed is going to lose control of those interest rates. When you print too much money, it gets you control short-term, but it is a recipe for losing control long-term. With those interest rates going up, what is going to pop? The stock market and real estate bubbles. All of that is what kicks off the big problem going forward. Normally you would say the bond market is going to be the problem, but I would tell you that it is actually going to be more stocks and eventually even real estate combined. Then ultimately, the bond market starts to go down, and down quickly once it starts.

When the dam finally breaks, it will break quickly. Literally, it is in a matter of months or certainly no more than a year once it really starts to go.

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About Curt

Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 20 years.

8 Responses to The Debt Dam Bursts In Two to Four Years

  1. Nan G says: 1

    Where should we be investing now?
    In commodities, like a year or two worth of food stuffs.
    In firearms and ammo.
    In super-secure, isolated locations and tamper-resistant locks and doors.
    In candles, storable fuels, warm clothes.
    Etc.

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  2. johngalt says: 2

    @Nan G:

    Some people would call you a ‘chicken little’, Nan.

    Not me, though. I see what is coming. It will make Greece look like an economic boom, in comparison.

    And anyone thinking that “it can’t happen here” needs look no further than Germany in the early 20th century, and France before that, as well as our own nation not too long after our independence.

    Fiat money, money that has no tangible backing, or value, is solely dependent upon the confidence placed in it by the people that use it. Our own dollar is one such form of currency. When that confidence starts to erode, it is all downhill and even a Herculean effort by the government and the Fed Reserve won’t be able to bring it back.

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  3. Jim S says: 3

    How can we avoid “fiat currency” if the size of the economy is larger than the supply of traditional hard money (gold, silver)?

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  4. johngalt says: 4

    @Jim S:

    One must then ask the question, “Why is the size of the economy so large anyways?”

    Why is it that a pack of gum, for instance, is now worth $.75 or a dollar, when just a few short years ago it was only 25 cents?

    Inflation? Would it surprise you to know that inflation is purposely injected into the economy by the monetary authority in the US, as a means of combating recession and depression? That it is purposely kept low, but still there, by that monetary authority, the Federal Reserve?

    And you cannot look at the gold or silver supply as finite. In terms of gross weight, you would be correct. However, the value of gold and silver is variable, meaning that the money tied to it can be increased(in most cases), or decreased(when conditions warrant it), in order to maintain the value of the currency in question.

    Is there enough gold and silver, above ground, in holdings around the world, to equal the rough GDP of he world? No, there is not. Not even close, actually. But then, prices for goods are only justifiable against the current value of the currency. No seamless transition back to a gold standard is possible.

    But the current situation the US, and the world, finds itself in is one of unsustainability, and markets will implode. They must do so, in fact, if we are ever to gain back common sense in our economy and the government. The only question is how long do we have until that happens, and how long will the tumult last.

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  5. Nikki Foster says: 5

    Get the book called Aftershock by Robert Wiedemer and Cindy Spitzer , they predicted 2008 bank meltdown as many others did but this book is a good guide on when and how to act to save what wealth you have. My family does not have much and what cash saved can be taken by obummer as he takes 401ks and gives you those government bonds he has been selling to our banks then buying them back. We would end up in jail if we managed our finances that way.
    We will buy silver coins as soon as we find a reputable dealer , save them until things get back to normal and if normal is a thing of the past, well , the silver will allow us to buy a ticket out of here or needed food.

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  6. Nikki Foster says: 6

    @Jim S: Yes , gold is high, but we will buy silver. I watched a man from Europe on some program, possible WW11 era, he said his family had some silver when his country was overrun with communists and the silver they saved allowed them to get out of the country. Paper money was of no value. We could get there so gold and silver is really a smart move.

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  7. Nikki Foster says: 7

    With the fed printing money and obummer set to have a free hand at raising the debt ceiling, gold and silver will hold their value as stated in the book “Aftershock”, Gold and silver are used in certain industry , and will always be needed for rebuilding our world after debt collapse. Paper will be useless because it will be so inflated. Banks stop dealing with citizens because gov tells them what to do , life insurance policies will be worthless also because of collapse nobody will be paid. People walk away from homes and rent in larger numbers than we see now.
    I think it was Andrew Jackson who got rid of the Federal banks in his time because taxpayers where on the hook for all debt in US and foreign debt also. He was correct , he knew federal banks would destroy America and now we see it up close as obummer owns the federal banks. the story goes that on his death bed he said the federal banks will be put back in business and he feared it would not go well for America.

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  8. Doug says: 8

    Well, Japan’s at 220% debt/GDP and hasn’t imploded (yet). Endless ZIRP has kept the debt from consuming their entire budget. It’ll end eventually. If the US simply equals their performance, it’s 20 years of $1 trillion deficits before we’re at the same point. The authors provide no basis for thinking a dollar crisis will occur in 2-4 years. We know ZIRP will continue for 2 more years under Bernanke, and there’s every reason to think it will continue under any successor named by this administration, so that’s 6 more years of loose money. Team O obviously expects to be safely out of office before the dollar tanks, and Team H (2017-2024?) wouldn’t be anxious for such an event to occur on her watch either; TPTB must think the crunch won’t hit for a long time or that some policy action in the out years will postpone it further. Mathematically it’ll still be possible to bring the deficit under control with a combination of measures that are scary to contemplate unless you’re a statist: slashing defense (e.g. to 1% of GDP), higher taxes on the middle class (e.g. a VAT), health care rationing (marketed with some Orwellian catch-phrase like “smart medicine”), and topped off with inflation to destroy the value of the old debt (private-sector retirees being acceptable casualties of the process).

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