Beyond the Cusp

December 24, 2015

United States Potentially About to Fall

 

The United States is precariously balancing between solvency and being revealed as bankrupt. The United States has mortgaged thousands of acres of virgin lands which hold resources above and below the ground. The resources include but are not limited to coal, uranium, lumber, wheat, grazing lands and potential oil deposits or precious metals etc. There are other questions which are relegated to conspiracy theorists and fear mongers but the fact that China has been purchasing gold and could be said to be hoarding gold for quite some time as the gold buying by China in a graph from 2012 displaying the situation in raw numbers as shown below.

 

 

China Gold Purchases of 2012

China Gold Purchases of 2012

 

 

The graph in and of itself is a solid display of a potentially damaging effect on the balance of gold holdings but in all honesty we need to make a confession; the number in metric tons is used as an alarmist shock figure which is a form of deception as taken as a percentage of the total holdings of all nations and one immediately realizes the minor difference eight-hundred-thirty-five metric tons is but three and a third percent of the over well over twenty-five-thousand metric tons owned by all the nations of the world. Perhaps a listing of the top ten nations in gold holdings according to the International Monetary Fund’s records will make a difference and put everything into perspective. Below is a list of the top ten national gold holdings listed below.

 

1) United States   with gold holdings of   8,133.5 metric tons
2) Germany          with gold holdings of   3,391.3 metric tons
3) Italy               with gold holdings of   2,451.8 metric tons
4) France            with gold holdings of   2,435.4metric tons
5) China              with gold holdings of   1,054.1 metric tons
6) Switzerland      with gold holdings of   1,040.1 metric tons
7) Russia             with gold holdings of     937.8 metric tons
8) Japan              with gold holdings of     765.2 metric tons
9) Netherlands      with gold holdings of     937.8 metric tons
10) India             with gold holdings of     557.7 metric tons

 

As can be note, 835 metric tons are a mere drop in the bucket providing these are the sole gold acquisitions made by China. There are claims that China has, as well as bringing in the amounts of gold in the graph through Hong Kong, has also established a surreptitious route through the gold markets in Shanghai and that they have acquired an additional 7,000 metric tons through this untraceable route over the past half a decade making China the largest gold reserve on the planet, providing these claims are valid and not just the ravings of conspiracy mongers living in some basement, likely their own basement, but basement all the same (we are located in a basement free apartment, so we can be trusted, well, that along with our track record of opinions over the past half a decade plus). The main problem with the seven thousand metric tons theory would be that such purchases would exceed the amount of gold available for purchase each year. The only way that China could have amassed that seven thousand metric tons would be if a state holding, or a number of state holdings, were to be being liquidated or transferred to China as payment of debts but being done under the radar through gold merchants in Shanghai, but even then one would expect the trade of such amounts would raise some suspicions and keeping them under wraps would be the best kept secret since the hiding of the Ark of the Covenant, itself constitutes a good amount of gold and things far more valuable than mere gold. That would beg the question as to who might be selling gold in such quantities.

 

This aside, China is on a definite path to acquire as much gold as they are able to buy and mine in efforts to improve its position and possibly having delusions that they could one day exceed the gold holdings of the United States, providing that China has not already cashed in their bank notes and other United States debt holdings, demanding payment in gold and routed this through trusted merchants in Shanghai who are actually Chinese government employees, high level Chinese government employees holding really cushy positions living the life in Shanghai. There was an increase in the interest rates charged by the lenders to top line banks by one-fourth-of-one-percent which some are claiming is a sign that the all but free money supplies are about to be tightened over the next year or so. While this very well may be in the plans, it is not what this tightening was about.

 

 

Gold Gold Gold Piled in Stacks Gold Gold

 

 

We can expect the Federal Reserve to hike the rates again this coming spring by as much as one-half-of-one-percent which will send panic waves through a fair number of investors and exactly the opposite through the other bulk of investors as there are going to be arguments that this is the end of expansion of the stock market and a slowing of business as lending will have become tighter and more expensive. Wrong again. These maneuvers are all being manipulated for political reasons and have absolutely nothing to do with the economy as that picture has not changed. After raising the interest rates the Federal Reserve will drop them announcing a reversal of policy claiming there was a misreading of economic indicators and it has become obvious that tightening the money supply is unwarranted and thus the return to the lower rate or an even lower rate. This announcement will be made about mid-September and will unleash a flurry of activity as stocks will soar, jobs will magically appear, most to deal with the holiday seasonal employment jump plus the coming available jobs held by students over their summer breaks. These replacement workers will demand a slightly higher rate of pay than did the summer employees working for near or at minimum wages. This will show a marked improvement in the jobs rate, lowering unemployment and even bringing some who had been dropped from the employment picture may return making the numbers all around look far better going into the fall campaign season. The improved picture will be claimed by President Obama as validation of his handling of the economy and his approach to growing jobs through government investment in the economy, also known as corporate welfare and crony capitalism. This will also make the Democratic candidates claims that theirs is the correct path to a bright future appear less Pollyannish and the claims that the tightening of the belt on government spending is actually necessary. This has been the path the Federal Reserve has taken ever since President Clinton needed a jobs, finances, and general boost in order to gain reelection and is now being extended when there is no President seeking reelections, more specifically a Democrat President seeking reelection, and the hope is to provide the best possible scenario for the election of another Democrat and keeping the republican Party out of the White House.

 

I can hear the skeptics already writing their comments screaming for us to quit with all of the conspiracy craziness and return to planet Earth. The problem is this has gone from crazed theory to actual reality as the economic health of the Western world depends on there never coming to fruition the exploding of the debt bubble. What the Western world, especially Europe and almost as deeply indebted United States, are facing is a huge and unpayable debt which has gotten to the point that there are no longer any credible sources of funding. This has caused these governments to do something which is euphemistically called Quantitative Easing which is where a loop is invented where one party loans funds they do not presently have to the government and then buy that money from the government in order to repay their debt but instead the monies are instead invested by distributing it to banks to lean and thus stimulate the economy. This might have functioned far more efficiently if the Federal Reserve had not already lowered the interest rates to where any corporate venture could be financed almost fee free thus there was no demand for these funds and the banks saw no upside to lending the funds anyways. Thus these funds which have come from a series of Quantitative Easings have basically sat in the larger banks vaults collecting electronic dust as these funds exist solely in the computers which run the economic system. This is known as stagnation of funds and means that the cash has no velocity, simply put the cash is not flowing through the system and thus has had absolutely no effect on the system which is good for keeping inflation low as had these funds been forced into the system then prices would have risen commensurate to the amount of increase is available monies for purchasing of goods and services.

 

So, when will these funds enter the system and what will be their effects? Well, they will come into play when the interest rates rise sufficiently that it becomes advantageous to the banks holding these funds to let them flow into the lending market. The situation will come about most likely when the prime interest rate set by the Federal Reserve reaches around four-and-a-half to five-percent which will mean rates of anywhere from six percent on up depending on one’s credit rating, the amount borrowed and whether the loan is backed by hard goods as in a mortgage or many business loans or if it is unbacked as are investment loans and purchases. There is a side problem which does not often figure into your or my daily life, and that is the Federal Debt which has about exceeded five-trillion dollars for the United States and a similar level in Europe which will only grow worse as more countries end up like Greece where the money flows in but nothing ever comes back including payments on these debts, they have become economic black holes where they take in but even small change cannot escape their borders. Once the IMF along with the Federal Reserve increase the interest rate it will effect an enormous upward jump in the short term interest rates which nations and the European Union all use to finance their debts and this will mean a jump in the interest payments, the minimum payment required for solvency.

 

The current rate is around one-half-of-one-percent for the best rates nations to probably two-percent for the riskiest of nations say Greece. Should the rate on these loans increase as expected for each level of increase in the prime rate, then the best rated nations could be looking at four or even five-percent and the worst risk nations clearing ten percent. Imagine if the United States, as a prime example, faced a change in their interest rates. Currently they receive a generously low rate, let us say one percent to make the numbers easy. Should the rate increase to one-and-one-fourth the United States would see their interest payment on their debt increase accordingly by one-quarter-of-one-percent, something easily handled. But what if the rate increased to around five-percent? Currently the United States uses approximately fifteen percent of their budget to pay their interest on the debt. Should that increase five-fold they would be spending seventy-five-percent of their budget on paying interest on their debt and thus they would reach the point of no return as this could not be sustained and still pay the salaries of the Federal Employees nor could they pay for the vast majority of programs and the military would be necessarily decimated to such an extent as to being unable to even be capable of protecting the mainland from attack. This would be the end of the United State and along with them the world economy as Europe would crash and the only way out for the world would be a total reset. The other definition for a total reset is a world war at whatever level of destruction required allowing for a complete restarting of all economies and the cancellations of all debts. The individual nations would then be dependent on their gold reserves to demand their seating as viable powers in this new world and this may be behind China, Russia, India and Brazil all buying gold and other precious metal and gems at a dizzying rate. Perhaps they know something the rest of us would be wise to note and understand.

 

Beyond the Cusp

 

June 2, 2015

Russia Assisting United States Facilitating Nuclear Super Iranian State

Filed under: Absolutism,Administration,Advanced Weapions Systems,Africa,Al Nusra Front,al-Qaeda,Al-Quds Force,Amalekites,Anti-Israel,Anti-Semitism,Anti-Zionist,Appease Islamic Interests,Appeasement,Arab Appeasement,Arab Authority,Arab League,Arab World,Armed Services,Ayatollah,Ayatollah Khamenei,Barrel Bombs,Binding Resolution,Blood Libel,Blue Water Navy,Boko Haram,Breakout Point,Cairo Speech,Calaphate,Chemical Weapons,China,Chinese Military,Chinese Pressure,Chlorine Gas,Civilization,Communism,Conflict Avoidnce,Coverup,Debt,Debt Ceiling,Default on Debt,Department of Defense,Ditherer in Chief,Domestic NGOs,Ease Sanctions,EMP Device,Europe,European Council,European Governments,European Pressure,European Union,European Union’s High Representative for Foreign Affairs,Executive Order,Federica Mogherini,Forced Solution,Foreign Funding,Foreign NGOs,Government,Hassan Rowhani,Hate,ICBM,IHH,Ineffective Sanctions,Interest on Debt,Internal Pressures,International Politics,Intifada,Iran,Iranian Military,Iranian Pressure,Iranian Revolutionary Guards Corps,IRGC,IRGC,Iron Curtain,ISIS,Islam,Islam,Islamic Pressure,Israel,Israeli Capital City,Israeli Interests,Israeli Media,Jerusalem,Jihad,Jordanian Pressure,Leftist Pressures,Light unto the Nations,Mahmoud Abbas,Mainstream Media,Meaning of Peace,Media,Military Intervention,Muslim World,Nationalist Pressures,Non Binding Resolution,North Korean Pressure,North Korean Threat,Nuclear Program,Nuclear Proliferation,Nuclear Scientist,Nuclear Sites,Nuclear Weapons,Nuclear Weapons,P5+1,Palestinian Authority,Palestinian Pressures,Plutonium Production,Politicized Findings,Politics,President Obama,Promised Land,QE1,QE2,QE3,Quantitative Easing,Quds Force,Rebel Forces,Resolution,Response to Terrorism,Russia,Russian Military,Russian Pressure,Sanctions,Sarin Gas,Saudi Arabian Pressure,Saudi Military,Secular Interests,Sharia,Shiite,South China Sea,Special Forces,Sunni,Syrian Military,Taqiyya,Terror,Threat of War,Troop Withdrawal,Turkey,Turkish Military,Ukraine,Ukrainian Military,United Nations,United Nations Presures,United States,United States Pressure,Upgraded Military Capabilities,Uranium Enrichment,US Air Force,US Army,US Marines,US Navy,Victims,Weapons of Mass Destruction,WMD,World Opinion,World Pressures,World Without Zionism or America,Zionism,Zionist — qwertster @ 2:09 AM
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With the silent blessings from the Administration of United States President Barack Obama, Russia is continuing on their steady path of nuclearizing and militarizing the theocratic government in Iran. The recent announcement that Tehran and Moscow have entered into an agreement to build two additional nuclear reactors in Iran and that building will commence on the first immediately came right on the heels of the announced near term provision of the delivery of sophisticated S-300 surface-to-air missile batteries rather than the delayed delivery which was originally announced in order to pacify Israeli concerns and active opposition to the eventual delivery. This has been an ongoing debate which had been put on hold as sanctions made any delivery impossible over the past two years. With the lifting of certain sanctions unilaterally by President Obama, the delivery of the S-300 antiaircraft systems as well as construction on the next two nuclear plants made construction possible. Further, the release of funds to the Iranians also facilitated their being capable of affording moving forward on these somewhat troublesome initiatives. When these developments are taken individually and outside the context of the recent military offensives backed and supported actively by Iran the case for alarm has mostly been avoided. Israeli concerns and protestations have mostly been swept aside and neglected as a blind, deaf and dormant media has reported on these activities with minimal interest or challenge to their potential ramifications.

 

If the initiation of two additional nuclear facilities being aided by Russia in Iran and the delivery of one of the more advanced air-defense systems being delivered by Russia to Iran were not sufficient to cause loss of sleep and a furrowed brow, perhaps some additional released information might give one pause. There have been recent intelligence reports which claim to have discovered something most astute observers had known for some time, that the North Koreans and the Iranians have been cooperating in their mutual programs to develop advanced missiles including ICBMs as well as cooperation on nuclear weapons research. There have been so many instances where one was able to witness the presence of North Korean scientists at the launch trials of new missile technologies and the presence of Iranian scientists at numerous North Korean nuclear and missile tests that there might have been smoking gun evidence even to the most casual observers of collaboration by the two nations. Additionally, when North Korea protested the loss of several of their technicians and scientists resulting from the Israeli bombing of a nuclear reactor main complex being constructed in Syria apparently of a variety used for plutonium production in North Korea on September 6, 2007, this should have raised further concerns of cooperation between Iran and North Korea as this was certainly a means by Iran to build such a production facility while removing any suspicions from their door by building the nuclear facility in Syria. It is reported that the two nuclear sites the Russians will assist in the productions will be light water reactors which are far less adaptable to the production of plutonium. Below are before and after aerial photographs of the main building struck in the Israeli raid.

 

 

Before and after photographs of Syrian nuclear site, located in the Deir ez-Zor region bombed by Israel on September 6, 2007, preventing the remote location of nuclear facilities for weapons manufacturing by use of Iranian proxy Syria. Raid was initiated by the Israelis after United States refused cooperation or action claiming the site was not a nuclear weapons site. North Korean observer scientists and technicians were apparently killed as per North Korean complaints against Israel for the raid.

Before and after photographs of Syrian nuclear site, located in the Deir ez-Zor region bombed by Israel on September 6, 2007, preventing the remote location of nuclear facilities for weapons manufacturing by use of Iranian proxy Syria. Raid was initiated by the Israelis after United States refused cooperation or action claiming the site was not a nuclear weapons site. North Korean observer scientists and technicians were apparently killed as per North Korean complaints against Israel for the raid.

 

 

These developments between the Russians ad Iranians have not received even the slightest protest from President Obama or his administration, especially Secretary of State Kerry who recently visited Moscow on an apologetic mission seeking Russian assistance in the removal of Syrian dictator Bashir al-Assad after attempting to make amends for recent administration efforts to protest Russian activities in the Ukraine. The mission failed on all accountings and things will apparently continue at pace with Russia assisting Iran who are assisting Syrian Dictator Bashir al-Assad. Secretary of State Kerry’s meeting with the Russian leader really got off to a cold start as Russian President Putin arrived for their meeting three hours late offering no reason or apology while expecting one which was given dutifully by Secretary Kerry. After insults and apologies were exchanged, Secretary of State Kerry got down to the actual groveling requesting Russian assistance in ending the confrontations in Syria between numerous rebel groups including the al-Nusra Front (an al-Qaeda affiliate) and ISIS amongst others. Despite Secretary Kerry’s greatest of efforts, little cooperation was arranged as President Putin gave all requests the cold shoulder but left the door slightly opened that perhaps future arrangements might be arranged. It was slightly after this meeting that President Putin announced the earlier than hinted delivery of the S-300 antiaircraft batteries to Iran, an in your face move as stark as could be imagined to Secretary Kerry, President Obama, Israel and the West in general. Now with the announced start of two more nuclear reactor sites, the Russian buildup of Iran is proceeding apace and potentially picking up steam. One can only assume that either President Obama actually approves of the strengthening of Iran or knows that he is powerless due to his puerile and pathetic prowess towards foreign policy practices despite posturing passivity pretending to prideful restraint.

 

This has been the produce from a foreign policy initially given grand but vacant gestures climaxing in various forms of contrite concession, gratuitous genuflections and pompous speeches all designed to present an image of America pleading forgiveness on bended knee humbled before her betters. This introduction was probably the sole truism in all foreign affairs fermentations which eventually produces a poisonous brew of crossed red line after red line, feigned commitment always falling short of the promised mark and general ineptitude which gave green lights to every bad player with grand designs to pounce on the open opportunity presented by a United States in remission so as to permit the world the room to repair all the ill effects from an overbearance of American past use or power. Nowhere in President Obama’s repertoire has there been room for even the slightest of doubts as to the malignance of American policies despite all evidence of best intentions of attempting to right the wrongs, including her own. To President Obama America was the bully who stole the other nations’ riches by economic plundering or through enhancing dictatorial powers while making them and the United States wealthy on the plunder of the poor and downtrodden placed under the dictatorial thumbs thus supported. Nowhere did President Obama and his cauldron of fellow haters of their nation, Samantha Powers, Susan Rice, and even the First Lady amongst others, some under the direction of the likes of George Soros, one of the preeminent America and Israel haters of the lot, did any of them ever consider what might have been the consequence of a world without American efforts. This has what has driven the foreign policy of President Obama, a foreign policy deviously applied hidden by apparent indifference, apathy, failure, and devoid of influence. The policy was to facilitate a multifaceted power structure to balance out America making her but one player amongst a plethora of actors, most aligned to oppose American might.

 

The plan was to empower Russia to take Europe, China to take Asia, Iran to take the Middle East and Africa, and a combination of players to restructure the Americas while the United States would be left relatively weak and gutted financially. The play began over two decades ago with the election of William Clinton who would take up where President Jimmy Carter had left off. President Clinton planted seeds in the military with Don’t Ask, Don’t Tell Policy and taking the peace cash bonus by cutting back military spending and enhancing social spending as well as supersizing the Community Reinvestment Act which eventually forced the housing bubble and related crash. President George W. Bush does not get the pass conservatives are apt to grant him as he was the originator of the monetary spending called Stimulus Acts or Quantitative Easing (QE). President Bush started QE-1 which was subsequently followed by QE-2 and QE-3 which required serious borrowing shooting the debt up to over seventeen-trillion dollars. This figure was attained with an additional investment made during President Obama’s first year in office when he pushed through legislation greatly increasing social spending on programs with some extreme cases leading to near and even over tripling the budget of many departments and programs. These new levels of budgetary spending became the new baseline thus massively increasing the spending on these departments and individual programs leading to runaway government largess and profligate social spending. This new levels of spending has had an additional and planned effect, it makes increasing Defense Department spending impossible for the foreseeable future. This will lead directly to the United States having to pull back on her military presence beyond her borders. What is remarkable about this is that President Obama has, by taking the most extreme of leftist defense and foreign policy positions managed to make the dreams of the furthest right wing paleo-conservatives dreams of isolationism come true. This has been the most perfect example that the extreme right and the extreme left both desire identical results for diametrically opposing reasoning and political positions. The end result will be a world devoid of the American influence anywhere near the levels of the past seventy-five years. President Obama will get to see his dreams almost realized as the United States power cannot be eclipsed by any single Presidential actions over even the full eight years. The risk is if the American people follow President Obama with another President of like mind that the United States might be taken from the world stage until only drastic measures force her to return. An empowered China, Russia, Iran and rising Islamist powers may bring either a Sunni-Shiite reckoning resulting in untold damage to much of the world or a Sunni-Shiite alliance which will present another world power vying for preeminence. Where and how far the world will spin without a strong power for freedom allowing for dictatorial Communism, theocratic supersessionism or whatever a resurgent Russia may become after Putin sees the last of his reign in power to be the tripartite powers dividing up the world and potentially remaining unopposed until one of the three turns on another thus upsetting the balance and leading to who knows what horrors in the ensuing bloodbath. The world may be entering a dark time and Israel may stand alone as the sole person with a flashlight in the darkness.

 

Beyond the Cusp

 

December 20, 2013

The Looming Economic Time Bomb

There is a theory that has been the backbone of President Obama and his economic administers that the government can stimulate and generally manage the economy. This is known as Keynesian Stimulus Theory. The basis of Keynesian economics is that government stimulus will give greater returns in tax revenues over time as the local multiplier effect produces many times the velocity of money in a local economy where government funding has been injected thus raising the general economic activity which will presumably return more tax revenue to government covering the cost of the stimulus and everybody gains. This interventionist economic theory was proposed during the Great Depression by economist John Maynard Keynes and was implemented in various forms and schemes by the Roosevelt administration. Many history studies on economics credit the use of the theories and principles from John Maynard Keynes for the recovery that pulled the United States out of the Great Depression. These studies were mostly written by economists and others who supported and believed that the Keynesian theories were the greatest thing since the invention of coinage which ended the barter system and made modern economic theory possible. The one small fact overlooked by most of these erudite studies was the difference of the effects of the Great Depressions in the United States where Keynesian theories were widely applied and Europe where they were not. Where in the United States it is remembered as the Great Depression, in Europe it was a hard but brief recession simply due to the fact that their governments could not agree on what should be done so their governments ended up doing nothing and the economic cycle continued normally and the bust was followed by the inevitable boom.

 

The argument often put forward to those who prefer the Laissez-faire Economic Principles has been to point out that even though most of Europe did recover more readily from the 1930s recessions there was still Germany which remained in economic collapse which led to World War II. That argument is not entirely honest as the main problems faced by Germany were not due to their economic practices as they were endemic results from the punitive strangling economic restrictions place upon Germany in the Versailles Treaty at the end of World War I. Some others attempt to deride those who prefer that the economy be permitted to naturally go through the peaks and valleys alternately which is the natural procession of any economic system by claiming that this system is the property solely of the Republican Party and that it favors the rich and big business as that is what the Republicans are known to do. Whether the Republicans are any more favorable to big business and the wealthy than the Democrats is a debatable subject and totally outside this discussion other than the attempt to paint those who disagree with government stimulated economic growth as troglodytic Republicans attempting to return everybody to the days of the Robber Baron Industrialists. This is a powerful argument due to one quote from President Ronald Reagan where he said “Government is not a solution to our problem, government is the problem.” As long as we are quoting President Reagan I will throw in an additional just because I like this one myself and it does pertain to government’s treatment of the economy which goes, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

 

Another economic truth which has been lost in all the noise was that there was no Federal Reserve and there were economic ups and downs all without government meddling and without a great depression. There must have been something added to the air and water in 1913 in the United States as this was the year that the Federal Reserve was established and also Amendment XVI and XVII which established the income tax and made the Senators directly elected taking away the representation of the individual States in the Federal Government. Maybe if we were to simply undo everything that American History Professors teach as the most enlightened year in all of America’s history, 1913, then many of the problems America faces today would begin to resolve themselves. Meanwhile, the administration of President Obama is completely committed to Keynesian Economic Theory and have been pumping stimulus monies into the economy mostly through having the Federal Reserve but Treasury Bonds using the cash made electronically which results in basically doing the same as if they simply printed up thousands of hundred dollar bills and made a present of them to the Federal Reserve assisting them to buy the Treasury Notes. This can be simply described by calling it what it is, America is buying its own debt as they are no longer able to find another nation willing to buy Treasury Notes to finance the growing national debt. What makes this even more suspect is that the Treasury Notes are kept in some of the leading banks and used to qualify for loans which is how they buy the next release of Treasury Notes by the Federal Reserve which is a private agency and not actually part of the government. The Federal Reserve is, at best, a quasi-government agency made up of the Presidents and major holders of interest in some of the largest banks in the United States and the World. That is the makeup of the group which has been assisting President Obama and advising the bailouts for the banks, insurance and mortgage industries, the very same industries from which the Federal Reserve gets their membership.

 

So, what is the result of this scheme where the Federal Reserve uses its holdings of Treasury Notes as the collateral for their next purchase of Treasury Notes each and every month? This operation has greatly increased the amount of dollars theoretically in circulation by a multiple of anywhere from estimates of quadruple to as high as ten-fold. As long as these cash reserves remain stagnant in the banks then all will be well. Should the economy pick up and the banks find they can make larger profits by loaning these reserves they will give the money what economists call velocity and thus pump all the reserve extra dollars into the economy. Such an influx of money into the economy can only have one result, inflation. When the economy realizes that instead of one to two trillion dollars in circulation it has six or twelve trillion dollars in circulation prices will begin to rise to balance with the larger cash flowing through the economy. Once inflation sets in there will be pressure to slow the inflation by raising the interest rates. Once the interests start to rise a problem which will need to be faced will rear up and threaten to destroy the entirety of the American economy. As it stands now the interest payment on the debt is relatively affordable with interest rates remaining steady for the past decade under four percent. For the last few years the interest rate on the national debt has remained comfortably below three percent. What will happen once the interest rates rise to six or eight percent and higher? The Congressional Budget Office projects that once interest rates go up, the combination of rising debt and rising interest rates is projected to cause net interest payments to balloon to nearly $800 billion, or 3.4 percent of GDP, by 2020 and approach one fourth to one third of the Federal budget. The real question becomes what if interest rates rise higher which they very likely might? There will come a point where the interest payments on servicing the debt will impinge on all other spending. What will happen should the interest rates cause the servicing payment on the debt squeeze government allocations to everything else and the government can no longer finance the nation’s military and it is forced to downsize to an extent similar to the Europeans. What if the government is forced to end payments on Social Security, Medicare, and Medicaid and threatens the national healthcare system in whatever form the Affordable Care Act resembles in another decade. The increased national debt and the resultant service payment on the interest supersedes any reasonably affordable portion of the budget. Where will the government find the necessary funds, raise taxes to over fifty percent and even approaching ninety percent on higher income levels? Will services be cut to the point that many programs no longer serve sufficiently the peoples they are intended to help and government has cut every program to the point of being next to useless? And what will be the effect on the economy, will it likely crush economic growth and even cause a downturn that will only make the situation more dire? The rising of interest rates is the time-bomb sitting waiting to ambush the American economy and people sometime in the near future. Perhaps somebody will present a vision that will rescue though what such a vision might be escapes this mere mortal. May the future find a kinder path than what some have predicted.

 

Beyond the Cusp

 

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