THIS is NOT sustainable, which is most likely why Obama, Harry, Nancy, Timmie, and Barney are pushing for increased debt instead of fiscal sanity. As average Americans, we know that the $105 Trillion that our government owes is an amount we will NEVER be able to pay back in even 3 generations; the real math does not lie. We also know that we are headed for dark days, and have been waiting for one of the big boys to step out on stage and say it out loud. In the past year, we have seen countries all over the world spend themselves silly with fiat money and deepen the problem of unsustainable debt past the point of no return.
I believe that when Hank Paulson said that we were headed for economic collapse in September,2008, he was lying because the big banks ARE NOT the base of the economy, we are. Would it not be more probable that Hank was trying to get some breathing room for himself and his buddies to divest, diversify, and protect their assets? Paulson has an estimated $700 Million net worth. What’s a few trillion of someone else’s money to protect your own? Now to the big boy on the stage.
I do not think Société Générale is lying because they appear to be using real math.
On March 15, 2009, AIG disclosed that, among its counterparties, Société Générale was to date the largest recipient of both credit default swap (CDS) collateral postings ($4.1 bn) and CDS payments ($6.9 bn), paid in whole or part by U.S. taxpayers.
Société Générale is the 3rd largest Corporate and Investment bank in the Eurozone by net banking income and the 6th largest French company by market capitalization. It employs 120,000 people, of which 75,000 in Europe, and maintains a presence in 80 countries. The bank is active in the finance, investment and asset management markets.
In France, Société Générale is active in retail banking with more than 2,700 branches (including its Crédit du Nord banking division).
SG CIB Société Générale Corporate and Investment Banking, the Corporate and Investment Banking arm of the Société Générale Group, is the 3rd largest corporate and investment bank in the euro zone by net banking income. Société Générale Corporate and Investment Banking serves corporates, financial institutions and investors in over 45 countries across Europe, the Americas and Asia. It provides value-added integrated financial solutions and is a reference bank in its three specialist areas: Euro Capital Markets, Derivatives and Structured Finance.
Société Générale tells clients how to prepare for potential ‘global collapse’
Société Générale has advised clients to be ready for a possible “global economic collapse” over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.
In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.
Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of “deleveraging”, for years.
“As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse,” said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.
Under the French bank’s “Bear Case” scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.
Does that not sound like what we are expecting considering we still have 4 more years of residential home mortgage interest rates resetting? And what about that commercial real estate? I shudder every time I think about it because I do not think our economy is going to last even that long. Our economy is on freakin’ life support right now, meanwhile, back in Washington, D.C., Congress wants to spend trillions more on healthcare reform getting their piece of the healthcare pie. When they ram this one through too, that’ll be all folks. Our proverbial goose will be cooked financially. When have you ever heard of paying for something now and not seeing the benefits until a later date?
It’s called a burial plot.
Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.
(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).
The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” it said.
Inflating debt away might be seen by some governments as a lesser of evils.
If so, gold would go “up, and up, and up” as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.
The bank said the current crisis displays “compelling similarities” with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.
I can think of only one way to stop these teenagers from wrecking everything we have worked for. It has everything to do with cutting up their credit cards, and controlling the purse strings once again.
Otherwise, stock up now: guns, ammo, food, water, medicines, gold, silver, etc. You know the drill.
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It’s really hard to know what to do at this point. The reaction to the discount rate increase provides a clue what’ll happen when the Fed really starts to tighten later this year. Gold, oil, and equities went down. Right now, strength in the dollar means weaker gold and equities. Once the Fed begins to tighten by raising the Fed funds rate, maybe late this year, the dollar should strengthen, sending gold down.
Things get sticky when there’s inflation and that won’t happen in earnest until next year.
For now, I’m looking for a correction in March into April followed by a huge rally.
You might want to add some cash to your stock up list.