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Nice!

http://youtu.be/8rqNZAIQH4U?t=1s

 

Not to dismiss a real problem but if everyone dumps at the same time who exactly is buying? Need a buyer for every seller. Plus its not like the economies in Russia, Europe or Asia are any better.

It's all systemic. If the US were to go down the world economy would go with it.

Unfortunately this is all too correct. There have already been rumblings about changing the worlds reserve currency to something other than the dollar. If that happens we are truly screwed. Our economy will crash to an extent we can't even imagine. With no money to pay out for welfare and all the other entitlements civil unrest will make Ferguson seem like a 5 year olds birthday party.

Our politicians have painted themselves, and by proxy us, into a corner in order to perpetuate the Ponzi scheme started by the Johnson administration. Both party's are equally culpable. None of them wanted to be the ones to have to take responsibility for telling the recipients of entitlements that the free ride was over and admit they had mismanaged our funds. So much easier to keep kicking the can down the road.

With Obama obviously committed to driving the country's dick completely into the dirt, I don't see this ending well.

Not to dismiss a real problem but if everyone dumps at the same time who exactly is buying? Need a buyer for every seller. Plus its not like the economies in Russia, Europe or Asia are any better.

It's all systemic. If the US were to go down the world economy would go with it.

Oil is traded as a commodity.  They more often than not trade in "futures", which sets the price based on the predicted price of oil.  The price you pay for a futures contract is based mainly on (1) how far in the future you decide to predict the price to fluctuate, and (2) whether you think the price will at that future time be higher or lower and by how much.  It's not really like normal buying and selling of a company's debt which then gives you ownership in part of that company.  With futures, you never really own the commodity.  You are facilitating the buying and selling of the commodity, hoping the amount you are paid back is more than you paid.

You can also buy and sell stocks in the companies that profit from the oil industry.  Then it's the same as any other stock you can buy and sell, or short/go long on.

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I don't know much about the debt, other than that it is frighteningly large. In a brief internet quest to understand it better I ran across this relatively bland but informative link:

http://useconomy.about.com/od/monetarypolicy/f/Who-Owns-US-National-Debt.htm

I had no idea that Social Security was the single largest holder of US debt. More than twice as much as China, which has actually already divested some of its US debt holdings while remaining our largest foreign debt holder. It does square with my experience of government spending, though. Any allotted funds not spent during a giving year will reduce the amount of funds allotted next year - so several agencies spend their budget surpluses on bonds. The article explains it fairly well. I wondered what the excess budget money was spent on. In some cases it is new printers, extra office supplies, rental car upgrades or conventions in Hawaii, etc. - all considered justified as putting money back into the economy. For some agencies it looks like buying US debt is another way of putting the money back into the economy.

I need to learn more about the economics of debt at this scale. Its an easy number to be terrified by but the details make at least a little more sense.

I don't know much about the debt, other than that it is frighteningly large. In a brief internet quest to understand it better I ran across this relatively bland but informative link:

http://useconomy.about.com/od/monetarypolicy/f/Who-Owns-US-National-Debt.htm

I had no idea that Social Security was the single largest holder of US debt. More than twice as much as China, which has actually already divested some of its US debt holdings while remaining our largest foreign debt holder. It does square with my experience of government spending, though. Any allotted funds not spent during a giving year will reduce the amount of funds allotted next year - so several agencies spend their budget surpluses on bonds. The article explains it fairly well. I wondered what the excess budget money was spent on. In some cases it is new printers, extra office supplies, rental car upgrades or conventions in Hawaii, etc. - all considered justified as putting money back into the economy. For some agencies it looks like buying US debt is another way of putting the money back into the economy.

I need to learn more about the economics of debt at this scale. Its an easy number to be terrified by but the details make at least a little more sense.

Here's a link to the Office of Management and Budget (OMB) of the White House, 2015 Budget, Summary Tables.

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2015/assets/tables.pdf

Open the Summary Table PDF, and go to page 170, table S-5.

Notice a few things:

We are continuing to spend about $500 billion to $600 billion more than we have every year from 2015 to 2024.  Cumulative deficit for 2015 to 2019 is projected to be $2.468 TRILLION.  For 2015 to 2024, the cumulative deficit is $4.930 TRILLION.

The way deficits work is, that's the amount we add to the national debt.  How do we expect ot EVER pay ANY of the debt if we continue to have a budget deficit every year?  Without a balanced budget, we can never improve -- it only gets worse!

Now for the fun part!! 

The top table has discretionary spending by military and non-military.  The total discretionary budget is $1.147 Trillion in 2015.

The next table has mandatory programs:  Social Security, Medicare, Medicaid, Other, and even Immigration Reform (nothing in 2015 --- yet!).  The total Mandatory spending comes to an estimated $3.455 Trillion.

Next is the Receipts -- how much money the government expects to garnish from tax payers in the form of income tax, Social Security Tax, Medicare and Medicaid Tax, Unemployment Insurance, Estate Taxes, Interest earnings from deposits, etc.  The total projected revenue for 2015 is $2.775 Trillion.

So, boys and girls, let's review:

Revenue = $2.775 Trillion
Mandatory spending = $2.086 Trillion

How much of revenue is left for discretionary spending? $2.775 -  $2.086  =  $689 billion

If you  subtract that balance from the discretionary spending, we are now at $1.147  - $0.689 = - ($489 billion) in the hole, budget-wise.  That's excluding interest we pay on the debt and adjustments for disaster costs.  Total deficit in 2015 will be $680 Billion.

What does that mean?  It means we barely cover all the bills we HAVE to pay.  That's before paying just over half of the other bills, like military defense, operating Air Force One, running the White House, foreign aid, and so on.

So, I ask you.  How can we ever expect to balance a budget without cutting back on things like Medicare, Medicaid, and Social Security Benefits?  The only way to have a balanced budget is to (1) cut Mandatory expenses, and (2) increase revenue.

A robust, growing economy is the best remedy for increasing revenue.  Cutting military spending will help reduce the amount we borrow, since the wars were all financed with debt, but that won't put much of a dent in the mandatory spending costs.  Plus the common defense of the nation is the ONE thing mandated in the Constitution the government is required to pay for!

Hope that doesn't keep you up too late at night!!

I don't know much about the debt, other than that it is frighteningly large. In a brief internet quest to understand it better I ran across this relatively bland but informative link:

http://useconomy.about.com/od/monetarypolicy/f/Who-Owns-US-National-Debt.htm

I had no idea that Social Security was the single largest holder of US debt. More than twice as much as China, which has actually already divested some of its US debt holdings while remaining our largest foreign debt holder. It does square with my experience of government spending, though. Any allotted funds not spent during a giving year will reduce the amount of funds allotted next year - so several agencies spend their budget surpluses on bonds. The article explains it fairly well. I wondered what the excess budget money was spent on. In some cases it is new printers, extra office supplies, rental car upgrades or conventions in Hawaii, etc. - all considered justified as putting money back into the economy. For some agencies it looks like buying US debt is another way of putting the money back into the economy.

I need to learn more about the economics of debt at this scale. Its an easy number to be terrified by but the details make at least a little more sense.

OK, so government agencies, funded by our tax dollars, are using their budget SURPLUS to purchase our debt.

Think about this for a minute. If they have a surplus, we are giving them too much money.

Wouldn't it make more sense to take that money back, since it's ours to begin with, and use it to pay off the debt? These agencies aren't autonomous, we own them, they work for us. Why are they being allowed to do this?

Economy of scale is BS economics, if you borrow a dollar, you owe a dollar plus interest. If you borrow a trillion dollars, you owe that plus interest.

If you pay it off, it doesn't exist.

This is a shell game much like the derivative shit sandwich the banks got caught in back in '06. Eventually someone has to take a bite of the sandwich.

How about having govt. orgs return the money they have at the end of the fiscal year instead of blowing it all on stupid stuff. The reason has always been that they wont get the same amt next year...well look at us now...broke dick....

Oil is traded as a commodity.  They more often than not trade in "futures", which sets the price based on the predicted price of oil.  The price you pay for a futures contract is based mainly on (1) how far in the future you decide to predict the price to fluctuate, and (2) whether you think the price will at that future time be higher or lower and by how much.  It's not really like normal buying and selling of a company's debt which then gives you ownership in part of that company.  With futures, you never really own the commodity.  You are facilitating the buying and selling of the commodity, hoping the amount you are paid back is more than you paid.

You can also buy and sell stocks in the companies that profit from the oil industry.  Then it's the same as any other stock you can buy and sell, or short/go long on.

I'm aware how commodities are traded but the original statement was countries will dump their currency reserves. If we're talking about debt we're talking about Treasuries not oil. A "dump" would require a buyer to pick up what's being sold. So either that's the US or they hold til maturity. Everyone likes to chicken little the scenario with "everyone will dump and reduce us to a third world country" when the economics doesn't support that at all.

Again I'm not saying this isn't a problem, it's a serious problem but I'm just trying to keep perspective.

No one needs to buy it; they send it back to the US and demand their investments in the dollar be paid in whatever form of payment they want. If it's gold, then we have to pay them in gold. If we are out of gold or any other commodity they desire, they begin to take land and/or natural resources.

And why do you think their economies are weaker than ours?



Russia is the largest supplier of oil and gas to western Europe, and even we buy oil from Russia. They also provide most, if not all, of the rockets we need to launch our commercial and military satellites into space.

China has seen the largest generation of a middle class in history in the past 20 years, is starting to form strong economic relationships with Africa, Western Europe and Southeast Asia, and has recently surpassed the US in spending power and is also expected to edge us out as the most powerful economy within the next 10 years.

The dollar isn't on the gold standard anymore so that isn't possible. Try to take your Treasuries and demand gold and let me know how that works out.

Russia by their own admission will be heading into a recession this year. Inflation is expected to top 10%. The Russians themselves are fleeing to the tune of $100 billion as of late. The rubble is weakening by the day vs dollar.
Europe is just now starting up their QE hence the weakness in the euro. China is slowing down and building giant ghost cities.

Like I said it's an international problem. Anyone that thinks you can unwind any major economy without serious ramifications to the rest of the world isn't looking at it with proper perspective.

Look at what happened when Greece almost defaulted. A country peons in size compared to the economies we're talking about.

The dollar isn't on the gold standard anymore so that isn't possible. Try to take your Treasuries and demand gold and let me know how that works out.

Russia by their own admission will be heading into a recession this year. Inflation is expected to top 10%. The Russians themselves are fleeing to the tune of $100 billion as of late. The rubble is weakening by the day vs dollar.
Europe is just now starting up their QE hence the weakness in the euro. China is slowing down and building giant ghost cities.

Like I said it's an international problem. Anyone that thinks you can unwind any major economy without serious ramifications to the rest of the world isn't looking at it with proper perspective.

Look at what happened when Greece almost defaulted. A country peons in size compared to the economies we're talking about.

The fact that the Russian Rubble is weakening by the day vs the UD Dollar is only relevant if Russia planned to stay under the US PetrolDollar Scam.  Russia and the rest of the ever-growing BRIC nations are delinking from the US Dollar; hence, it becomes a mute issue in the long-term, since those nations will soon be conducting international commerce in an independent financial system of exchange.

Furthermore, if and when the US and her financial allies implode because of the US Debts to the World, the other nations will feel substantial negative economic effects, but once again, those potential effects are being mitigated every day as the BRIC nations move forward with delinking from the US Dollar.


Kuleana

You can try to work out the details but it's kind of pointless. What we do know is that the system is set to self-destruct, and people still contributing to their 401k's and retirement accounts are in for some serious disappointment.

Govt. agencies... sorta like normal people... don't like pay cuts. This isn't rocket science or even surprising.

On the more practical side, budgets makers - also no surprise - don't have crystal balls. Existing budgets levels generally match a reasonable max expenditure under worst case scenarios. Each year they don't have to spend the max they sink the excess into other things because, as I mentioned, they won't get that much next year if they don't.

"Ah HA! We're paying them too much, then!" Its a reasonable reaction to this sad reality of government budgeting. The flip side of that is that if their budgets get cut to a lower operating level then when emergencies arise that they can't afford to handle properly then they get their asses raked over the coals publicly and accused of being inefficient and unable to manage their jobs.

This is ~exactly~ what happened to FEMA with Katrina and why they started stockpiling supplies in the years afterwards. Emergency supplies in hand aren't subject to DHS budget shifts. (FEMA funding was siphoned off to pay contractors in Afghanistan prior to Katrina.) I know some of the people who made those decisions and was working with them (as a videographer) at the time.

That's part of the reason DHS was created, by the way. Yes, it does facilitate better integration between the various agencies under its umbrella. It also provides a simple way to funnel funding from one agency to another. In theory this seems like efficiency. In practice... FEMA appeared to be caught with its pants down while Haliburton got its paycheck that month.

I'm not defending this silliness about govt. budgeting, by the way - I'm explaining it. It would be better if we had the potential excess in a general fund that could be drawn on at need but that isn't the way it works. If there is un-earmarked money in a budget Senators start salivating and trying to figure out how to siphon it to their districts, relatives or supporters.

I just paid $11.18 for a dang burger fries and a drink at the Burger King.  No inflation, nope, not a smidgen.

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The reason we are in this mess is precisely because we and the rest of the world are not on a gold standard. And if I could, I would take out all my investments and savings in gold when the time came.

I'm not really arguing with that but your initial point was that investors will demand their return in gold, which I pointed out is not possible.  This is a pretty good price for gold, right now it's selling for spot and Apmex is a reputable company.

http://www.ebay.com/itm/1-oz-Pamp-Suisse-Gold-Bar-New-Design-In-Assay-SKU-84698/121417276792?sourceId=1411603&sourceName=forums

Russia continues to expand it's borders and military, and maintains dominance over Europe's energy resources.

Russia has some control over Europe in that respect but Europe has built up large reserves from the last time Russia shut off the pipes.  Also, it's a two way street, Russia needs to export oil in order for their economy to keep moving.  Any long-term shutoff will hurt them as well.  You have to remember that Russia isn't like a Saudi Arabia, they don't have huge cash reserves they're sitting on that will allow them to endure prolonged oil prices at these levels.  To make things worse, their banks are cut off from the capital markets so the Russian government has to use their reserves to recap them.

They were once a strong member of the G8 and now their economy is the equivalent of Spain.  SPAIN.  As I mentioned inflation, especially in food, is high and projected to go much higher because Russia imports a lot of food and by banning the import of food it has resulted in a significant rise in inflation.  Remember, it was low oil prices that destroyed the Soviet Union. 

I think at some point if oil keeps dropping (or maybe even stays in the 60s) Putin will start up some sort of unrest.  Markets don't like unrest and he'll need to drive the price of oil up.

China continues to expand it's military and close the gap of technological advances, and has now surpassed the US in both average middle class citizens and spending power.

Their economy is now the world's largest but that's because they have such a large population.  I'm not really sure what you mean by surpassed the US middle class, China's GDP per person is lower than the US.  A lot lower.  I guess if you look at it in terms of numbers, China has larger middle class but again that's because of their demographics.  On a percentage basis, the average Chinese are rather poor. 

Tell me how your original point demonstrates how we are in a better situation, given that while Russia and China are still continuing to grow and expand, we are losing resources and influence?

Because that's not what's happening.  Russia will be in a recession next year, which by definition means negative growth.  So they're not expanding.  China continues to expand but at a much slower rate than before and a lot of it is through the building on infrastructure that no one is really using.  In other words, a lot of their growth is really smoke and mirrors.  Google China ghost cities and you can see some examples.

You can choose to accept this or not, but in all honesty it doesn't really bother me. I'm doing what I need to do to prepare for what is coming, and I'd hope that people might take something from this and start to prepare themselves.

I'm not one to stop anyone from preparing.  That's a good price for gold I linked assuming you think gold is undervalued right now (which I'm assuming you do).  I just see things as a lot more connected and systemic based on history and economics.  If things get as bad as the doomsday folks say it will, then we're talking about Earth turning into a self-lightning parking lot.  We're past the point of technology where we can have a conventional war that eventually ends with massive losses.  We have the technology in too many people's hands to end all life on Earth if they choose.  I don't see any orderly way of collapsing a major economy without someone turning to a nuclear option, just my opinion.

Chris Martenson does a good job, IMO, of laying out fractional reserve banking, peak oil, debt, etc. in easy to understand videos.  They're long but he also has an accelerated version. 

http://www.peakprosperity.com/crashcourse

I think a lot of people here will be agreeing with a lot of what he has to say.  It opened my eyes when I first watched it back in 2008.  As with anything, I wouldn't take his word as dogma but figured I would share since we're on the subject. 

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