Friday, February 12, 2010

Greece is Irrelevant Compared to What's Unfolding in the U.S.

It just boggles my mind that the whole world, especially the mainstream media in this country, is completely - no, tragically - focused on the possible collapse of tiny Greece, when the real story is unfolding right under our nose in the U.S.  Keep in mind as you read this that Greece's GDP is roughly 3% of total EU GDP.

We all know about California's problems. Right now that State is staring at a $21 billion budget deficit - that forecast is probably too optimistic - and California already is over $6 billion in the hole on its unemployment insurance fund and is borrowing from the Feds to fund payments.  Many States are now borrowing from the Government to fund unemployment claims. California represents 13% of total U.S. GDP, is the seventh largest economy in the world and has well over $500 billion in total debt outstanding (largely muni paper). Compare that to Greece, which has a little over $400 billion in debt and is insignificant in terms of global economic output. Yes,. Greece will default on its debt if it isn't bailed out, but what about California?

How about this piece of news which hit the wires yesterday afternoon after the stock market was safely closed:  the New Jersey Governor declared a "fiscal emergency" because the latest budget proposal now has an $11 billion deficit, up from an $8 billion forecast deficit as recently as November, and up from the deficit in the current year which is projected to be $2.2 billion.  Here's the Reuters link: NJ To Take a Dirt Nap? Last year New Jersey ranked 7th in relative economic output by State.

How about Pennsylvania? In a little-reported event last week, the State capitol city of Harrisburg is contemplating a Chapter 9 bankruptcy filing. Pennsylvania ranks 6th in economic output. New York is running toward the brick wall of insolvency. NY ranks 3rd in economic output. Ditto Illinois, which ranks 5th. Same for North Carolina, which ranks 9th. Michigan, Ohio, Nevada...

Anyone now think Greece looks problematic in the grand scheme of economic problems? And this analysis does not address the Federal Government debt swamp. Let me just say that anyone who believes Obama's forecast of $1.6 trillion for the next fiscal year is doing way too many bong hits. That budget deficit projection does not include an accounting calculation of the Government guaranteed entitlement payouts from all of the long term legacy psuedo-welfare programs like Social Security, Medicare, etc. From a financial accounting standpoint, that calculation needs to be taken into account annually, similar to the way it is required for all businesses. It also does not include several $100 billion in "off-budget" military expenditures. And the amount of total Treasury debt outstanding currently should include, but does not, some calculation that takes into account all of the recent guarantees issued by the Treasury in the last year which back trillions in banking system liablilities. Included in this number would be the $6 trillion of FNM/FRE debt being guaranteed, $600 billion in FHA mortgage paper, and the $1.25 trillion in mortgage paper purchased by the Fed.  There are several other financial guarantee programs that will require billions in funding this year, like FDIC.

Anyone see any problems here? When you stack all of the above up against Greece, or even an aggregate of the so-called PIIGS + the UK, I think I'd rather have the EU problems than the catastrophic Debt Bubble getting ready to explode in the U.S. Make no mistake about it, Bernanke will soon be forced to seriously crank up his electronic printing press and dispatch a whole fleet of B-52 bombers to implement his infamous cash drop on a collapsing empire.  It's exactly this predicament that is causing gold to move inexorably higher, making all those who forecast gold's price demise and lack of value look like complete idiots.

17 comments:

  1. so, how much further can the can be kicked down the road

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  2. LOL. that's the $64k question...the U.S. could fall off into the abyss at any moment, especially if China gives us a good push.

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  3. playing russian roulette with the global economy.

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  4. Anyone else investing in copper-coated lead?

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  5. More hits from the bong indeed!

    Most top "economists" say the US debt problem is no issue because the governemnt can just raise taxes bigtime and/or seize private property to close the gap. I say you do not understand most Americans if you find that a viable solution!

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  6. There is no grey matter here in the Dave from Denver world of gold promotion. Once in a while, thou should say "I run a pro-gold hedge fund" so your readers understand IF you have any conflict of interest. Even when we are 100% honest and true (as I believe you are), the outside world can perceive "conflict of interest" and a perception can be stronger than truth.

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  7. John ExcessCapacity GuyFriday, 12 February, 2010

    LOL

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  8. @Anonymous - Actually, I do not "promote" gold at all. And the fund I run is not "pro-gold." I present precious metals as the most viable altnernative to preserve your wealth from the ravages of Government and Central Bank policies which are reckless, destructive and serve no purpose other than to effect the massive transfer of wealth from the middle class (which is everyone not in the top 1% of wealth and power) to upper 1% elite.

    If you disagree that precious metals are the most viable means of accomplishing the goal I stated above, you are free to express that view.

    What I find objectionable is that you choose to hide behind "Anonymous" and sit in the peanut gallery and take potshots and throw insults at those of us who are trying to help present, clarify and expose the truth about what is really happening in the system. What the fuck are you doing to help out other people? Nothing. Nada.

    "Conflict of interest?" No, I don't have any conflict of interests. I don't solicit my advisory services, I don't sell gold, I don't promote mining stocks. I try to present the facts, supported by as much as evidence as possible, that the business leaders, bankers and policymakers of this country are bending us over and ramming it up our ass without even giving us the courtesy of a reach-around.

    I see you offer no alternatives, solutions, ideas, original thinking. Where's your blog? Where's your contribution to humanity?

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  9. american people are brainwash from a two party system. like the old sane real estate never goes down bullshit you americans got your ass kicked in real estate just like the goverment is kicking your ass know.

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  10. Good points, except where Americans failed themselves is in letting two-party system morph into the Corporate/Govt Party and the Sheeple Party.

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  11. a third or fourth party needs to emerge in this country. one that still believes in the constitution and not corporate megajalopy. i will not vote for any one in either the dems or republicans again!! they both suck and have moved too close together to make a giant mistake/problem. help to dethrone them or face the consequences........

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  12. We have five parties in Germany. So what? they are all almost the same. You don't think one is less corrupt than the other. Small differences just to have more smoke and mirrors for the simpletons!

    Our political bodies are SOLD EVERYWHERE!

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  13. re. fauvi.......at this point a party who tries to adhere to the constitution would be a major, not minor difference!!

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  14. Agree Anonymous. Except that at this point for that to happen, we need to burn down a lot legislation - like the Patriot Acts, Homeland Security Bill and Detainee Bill - reverse a lot Supreme Court decions, especially under the current Court and get rid of a lot Executive Orders signed under Bush and now Obama.

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  15. Thanks for the post. I too have wondered just when the endless flow of domestic bad news is going to finally get the attention it deserves. Christie's speech on Friday was good, but we need to hear more of that kind of thing. I still get the sense that most people (if they are employed, that is, and are not massively underwater in their house) don't get just how bad the next year is going to be. And the year after that . . .

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  16. So true Clark. Anyone who has a job is mostly obvlivious to what is really happening. I guess it's the old adage: if your neighbor loses his jobs, it's a recession - if you lose your job, it's a depresseion.

    There is a serious rogue wave of mortgage defaults and foreclosures that will hit the system starting now.

    Here in Denver, there are now lower priced neighborhoods that were being propped by the first-time buyer tax credit that are now seeing noticable declines in listing prices.

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