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USA Republic at Debt Crossroads

Tuesday November 13, 2012 11:01

As Fiscal Cliff Number Three approaches in January 2013 some wonder how many cliffs we can fly off and yet remain alive?

Economically, in our view, America (and other dominant world global economies) is set-up for a hard and violent credit shaking. Irrespective of which party gains power in the USA November 6 election, inflation is baked into the money cake and potentially hyperinflation is too. Read European history of post World War I to get an idea what could happen.

Worse than that nasty smash, international debts have crossed the line of no return. It is much too late to balance and replenish central bank budgets, pay down trillions in massive debts and right the enormous global international ships.

This time it is different, as the impending wreck is not one nation or one continent, but the entire world collectively poised on the brink.

Please tell me who is left with any good credit that could even come close to covering this mess? Some say China could lend and pay but they are in worse shape than the USA and are doing a perfectly good job of hiding it.

China may be holding one trillion dollars in USA debt but how do they collect? Do you really suppose they’ll get their money back let alone be paid the interest? How do they collect interest when USA short term paper costs 20%? Smells like Jimmy Carter’s wonderful credit markets in 1981 would be coming next in 2013.

The whole bloody Armada is ready to sink in a typhoon whirlwind of bad debts and failed socialistic/communistic politics. Hurricane Sandy was a little mud puddle compared to what’s coming in a monstrous hailstorm of a Fiscal Category Five; or is it a Ten Smasharoo?

Too many small nations in the world’s international credit fleet have already sunk or are sinking. This is throwing up red flags and flares, to the extent that big private money has been running to cash in their chips and hunker down for a currency hurricane that will engulf the world.

This would also include international corporations like one we know where the CEO telephones his company treasurer every night to see where their $40 billion in cash sits. If that cash were in Euros and in the wrong bank at the wrong time, guess what?

Billionaires and central bankers are racing toward gold, silver and other commodities in the ground and above the ground, converting confetti fiat money to hard assets. This is real stuff, not fluff or “let’s pretend? currencies, bonds and bills.

“Today, one of the largest gold and silver dealers in the United States told King World News, ‘We had massive retail buying of gold and silver this week. I would also add the buyers have come flooding in for the past two weeks, but there was literally an enormous surge of buying, which took place on the gold and silver take-down (price sell-off) on Friday.” (11-2-12 King World News)

This precious metals trading action last week is probably one of the most powerful we have seen in retail buying during the last decade. This is a cl signal that further selling corrections might be quite minor in comparison. TAKE NOTE: this is a powerful buying trend on the fundamentals.

The big bond flotilla’s survival hinges totally on confidence; and lots of confidence went off the cliff after the 2008 smash. Meanwhile, the old paradigm gang is still pretending to be in control with a stiff upper lip, firmly at the helm, supposedly holding their ships of state steady.

Many are in sheer panic, some have committed suicide, and several have been scapegoat-fired-to-pin-blame-on-others for misdeeds ordained by higher-ups just anxious to save their collective criminal butts.

One huge bank (deliberately un-named so we don’t get sued) has set aside $6 billion in potential damage claims for 10,000 lawsuits filed against them. No kidding! Know what else? That is just the beginning. Watch when the toxic world of derivative land hits the courts!

Those big iceberg debts are dead ahead, and like the Titanic, they have not a prayer of stopping in time or swerving to avoid the wreck. If you like big car wrecks for entertainment at the speedway, you will love watching this one! If we could sell tickets we would be rich. No need, you can see it all on television.

This is going to be the Mother of All Scams. This is the epitome of fiscal crimes on steroids. This is the World Criminal Championship of historical asset/credit failures.

You could see it very clearly in recent panicky remarks from smart and powerful people in think tanks, high government officials, resignations by bankers in the hundreds, and belated financial criminal prosecutions gaining in rapid escalation. All this while some big companies like Sony, Sharp and Panasonic circle the drain in Japan.

You could see it, as US Treasury Timmy Geithner remains invisible. Is he still working? Is he still in America? Has he fled to hide in the dark forest where all financial miscreants go to hide?

You could see it while Spain’s economic minister told the world out loud that Spain could not borrow enough to cover 80% of their outstanding debts; but merely a puny 20%, which is something north of $25 billion Euros. So, where do they get the other $100 Billion? This crack-up equals 12 times Greece.

Meanwhile, unemployment for Spanish youth to age 24 is 50% and getting worse.

Now, Spain is chopping up the debt-ridden pile of their failed banks. It’s way too late to separate out the bad loans from them. Spain’s Crash City is so advanced that entire groups of smashed lenders will be divided into good bank piles and bad bank piles.

What’s really funny is they have the audacity to solicit bids from international bottom feeders to buy that failed pile of toxic trash at a discount. Some big traders will do it too as they bet they can trade that junk and make money on it. For a while, this may actually work, but we would certainly not have the stomach for those trades.

Do the Spanish good banks allegedly have enough assets to survive? How is that supposed to happen with a skidding Euro currency, Euro bonds to the moon, and so many failed counter-parties on mountains of bad loans …who, pray tell, is left to cover? 

Answer: Nobody!!!! These banker boyz and girls and those bottom-feeders think they can play money-credit-bad-loan-musical-chairs. Of course when the music stops, the last chair-less fool melts down in a rain of insolvent tears.

Iceland is coming back just fine thank you very much as they arrested their crooked bankers and told the Euro-bankers they would not get re-paid. However, Iceland might have enough cash left to buy lunch for all at the criminal trials forthcoming in Euro-land. Iceland did it right and they are a recovery model designed to come back from this maelstrom.

Fiscal Cliff Jump Numbers One, Two, Three and ?

The American Bush tax cuts are due to expire on January 1, 2013. This is commonly referred to in our daily news as the Fiscal Cliff. Yes it is, but we would call this Fiscal Cliff Number Three as the other ones were Fiscal Cliff Number One (the Nasdaq Smash of nearly -90% in the year 2000). This was then followed by Fiscal Cliff Number Two after 2008, and the following TARP Band-Aid repair. 

Some commonly refer to the second one as the Great 2008 USA Taxpayer Big Boy Banker Hold-Up, designed to recapitalize insolvent bankers in New York City.

We suggest that if Fiscal Cliff Number Three in January 2013 is permitted, Fiscal Cliff Number Four may not happen. This is because Number Three would kill USA GDP driving it to a -2% and ruin any hopes of even a tepid recovery down the road. Several politicians say they want the tax cuts expired so they can take in more money for wasteful spending.

This national election is about a nation moving toward the nanny state of Europe or turning back the clock to recover the United States to its former glory as a bastion of capitalism and free enterprise.

We would suggest the socialists and communists had better think long and hard what they wish for; they just might get it. Ask residents of former and present communist nations how well that works.

We cannot see buying into new stock positions unless they are shorts during the first two weeks of November 2012. If you own stocks, use risk stops on bigger companies and take profits or hold on with juniors, knowing they should sell and then bounce back.

Somebody please tell us when the global bond markets crash for good and we’ll tell you when this can all get better and we can start all over again, maybe with a partially backed fiat gold currency.

By Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com

Roger Wiegand is the writer and editor of Trader Tracks Newsletter for gold, silver and energy traders.  Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. Stay tuned for more of Traderrog’s insights and predictions via his exciting new daily audio subscription.  Coming soon! Details at www.wavelengthpublishing.com

Roger also is a regular contributor to The Korelin Economics Report ( www.kereport.com) , the highest rated daily internet radio program listened to throughout the world dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report which airs on radio stations across the U.S. on Saturdays and Sundays.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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