Are You Ready For All Hell to Break Lose? I Know I'm Not!

SEE HERE I only stumbled on www.inflation.us today but I share their concerns so I signed up for their newsletters (as if I don't get enough email already). As a result of signing up I got a welcome message and I thought I'd share at least part of it here on Political Brambles. It's a very sobering message.

---

The United States now has over $76 trillion in total debt obligations. Our budget deficit in February of 2011 alone was a record $222.5 billion, more than the entire year of 2007. Although our 2010 cash budget deficit was $1.3 trillion, once you factor in changes in our unfunded liabilities for Social Security, Medicare, and Medicaid, our real budget deficit for the year actually surpassed $5 trillion.

NIA believes that not only will it be impossible for the U.S. to ever pay off its national debt, but it will be impossible for the U.S. to ever balance its budget again. Even by the White House's own projections, the U.S. budget deficit in 2011 will be 43% of total government expenditures. This level of deficit as a percentage of total expenditures is about equal to what most countries have experienced right before reaching an outbreak of hyperinflation.

Up until now, the U.S. has been lucky enough to export most of its inflation to the rest of the world. This was mainly due to the U.S. dollar's status as the world's reserve currency and the world's willingness to hold onto large amounts of U.S. dollar reserves as a safe haven. This is all about to change. The Federal Reserve is now effectively monetizing our debt by buying 70% of U.S. treasuries, up from previously only buying 10%. Foreign central banks are now only buying 30% of U.S. treasuries, compared to previously buying 50%.

With the earthquake, tsunami, and nuclear crisis in Japan, the U.S. will likely see its second largest buyer of U.S. treasuries become a net seller. In fact, with the U.S. government antagonizing China by calling them currency manipulators, we might soon lose our largest buyer of U.S. treasuries as well. Pimco, which was previously the largest private sector buyer of U.S. treasuries, just dumped all of their government bond holdings in its Total Return Fund.

Pretty soon, NIA believes the Federal Reserve will be the only buyer of U.S. treasuries and there will be a rush out of the U.S. dollar. In our opinion, the U.S. dollar is likely to lose nearly all of its purchasing power over the next few years. The U.S. government will soon go bust as a result of hyperinflation and millions of Americans who have become dependent on government entitlement programs like unemployment, food stamps, and Social Security, just to survive, will likely starve to death.

---