Thursday, 8 May 2008

US Government Facing Fiscal Armageddon- US Dollar in Deep Trouble

When a president tells you the economy's OK and wannabe presidents tell you it's a disaster ... or when Wall Street pundits change their story almost daily ... I can understand how it may be tough to know what to believe ... and even tougher to decide what to do.

But when three respected government agencies put out reports and data that unanimously lead to the same conclusion about the most important factor in your financial future, there's no room for disbelief, no excuse for inaction.

That's precisely the situation we have today:

Three non-political, fact-based government reports point to a single outcome: A long-term decline in the U.S. dollar.

This is not to say the dollar will fall in a straight line. Quite the contrary, as Jack Crooks has correctly pointed out, dollar rallies are inevitable and some may not be trivial. But the big picture for the dollar is clear: Down.

The recent stock market rally and future rallies should not be taken seriously. There are no credible signs the US economy has turned the corner and it looks as if the situation is set to deteriorate.

The article points to 3 government reports that spell doom for the US.

1. The U.S. Government Accountability Office (GAO) — the auditing arm of the U.S. Congress — warns that the nation's deficits and debts are now so overwhelming, America may face fiscal Armageddon / the federal government's fiscal burden — including expected Social Security, Medicare and other liabilities — totals $50.5 trillion, or $400,000 for every full-time worker in America.

2. The $48.8 Trillion in Credit Market Debts.

3. The Notional Value of U.S. Derivatives is Now $164.2 Trillion ... 12 years ago, the total notional value of derivatives held by U.S. commercial banks was $16.8 trillion.

Thus far we have only seen a reaction to write downs and losses totaling about 300-400 billion. What looms is the bankruptcy of a number of major banks and perhaps the near bankruptcy of the US government itself.

[Posted at the SpookyWeather blog, May 8th, 2008.]

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