Friday, February 18, 2011

“We Owe How Much?”: Waiting for The Big Splatter

Last week, a bit of news came out that—weirdly—didn’t garner the attention or the reaction one would have thought it would: 

The U.S. Federal government deficit for fiscal year 2011 was revised to $1.645 trillion. That revision was up from the previous estimate of $1.4 trillion, which itself was a revision just a couple-three weeks ago by the Congressional Budget Office from the White House’s earlier projection of $1.267 trillion in December. 

The additional $378 billion in deficit spending comes from loss of tax revenue: Both from the fall in tax receipts due to the ongoing depression we’re experiencing, as well as from the idiotic budget deal with the Republicans, whereby the Bush-era tax cuts were extended. 

These deficit numbers are huge. Huge. HUGE

As for the total debt, as of January 2011, the U.S. Treasury had $8.965 trillion in outstanding securities, plus an additional $5.166 trillion in “non-marketable” securities—that is, intra-government debts. The total outstanding debt of the U.S. Federal government is $14.131 trillion. 

The U.S.’s gross domestic product in 2009 was $14.29 trillion. 

So this current deficit is over 11.5% of 2009 GDP. Even if we take Office of Management and Budget (OMB) rosy predictions for 2010’s GDP, the deficit is still 10.9% of GDP. 

As to the rolling debt? It’s just about 100% of GDP. 

These are Third World numbers: Deficits that are in the double-digits vis à vis the gross domestic product—and total debts that equal tha GDP—are numbers that Argentina—Greece—Zambia gets: 

These numbers aren’t supposed to happen to the good ol’ U.S. of A.!

Oh, but they are happening. 

Coupled to those terrible numbers, the Federal Reserve is monetizing the Federal government’s debt—that is, printing money, in order to help the government pay its bills. There’s really no other way to look at it. As I wrote here (when the deficit was still projected at only $1.267 trillion), the Fed is monetizing 50% of the FY 2011 deficit, and buying up an additional 10% with excedents through QE-lite

With the new numbers, that proportion of what the Fed is buying for FY 2011 is diminishing, to 47% of the deficit, of which 37.5% is outright monetization. 

But this is like fiscal heroin: It’s clear to anyone that the Federal government cannot continue to function without the Federal Reserve’s ongoing purchases of Treasury bonds by way of Quantitative Easing 2. With the 10-year at 2.5% interest, there would simply be no demand for Treasury debt, if the Federal Reserve cut off the Federal government—and the Fed knows this. 

So the Federal Reserve will have to continue monetizing the Federal government debt, with no end in sight—it really has no choice: If it doesn’t, interest rates will rise so high so fast, that the Federal government would simply go broke. So when QE-2 expires in June, it’ll be extended: Quietly, and without fuss. 

Again, this is a Third World policy: Deficit funding that nakedly depends on the central bank printing up and buying close to half of the new issuance of debt. 

And on top of everything, this budget deficit is for a budget that has yet to be passed! After all, the fiscal year 2011 budget has not been passed, the government operating since October 1, 2010, under continuing resolutions. The latest extension runs out on March 4—when presumably the budget has to be passed this time—for sure! . . . maybe. 

Yet for all these terribly depressing facts, here’s the rub: 

No one seems particularly concerned. 

It’s as if it were happening to someone else—it’s as if it were happening to the Canadians, not to America. The American people are taking the whole budget deficit thing so la-di-da that you would think that the entire country had dropped extacy in one giant, collective, “Don’t give a fuck about nuthin’ ‘cept dancing!” moment. 

Why is no-one concerned about this fiasco which is the Federal government’s budget? Why is everyone buying the patently ridiculous notion that the American economy will “grow its way to prosperity, and out of debt”? Why is no one freaking out over the incredible monetization of the Federal government debt that is being carried out by Ben Bernanke and the Gnomes at the Federal Reserve? 

I have a theory—unscientific, but I think it’s true: 

The American people have thrown in the towel. They collectively realize that the shit is gonna hit the fan big time. So in this little window of time before The Big Splatter, everyone’s pretending that nothing’s wrong, everything’s fine—we’re doing hunky dory, couldn’t be better. Any bad news—like the monster deficit? Ignored, blatantly. 

You know those gamblers in Vegas, who go there and blow their house on the black jack tables? And then they go around town buying hookers and blow left and right, partying hard until the dawn, acting as if they didn’t have a care in the world? At least until the night runs out?

That’s the United States. 

The American people—collectively, irrespective of political parties—blew their country like a gambler blows his house on the black jack tables. Whether it was on unsustainable entitlement programs, or unwinnable (and illegal) (and pointless) wars, or foolishly short-sighted tax policies, or crony corruption, or demands for absurd services—it doesn’t matter, the result is the same: 

The American people collectively blew their country. So now, everyone’s pretending that everything’s fine, while they wait for the shit to hit the fan. 

Everybody with any sense knows that The Big Splatter is on its way—everyone knows there’s nothing that can stop it. So when bits of bad news crop up—like the revised deficit numbers—Americans are placid as Hindu cows. 

And why not? These deficit numbers are nothing! Americans all know that it’s going to get much, much worse. They all know that there’s no sense worrying about the little milestones on the road to hell. 

They all know that they’re waiting for The Big Splatter.
If you’re interested, you can find my recorded presentation “Hyperinflation In America” here. I discuss in detail what I would do, if and when the dollar crashes. 


  1. I see what you've just said in the blank, damned near drugged look on the faces of people when I try to convince them to prepare for what's coming. They'd rather accept a lie than face the truth. And I've had the feeling that they're well aware it's a lie but they'd rather just pretend none the less.

    These same people will be the first ones to say they never saw it coming.

  2. GL,

    Hmm, not everybody is waiting...the rise of the Tea Party suggests there are many people who are very concerned...

    Then there are others that are stockpiling food and guns and bullets and water and gold and silver for after the SHTF.

    Dennis G

  3. Sorta like the neighbor of the serial killer who has body parts in the freezer when they say, "He was such a nice guy!!!"

  4. Although tax policy in general is short sighting and unrealistically confusing, tax cuts were really not a bad idea. The federal government has never been able to collect more than about %20 of GPD regardless of the tax rates.

    Many say the problem is spending. That is a problem, but not THE problem. I believe is really boils down to a fiat currency issued by a private cartel combined with legal tender laws and legal fractional-"reserve" banking.

  5. It is coming: The big splatter. I'm thankful to have a large close knit family that lives close by. I think that family or community of people you can trust will be of paramount importance once the splatter occurs. I feel for those who live in large disarmed cities like Chicago, New York, Los Angeles. Those people will be in a veritable prison camp when this happens and the bridges are closed. There is really no point any more in arguing about what should be done or how we can turn the economy around. It is already too late. In fact, you could argue that the inflationary policies of the Fed are actually keeping the game going for just a little bit longer. God bless.

  6. GL - great article and the splatter is coming. I see it more each day. We are not all asleep at the wheel or singing zippy de do dah! Some of us are using this precious lag time to get ready. Stocking up on staples and converting what little money we have into something that will be recognized as money when the SHTF! I am very grateful to live in a community where so many are AWAKE and are getting prepared because that is what I think the answer will be tied to. You could not pay me enough money to live in the city right now. I fear that you are right about a majority of the people who have always and will always believe what the government puts out...we are getting better and turning things around...the stimulus is working when all the while the number of unemployed is skyrocketing, they might as well have burned the money in the stimulus and chaos is on its way. If a reader does not believe it...they need to read MORE and they need to PREPARE right now!!

  7. Let the blades spin as it splatters everyone around the globe. We were all part of it we as voters allowed false representatives in government to vote billions into their lobbyists coffers. We freely gave money to other countries instead of taking care of our own people. We as a country wanted to be the big shot with our armies flashing our weapons around the world showing our might when we knew that it was very costly. Let the fan fly and let it splatters us all. Folks learn to love the manure we created ourselves. We did it to ourselves. So enjoy your share of splatter.

  8. I'm new to your blog and found your post right-on. Really awful to read many of your readers' posts talking about guns, stockpiling, etc and that is the true ruination of this country, imho.

  9. Matt Taibbi has nothin' on you Gonzalo! I have a's justhefakspleze Cheers, tb

  10. Fatalism, nihilism, cynicism. . . Does any of it help? Does it not make more sense to figure out where we went wrong, come up with ideas to fix it, work hard to fix it, then be vigilant to never let it happen again? Does it have to be TEOTWAWKI via violent chaos and collapse?

    1. Uh Anonymous (lol)... WE KNOW WHAT HAPPENED! We also do know how to fix it!!

      The problem is that it is too late to avoid a collapse AND those that caused this are in charge and already have police and military powers over us and have ruined the Constitution. They are criminals and won't stop.

      It's every man for him/herself now and you need to wake up, realize this and prepare while there's still some time left.

      NOTE: STOP shooting the messenger that you've been ignoring.

  11. People feel the end is near and since there is nothing they can do about it might as well ignore it. They have enough problems in their own households to worry about what a distant goverment is doing. The revolution is inevitable, lets pray that the forces of communism will be defeated and a new beginning will reset the coutry to the original format.

  12. I don't think most citizens believe that the problem is that we are simply undertaxed. To say that the failure to raise taxes was idiotic seems... well, idiotic. Does anyone really believe that if we gave the government more of our money they would become responsible and stop spending more then they take from us??? ReallY!!! This is a spending problem not a failure to tax.

  13. I knew the USA was screwed when they offered to give me a $40 coupon redeemable by BestBuy to purchase a made-in-China television signal converter.

    What a waste of money.

    They first blew $1.34 BILLION... and then went and allocated $434 million more to it! That $1.34 billion translates into over $4 per US citizen.


  14. Last year I moved from the US to Brazil - didn't want to be a hero and try to save the Titanic. From here my perspective is a little more clear than when caught up in the middle of everything. I find it interesting to note the recent union protests over a relatively small amount of money compared to what they are earning. It is clear that most Americans are clueless as to the real state of the ship they are on. With the White House telling them constantly the country is in a big recovery, they blindly choose to believe what they want to hear. The ship is sinking - it is time to bail out the excess weight and save the ship and our lives. People are going to have to throw out the family jewels if they want to see any chance of a sustainable economy. Now is not the time to fight for rights to 100% insurance and pensions...

  15. The idiots that keeping voting for what runs our country will be the first to panic. I just hope and pray that it is not too late to save ourselves. History is not taught anymore, so nobody believes it can happen here. There is no more journalism, so we are terribly uninformed and outright lied to. Basically I think we are toast, unless a miracle happens.

  16. Sell all our debt to China in 5 year notes that cannot be rolled over, print tons of money to jack up inflation to ridiculous rates so the debt is basically worthless. Pay it off at maturity and shut off the printing presses. Forbid Federal debt sales to the American public or slap a rollover inflationary and/or a no foreign resale clause on such sales so when the presses shut down they're actually worth something again within the US. Yup, that would do it.

    In the meantime, join groups that are working hard to reform our way of conducting our Federal operations and act venomously to affect change. Maybe some of these mid-eastern countries really do have the right idea about changing governments.

    And remember, the declaration of independence says, in part, as follows, which obligates the American to act on their own behalf for their own good and welfare:

    — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. —

    So where does our Federal government stand in that context right now, eh?

    Think about it!!!!

  17. First we take the USA, than Europe!

  18. Gonzalito,

    The rising prices of gold and silver and commodities indicate that there are some of us that see the splatter coming.

    I'm waiting to buy some ocean front Miami condos for ten ounces of gold each. LOL!

    By the way, when is el Banco Central de Chile going to issue gold and silver coins? Do they have a Friedmanian aversion to shiny metals?

  19. Spelling error in the 14th text block: "Queantitative"

  20. The Limbaugh Loons make me laugh. SOCIALISM! COMMUNISM! LLLLLLLIBERALS! This isn't a failure of communism; this is mostly a massive failure of American style, naked greed, fundamentalist, vulture capitalism. When did we start going downhill? With the massive deregulation orgy kicked off by Reagan. In fact we can go back even further to Vietnam. That's when the Eisenhower warning about the military/industrial complex started to come to fruition. The military whores (ie the war industry) started flexing its muscle, banging the table demanding more money for "defense". If "entitlements" are such a horrible problem why aren't New Zealand, Australia, Canada and the Scandinavian and other socialist "hell holes" going bankrupt? Maybe because they don't have a massive worldwide empire to support.

  21. The schools have abandoned the idea of a timeline to human history, because this is a Judeo-Christian idea.

    So we have accepted the notion, as part of the dumbing down process/evolutionary or "scientific" theory, that life will go on always as it has before, with no enormous mega-changes along the way.

    But the Bible contradicts this thinking (or non-think). It tells us through the prophets of old who had a direct communication with God's heart & mind, that there is indeed an end to it all. And we are approaching that end. I think people understand that we as a whole and they, personally, are "in for it". Whatever "it" is.

    Revelation 1:1 states the purpose of the book, "to show..the things which must shortly come to pass", speaking of all things which happen in the book. The word "shortly" means once the day begins for the fulfillment there will be no delay in its execution.

    If you'd like to know more about the end of this timeline go here:

  22. Hey Geodesiq,
    Things started going downhill when FDR took a giant leap towards socialism.... The creeping levels of social handouts, coupled with military spending, corporate and personal greed in unions, and increased global competition changed everything. Kennedy, like Reagan, proved cutting taxes results in higher revenue to the govt. The problem is, Congress goes and spends the revenue and more, thinking there's an unending gravy train. Socialism, starting with FDR, began us on the road to destroying capitalism, a system which has created more prosperity and more freedom for more people than any other system in the history of mankind.

  23. Comparing these times with the big recession in the 70s its clear that extended wars are the biggest financial drain. Paying for the Vietnam War in the 70s and paying for the still ongoing War on Terror for the last decade.

    Ironic since Rumsfeld said the Iraq war would cost only about $80 billion, as I recall.

    The big positive social changes are happening in the Middle Eastern countries that we didn't invade, begging the question - why are we still in Iraq and Afghanistan?

  24. Kenna,
    Bush spent around 900 billion on wars over the course of about 8 years. Obama 1.5 trillion in a year and half. Although expensive, no doubt highly wasteful and inefficient, there can be argument that it helped protect our country and interests, helped with installing democracy in the region.... we got something for our money at least, and spread over that length of time we had the potential to cover it... Obama spent too much too soon during a time when there is no growth and we got next to nothing for it. (nothing permanent, that's for sure)

  25. Well, not everyone is pretending that everything will be ok. There are some of us that are preparing for this by growing gardens, getting out of debt, hoarding non-perishable foods, stocking up on ammo, and in general trying to anticipate all that will be necessary to survive after the shit does hit that proverbial fan with a splatter.....

  26. Dear GL, in the US, tax increases will not reduce the debt because the politicians will spend it all.
    The US is not under-taxed it is over-spent.

  27. This wasn't a problem of capitalism and it didn't start with FDR. He certainly goosed the throttle on the train, but really wasn't the beginning. I believe that Lincoln was the first real American enemy.

    He destroyed federalism in favor of nationalism. He passed the national banking act which further legalized and pyramided the fractional reserve system. These problems from then manifested themselves into what we have today.

    The Federal Reserve, FDR, Bush, Obama, etc. are all just symptoms of the problem. The states reasserting their rights and individuals taking personal responsibility would score an order of magnitude higher towards the goals of a limited federal government, real money and liberty. A balanced budget would just continue the charade...

  28. Dear Mr. Lira: I wrote a blog a few weeks ago in which I maintain that people aren't worried about hyperinflation because they can't see the money. In Weimar they carried it around in wheel barrels. In Zimbabwe they see three new zeros with each new print run. Our money is being spent from debit and credit cards. It's not be printed and no one can see it. In order for most people to understand a problem it has to be presented to them in vivid color; abstraction is not everyone's strong point.


  29. Opiate for the masses keeps them numb & dumber, and the average schmuck is now so dumbed-down on a steady diet of junk-news, tv-sports and contrived "reality" shows that they're totally clueless about anything else.

    The federal debt numbers are now so mind-blowingly gargantuan they nearly defy comprehension, so is it realistic to expect people who can't even manage their personal debt to comprehend the significance of rising treasury yields or "monetizing" sovereign debt?

    All of which has to suit the politico well, since it's easier to placate the stupid than it is to be accountable to the informed & intelligent. /end-rant

    As for "fiscal heroin", I prefer the way the (Beijing-based) Dagong Global Credit Rating Co put it last year (June 2010):

    " will be proven to be a practice resembling drinking poison to quench thirst."
    For good measure they also said the US was dissolute, at risk of insolvency, and at risk of triggering a second global financial crisis.(read the whole report here: )

    The longer and harder Uncle Ben keeps shaking his money maker the bigger that SPLAT will be when it hits the wall.

    The ONLY thing allowing this fiscal horror show to keep rolling is the 'worlds reserve currency' status of the USD, and that status will not survive much longer.

    Just my 2 (Canadian) cents worth.

    Roy C.

  30. u seem to think that the government is revenue constrained...

  31. Milestones on the road to hell...perfect description. GL...its not that people dont care its that the criminal politicians that represent us do not represent us and wont do what theyre elected to do. There is no way, short of actual Egypt style revolution that any positive change can come in the US.
    The above argument, combined with too much fast food, flouride in the water, and selfishness beyond belief for the average American to care about anyone but themselves is a witches brew for disaster. Im sure youre right...when the disaster hits people will protest and it will be too late to do anything except.... die.

  32. The masses in our country are predominantly ignorant and still bicker about which political party has the answers to our economic problems and which party is to blame. I believe the reason for their lack of concern about the future is not that they've given up -- they're simply ignorant and therefore naive about the role of the Fed and what it's done to our nation. When the SHTF, they'll be totally caught off guard and glued to the TV set, foolishly expecting their favorite news channel to explain it all to them.

  33. A few varied and random observations:

    Really, Lincoln is where this started? How about Alexander Hamilton? That's where this problem all REALLY started, right? Or was it Jesus with all his "render unto Caesar" philosophy? Point being, who started it all is moot. What are we going to do about fixing it, if anything?

    Another point: This isn't really about over-spending, it's about over promising. Specifically related to healthcare in Medicare and Medicaid. Until we get real about these programs bankrupting us and having some sort of obilig-a-dectomy, then everything else is just sideshow politics. Really, the NEA, Planned Parenthood, and all the other little political targets for "cuts" are totally meaningless.

    And on top of that is the Keynesian stimulus program known as "Defense". Republicans are so disingenuous on this point. If you really think we need to cut spending, then get serious about cutting military spending (along with the Democrats cutting Medicare/Medicaid). The pain should be universal for the political parties.

    As for our apathy, what can we do? The Tea Party seemed to want to be this great agent of change, but if we look in their farmhouse, we hear "twelve voices... shouting in anger, and they [are] all alike." So, what's left if a bloodless revolution doesn't work?

  34. If it wasn't for the Bush tax cuts then I would
    not be able to balance my budget and pay on my
    debt and that is the same for many laborers
    working for companys that pay as little as possible.
    Tim G

  35. Unfortunately, most Americans don't have a clue what's going on. And, if they do have some sense that things aren't quite right, they're reasonably sure that things won't get all that bad. We'll just muddle along as usual

  36. Besides the excellent article Gonzalo, I loved three posts in particular. The post about knowing the SHTF moment when they gave everyone $40 coupons for digital converters. The post about the glazed look on people's faces when you try to present this material (know this oh, so, well). and the post about the incomprehensible amount of money that we owe in debt obligations.

    So, my contribution is with regards to the numbers, yes, people have absolutely become desensitized to the magnitude of the problem.

    Those of us who are awake have already gone through the accident as we try to awaken the drunks behind the wheel.

    Like most drunk drivers they will survive the accident, but when they come out of the sudden, violent accident they will pickup nothing, but a wrecked life and economy on the other side.

  37. GL

    It seems as just the opposite is true among my circle of friends. No one wants to hear bad news NOT because they have thrown in the towel, but because they don't believe it. They have bought the government kool-aid that everything is fine.

    I am totally stunned at all the intelligent people I know who cannot see the upcoming disaster. For example last week, friends of mine wanted to purchase a house before they sold the old one. They cannot afford two homes. Luckily the bank put a stop to that maneuver.

    My parents lived in poverty and tyranny in Poland so I know that political and economic freedom cannot be taken for granted. Most people I know have never experienced the lack of freedom so it does not compute. They are hopeful and cannot conceive any other possibility other than things are going to get better.

    One of my other friends decided not to look for work after she was laid off because she realized she could function on her unemployment checks. She is milking the government for all its worth. Little does she realize the government checks can stop at any time and she will be looking for work at the same time everyone else will when their government checks stop.

    We have been so spoiled in this country. Alternatively, are the citizens brainwashed? Naive? Too trusting? I feel as if I am living in the twilight zone. Any proof I give them is dismissed. They cannot connect the dots. No one hears me, no one cares.

    At least the blogs help me realize I am not alone in my thinking.

  38. From where I sit in Australia, you guys in the US are totally screwed. Your government and media lie to you constantly, because to call out "fire" would only worsen your problems. They know that thrift, DIY food, paying down debt, etc is negative for your economy. They have to keep the party going.
    This will hit all countries sooner or later. We think in Australia we're above it all, but as suppliers of resources that get made in China into products sold to you and Europe, we'll feel the pain eventually.
    The world economy is like a dog. Trouble is, being on "the end of the tail" Australians can't tell whether our current "healthy" economic activity is the wag of a healthy dog, or the twitch of a dying one.
    I know which one I'm putting my money on.

  39. First, we really don't teach economics at the highschool level, where lots of people end their academic careers. Second, the people who comment here have come here, that alone sets them apart (and should be pretty self-evident), our opinions are likely 'outside the mainstream'. Third, without liquidation, there is no chance anything approaching a sustainable economy will occur at the macro level. Fourth, our elected officials believe it's their job to save us from our own stupidity, laziness and greed.

    Take all that and stir it together and what do you get? The vast majority of Americans doing their darndest to get through another day, holding their little piece of this great mess together. From the janitor to the executive, from the local justice of the peace to the ranking US Senator, from the humble penitent to the bishop. All of them, pushing and pulling as hard as they can for their own reasons, based on their own beliefs.

    And at a moment, something will give. It won't be pretty. Everyone will either be blamed or take credit for having seen 'it' coming. And it won't matter, because it will be as it is then. I'm content to prepare, to work with others locally to inform and prepare, and try my best to not get overly excited about any of it.

    Given the malinvestment and refusal to allow liquidation, combined with grotesque creation of utterly fantastic quantities of liquidity which are gradually filtering into the market, it certainly doesn't take a rocket scientist to figure out that 'something wicked this way comes'. The time to avoid it is long since gone. It's hard to think badly of those for whom ignorance is bliss in this case.

  40. I honestly disagree Gonzalo... I think the vast majority of people really don't have any idea.. they are just so ignorant..

    I was told I was delusional the other night by a guy with a CPA... it happens to me all the time. I was trying to explain how desperate QE really is, and he called it (QE) "esoteric". People don't know, and when you try to explain, they rationalize it away and make the bearer of bad news out to be "delusional". Saying that most American's know that the splat is coming is giving them too much credit.

  41. Dunno about you GL ... but I'm planting vegetables.

    Hope my kids like 'em. Because it's all they're gonna' be eating for 10 years.


  42. It is so sad that it has come down to this.

    Knowing what most of us know here, makes me feel like I am walking around in a dream...but it's not a dream it's a nightmare and I think it is going to get cranked up real soon.

    We do live in some very interesting times.

    All the best to everyone,
    The lime guy

  43. I agree with your theory.....but I would also add that the banksters and thier associates are also buying time (literally) so they can get their affairs in order...get out of the fiat and into the hard assets...these narcissistic pucks actually think they have it all figured out.

  44. @ SimonP

    I've been more concerned by Australia's response to the oncoming post-peak oil collapse than the USA's demise, but also noted the export connection similar to how you describe it. Having a surge in the cost of production combined with a drop in the demand is going to king-hit the backbone of Australia's economy: primary industries. The nebulous RealEstate/Finance/Insurance will no doubt unleash their quota of new poor on the dole queue, not that the corporate profits will be there to pay for it. I pity the fools who live in Sydney and Melbourne, they will have it the worst.

    Presumably when you say you are "putting your money on" it, you mean you're getting rid of as much money as you can?

    Actually I lost my job 4 weeks ago and haven't had the motivation to look for another one yet. As long as software developers are needed I'll be okay, but that doesn't sound like it will last for long when negative growth is around the corner.

    I don't own my own home, and I don't have a mortgage. I'm just wondering if right now is the best time or the worst time to buy a home. If civilisation falls apart and descends into survivalist chaos, would the bank even notice if I just stopped paying one day? I guess they would, eventually, with the inevitability of death and taxes. With back-interest, the bastards.

    What does everyone else think?

    In the 1980s, the future was so bright we had to wear shades. George Kuffs and Ferris Bueller never had challenges on quite the same level as this.

  45. I'm probably speaking out of my depth, but what the hell, I'll take a stab at it (what's one more fool in cyberspace anyway, eh?). The reason why this world is so screwed up, as I see it, is because the foundation upon which it rests is a pile of crap, that crap being the fractional reserve, fiat based IOUs which the government forces us to use, or else. The whole lousy setup is a ponzi-esque house of cards doomed to fail for no other reason than simple mathematics, which can be illustrated thus: for the sake of sheer simplicity (and using a bit of imagination), let us say that the Fed, when it first came into existence in 1913, made one single loan to "whoever" in the amount of $100, but demanded that $105 be payed back a year later. Now, how the hell is is "whoever" supposed to pay back $105 when only $100 has been conjured into existence? It ain't possible, unless the FED creates more loans, which will allow "whoever" to repay that $105, but what then about the other new loans? See what I'm saying? It's a perpetual treadmill of indebtedness which must continue to grow, or else it and everything attached to it will collapse (which it eventually will, under it's own weight). We're all screwed, and not in a way that most of us will find pleasing. Maybe those muslim countries that don't charge interest, calling it usury, have the right idea. Who knows. I'm just saying that the parabolic growth of indebtedness cannot continue at it's present pace without there being some ugly consequences at some point. Hope all of this makes some kind of sense. Am I right, or as Gonzalo says, am I nuts?

  46. By the way, thanks, Gonzalo, for allowing this forum to be a refuge where free-thinking anarcho-libertarians like us can spout off, using words like "crap" and "hell" to punctuate our points of view, without running the risk of some cyber nanny purging our writings because some sensitive, thin skinned weenie might be, oh-my-god, OFFENDED (cripes, nothing offends me more than some uptight, sanctimonious dickwad taking offense because the language I choose doesn't meet with THEIR approval). Ok, that's ranting for now. G'nite.

  47. Fair enough. Hamilton was indeed an enemy of freedom. Lincoln just had to opportunity to really show his colors.

    Liquidation certainly would help. Deflation would be good for the "little" guy. Unfortunately, as so aptly pointed out earlier, the banksters are in on it and with the fractional reserve fiat mess liquidation will not occur.

    The system will continue to be propped up until something bursts.

    The "Tea Party" Republicans, for all their speeches and gestures, have already shown their real colors with their pathetic budgets and passing another extension on the Enabling Act. Oh, I mean the Patriot Act.

  48. People, by nature, extrapolate to the future based on the recent past. The recent past here in America has been a fantasy, so it stands to reason that people would resist the idea that the future would be much different.

    None of this will be without wretching social upheaval and we're seeing that now in the mideast and the mid-west. Some are awake to the problem and have an issue with problems being balanced strictly on the backs on the people while the oligarchs get massive accommodation. I think this plays partially into events in Wisconsin. Other folks are sleepwalking and have no clue about what's about to beset them. Either way, social upheavals will be plentiful and that's what messed up about this entire thing.

    I fully believe that we'll see some states/region secede from the union and that will add more fuel to the fire. The thing is very quickly unraveling.

  49. Yes, it will fail, but when? I have a feeling this can go on longer than many of us think. How many people have passed away thinking the late 1970's/early 80's was going to be the end?

    Yes things are bad but it seems like TPTB are always able to pull another trick and delay the end.

  50. I agree with much of the article with exception to comparing Americans to Hindu cows. The world may be surprised how many lions still reside here. Many relish the fact they think we are going to hide in the woods with a bag of potato chips in one hand a rock in the other, don't bet on it.

  51. I think there is an analogy here with Egypt.

    Until recently it seemed that the vast majority of Egyptians were apathetic about politics, and just accepted the situation. Then the Tunisian government fell. In that moment millions of Egyptians simply changed their minds about what was possible.

    So also in America, just one extraordinary event such as the collapse of the Comex or the onset of hyperinflation could lead millions of Americans to change their minds. Then anything might happen...

  52. I agree that the Fed is on an unstoppable path for a train wreck. I also think it is coming sooner than people realize.

    However.. I also believe that that our founding fathers established a structure that will allow the US to continue on when this happens. It just won't be the US we have all known.

    The Fed is going to fail, and it will happen soon. If people get smart, however, they will rise up in their States and petition for secession. It is time to cut the cord from the Fed criminals (and completely incompetent ones at that). If all fifty states do this, the Fed ceases to exist. Next, the States form a new union, create a new currency, and begin a new.

    While sounding far-fetched, it is the only hope, however slim, we in the US have. The Banks have destroyed the world in the name of greed. The scary part though, is this is exactly what the Bible has indicated would destroy us. Even Jesus referenced the greed of bankers in the final days.

    God help us all.

  53. more taxes are not the solution. Congress has never been able to spend within what it takes in. That is the real problem. So taking in more tax revenue will not reduce the deficit or the debt. The only solution is for Congress to spend less than it takes in each year so it can pay off the debt.

  54. G,
    Great insight...keep it coming.
    As unfortunate as the engineered economic collapse is by TPTB it is very exciting to see the great unwashed masses coming out of our media-induced comas and start piecing together the truth thanks to the internet.
    You know it's sad to think how obvious it was to see the Soviet Union use propaganda and state controlled media to control their citizens. And, just as obvious who was running the country (politburo) behind the scenes. Very much out of George Orwell's "1984". All we could think in America was it could never happen here.
    But...if you are in the middle of it suddenly your perspective is altered dramatically. You don't realize that everything is set up to distract you from who TPTB really are. You've been educated in the government school system and are led to believe that we've moved beyond what everybody else in world history had to battle - tyranny. Sure, they tell us a little about the rule of pharaohs, kings, etc. in times long ago. But, we are led to believe that because we have the right to vote for our supposed leaders that we no longer live in tyranny. Well, I think more and more Americans are starting to realize that their "real" government isn't up for election every 2 or 4 years. They are firmly entrenched like tyrants and they dictate to the newly elected representatives just what their marching orders are going to be. And, if the politicians we elect play ball with TPTB then they get re-elected. And, if they don't there are various ways to weed them out of office.
    Just remember that all of the division and anger in the world is supported by TPTB to keep the people divided and fighting among one another. For if the people are fighting the contrived battles then they will be too distracted to notice what TPTB are really doing at the top of the pyramid. The people will be unable or unwilling to come together, close ranks and organize a peaceful rebellion against TPTB that remain "invisible" thanks to all of the energy wasted on the democrat vs republican, black vs white, union vs non-union, rich vs poor, muslim vs jew/christian, etc.
    The truth is there is only one real division in this entire world and if you look on the back of the U.S. $1 bill you will see it. You're either on top of the pyramid or you are one of the slaves working for them. Some of the slaves do a lot better for themselves than others, but we're on helping build the pyramid for TPTB on top.

  55. To anonymous @ 12:44

    Spot on! Every form of government that has ever existed and which currently exists is nothing but a tyranny (heck, even a democracy is nothing more than the tyranny of the majority). Whether one calls them kings, pharaohs, chancellors, prime ministers, czars, chiefs or even presidents, the fact is they got to where they are simply because they were/are more accomplished liars, thieves and murderers than their fellows, and with banksters thrown into the mix, an unholy union between the two exists such that we the people are chained to a never ending treadmill of involuntary servitude (a prison without bars is no less a prison, and quite often does a better job on a more subtle level). Like old Ben Franklin said, "....a republic, if you can keep it".

    NB. Not all who are in politics are evil, of course, since it is true than an occasional innocent man does get swept up into the craft. It's just a case of 99% of politicians making the other 1% look bad.

  56. Google the phrase

    "13 families"

    to find out who really runs the planet

  57. Gonzalito,
    Sinceramente espero que tu razonamiento y el de otras muchas personas esté correcto, y que ese puto pais de los Estados Unidos, junto con sus degenerados, inmorales y racistas habitantes DEAPAREZCA de la faz de la tierra. El mundo será mucho mejor sin la mierda de Estados Unidos.

  58. There are many in American who are very concerned. Hundreds of thousands are planting vegetables, storing non-perishable foods, raising chickens in the suburbs, learning to use food dehydrators and canners, and buying generators, guns, and ammo. They want to be able to protect themselves, feed their kids, and help others.

    When the House voted this week to approve a budget that reduces spending less than 1/2 of 1%, and when our president verbally skewered the efforts of the governor of Wisconsin to curtail gold plated public employee benefit plans, those of us who have been pounding the desks for years just throw up our hands in disgust. The government spending train wreck rolls on, while Mr. Bernanke runs the QE2 printing presses and drives up the cost of food and fuel at warp speed.

    When the excrement hits the air handler it will be the biggest, stinkiest, most toxic financial mess in human history.

    The wise among us are zipping up their hazmat suits.

  59. The word democracy means MOB RULE!! The founders set up a representative government which means even the small groups get a say!! Once the career politicians showed up that all changed! The corruption has taken over good government like a cancer! The only way to cure this is to cut out the ROT!! Keep your powder dry and band together with like minded PATRIOTS! I also have a 50/50 rule; ie Half of this country are hard working PATRIOTS, the other half are slacker MORONS!! PRAY TO JESUS! HE IS OUR ONLY HOPE!!!

  60. To all you doomsdayers, your scare tactics don't help anything. There isn't going to be any Day of Reckoning and the situation isn't half as helpless as your fear mongering makes it seem. ... YES, you are right to be scared. YES, the situation is ridiculous. But the deficit can be brought under control if we'll just get serious about it. How you may ask? How about we go back to the '90s tax rates, at least for the well to do, we cut defense spending by 30 percent and we freez all other spending for five years? That alone would make a trillion dollar difference in the yearly budget by 2015, assuming the economy gets back to full strength. Remember that we had a balanced budget in the 90s. ... AND WHAT IF WE DON"T DO ANY OF THIS? Well, we'll just slowly but surely destroy the middle class's standard of living but I doubt there will be a moment where you'll need guns and canned foods in your house.

  61. James Ball,
    In the fall of 2008 financial instruments pumped up by a huge Fed debt bubble were revealed to be what they truly were - shadows and phantoms. Bank balance sheets collapsed like a house of cards.

    Hank Paulson and his acolytes were able to convince Congress to shell out billions in bailout money to plug a gaping hole in the debt bubble and prop up the system. This happened a mere 6 hours before the entire world financial system experienced vapor lock.

    Our financial leaders declared victory, wiped their proverbial brows, and congratulated themselves.

    Fast forward to today. The pressure in the debt bubble has grown even greater with Stimulus 1, Stimulus 2, QE1, and QE2. There is talk about bailing out the euro with QE3.

    What you describe is a possible solution. But the supposed fiscal conservatives who were elected last fall to do exactly what you are suggesting just voted last week to reduce the deficit by a literal drop in the bucket. Imagine a table piled high with 10,000 pennies. If the federal budget were represented by these 10,000 pennies, the amount cut by our Republican controlled House would be less than 1/4 of one penny.

    Governments all over the world have issued debt that is beyond the ability of their economies to repay. The total dollar value of all derivatives is many more times the total value of all the assets on the entire planet. The world financial system is teetering on top of so much debt there are many who believe those who are spinning the dials to keep all the plates in the air will be unable to act quickly enough when the next plate careens out of control.

    I hope you are right. I hope there is no catastrophic collapse. But I do not rely on hope. In some parts of the country the price of Cheerios has risen to $7 a box, and peanut butter has risen to $4 a jar.

    Hope cannot fill the belly of a hungry child.

    K Smith

  62. In few words...Every people have the Government that they deserve.[as simple as that]

    And the darkness, is rolling on.

  63. Gl,
    i have been reading about this for such a long time that I want this to come ASAP.SO i can stop reading about it...

  64. Great post. And great comments. I agree with some and disagree with others, but I liked them all. The reason I liked them was because they actually show signs of working brains. This has disappeared from much of the American people judging by some of the comments posted elsewhere.

    I see from your e-mail address that you are an expat. I am one too. I left the states over six years ago with every intention of returning. But now I will not. I have watched from an outside perspective while the country I loved and thought I knew has spiraled down to something I no longer can identify with.

    I am a Constitutional libertarian. A student of history and philosophy. And I can tell you that things look mighty different from out here. The U.S. is hated by most of the rest of the world, sorry to say. This is also something which is totally lost on the average American, who seems to live in a dream state of denial. Up until about two years ago, I was passionate about looking for some way to fix the mess but have also continued to educate myself with the truth and I have given up any hope.

    The U.S., thanks to the partnership between the central banks and the traitors in the government, is a train wreck about to happen. The zombies on the train are all happy to watch it speed along and feel that since the wreck has not yet happened, that there is nothing to worry or think about.

    But it will be too late once the wreck occurs, and I think it is too late to stop it. Has there ever been a more perfect storm of events coming together to finally destroy our country? I think not.

    To paraphrase Tomas Jefferson, the American people will wake up jobless, homeless and broke after the wreck, and they will have no friends. The U.S. has evolved into an arrogant empire. We torture, we have killed over a million innocent people in other lands with no more concern than playing a video game. And in order to do so, we have run up the largest debt in the history of the world.

    The welfare mentality is everywhere and even our soldiers, the brave men and women who serve the empire, and to whom the Government pays lip service , are ultimately abandoned, wondering why the government has done this to them. They are sacrificed as well as the American people to a corrupt evil element in control of our country, which has come to a shadow power which very few even understand.

    Have a nice train wreck everyone.

  65. I am glad people can express themselves and care enough to do so. One thing about which I would like to remind people is that the people we thought we voted for may not be the ones who actually got our vote. It is well established that computer voting can easily be manipulated. We need to work to get rid of the computer voting in all areas. I liked the idea of every state seceding but how could that ever happen if our votes are redirected? Last point, Ron Paul may run for President again. He needs financial support to do so. If you don't know his stand on issues, google him. And then hope our votes for him get counted.

  66. James Ball,

    We didn't really have balanced budgets in the 90's either. That was a couple of accounting gimmicks. First, simply not counting accrued entitlement spending. Second, rolling over long term debt for short term.

    If you look at 2009 for an example the official figure was $1.4 Trillion. The real number was $4.3 Trillion. This accounting has been going on for a very long time. Our real total debt has been estimated anywhere from $50 to $200 Trillion.

    The second reason just makes the debt that much more unmanageable. Eventually, if the Fed wants to keep being in charge of the gravy train, they'll have to raise interest rates. Just imagine what our budget would look like when all tax revenues are spent solely on interest...

    That is entirely plausible and likely even. There is no saving such a corrupt and broken system. Doomsday speakers, March ON!

  67. @ anonymous 2:47 a.m.

    Yes, it is plausible that computer voting can easily be manipulated.

  68. "The American people have thrown in the towel. They collectively realize that the shit is gonna hit the fan big time"

    That hasn't been my observation. Most of my friends and family have no clue that there is any sort of federal spending problem, or that the bond market could explode. No clue at all. So when interest rates go to double digits, housing prices collapses and unemployment skyrockets they won't know what hit them.

  69. In my humble opinion, we should remember that this is not an exclusively "Americano" problemo - yes, all signs point to shit hitting the fan eventually, but the funny thing is that a lot of that shit splatter will end up on the global faces of folks who are just as clueless and/or resigned as the Americans that all of you commenters have been bashing.
    In fact, starvation is already being gifted to many of these folks courtesy of the Bernank, no?
    China, India, emerging markets ... a lot of those suckers (whose heads have been steadily inflating) are goin' down when the USA Titanic starts sinkin'. And their food-to-citizen ratio is way more fucked up than it is in good ol' USA, so this should be an interesting race to the bottom ...
    Having grown up in Southeast Asia and now living in Silicon Valley, I can say that the 80/20 pareto distribution of stupidity is absolutely equal opportunity & color-blind.
    All of the extremely insightful things that GL points out as problematic with the US ... exist in plentiful amounts all around the world.
    Human nature is the same everywhere - stupidity, greed, lust, envy, corruption, blah blah blah ...
    "... there is nothing new under the sun".

    Enjoy while you can :)

  70. Consider history. I read a book a few years ago about the Pelo-Ponesian war that took place in the Greek world about 450 B.C. America is as Athens was then, and Athens lost. Everything. In the course of 30 years they went from the top of the world to the bottom of the pit. I believe this piece of history is profoundly significant to what we are experiencing today, and what we are about to experience as a nation. If you are prepared and anchored, please remember compassion for those who have lost everything and need help. God bless you.

  71. Simple really:

    The rich rule over the poor, and the borrower is the slave of the lender.

    Stay liquid my friends...

  72. I think there are as many different responses, denials, evasions, half truths as there are people. Bottom line - debt doesn't go away. It is owed to other red blooded human beings in some form or fashion and at some level they count on it to pay bills, improvements, education, luxuries, etc. They won't go away.

    Looking at all of the problems, and there seem to be too many to list here, it seems like you couldn't invent a better way of killing off billions of people. Kind of like World War I when the leaders (I mean educated idiots) of the "first world" sent their sons to be butchered using machine guns and artillery across fields in some kind of sick "goldfish in a bowl" approach to methodical killing - stretched over years. When noone was allowed to learn and adapt - until WW II when the Tank was introduced (happy day for the military industrial complex!).

    Folks, I love to hope, but you take away cheap fuel, cheap food, a world's reserve method of exchange - and introduce idiots (Obama, Clinton, Palin, Gaddafi,...too numerous to list) and you get a mass kill off. Someone please tell me I am wrong?

  73. I disagree with the premise that most Americans know the true state of our financial affairs and are just ignoring it until the end. In fact, most Americans just go to work each day (those nowadays lucky enough to have jobs... the rest on never-ending unemployment checks) & live their lives secure in the misguided belief that their elected officials are handling the situation OK. These uninformed people think the Tea Party people are the uninformed wackos. Most Americans have been mis-educated in government run schools, hardly think for themselves & prefer to watch nonsense TV. Many can't really read or write well, if at all.

    As bad as things are in the USA today financially, please read "Lords of Finance" to see how the post WWI Weimar Republic of Germany COULD have repaid its debts, if it wanted to. But it didn't & political leaders chose instead to squander their money on social programs, rather than pay down their huge debt... leading ultimately to hyperinflation, economic collapse & then to Hitler.

    I think we CAN avoid economic disaster still in the USA, but the political leaders need the guts to tell the sleeping Americans the truth & get to work CUTTING THE FEDERAL BUDGET DRASTICALLY, eliminating/phasing out social programs & returning to a small, limited, more Constitutional Federal Government. But I don't think our politicians are up to it & most people will dream away oblivious to the coming disaster.

  74. I wonder if the bank runs now happening in South Korea are going to go global??


  75. Does anyone know why Gonzalo is not posting or answering emails?

  76. I don't know where he is but maybe someone aught to go to his house and see if he's OK

  77. There's more to life than blogging. He'll be back. He's probably out indulging in sex, booze and rock and roll on a bed of silver eagles the lucky bugger!

  78. The elites on both sides of the aisles, but particularly on the culturally dominant left, believe that the nation-state is dead. Why worry about the finances of a dead and discredited institution? The Conservatives believe that once you've busted out a corporation for everything you can get from it you should just take your Golden Parachute and leave, hopefully to find another one. The Left believes that even if their policies produce bankruptcy it is irrelevant in the face of higher goals, like "inclusion." America is becoming just a cheap brand name, like RCA, to be mined by the elite for what they can get out of it and then discarded.

  79. Dear Ian:
    I believe that you are correct, those that hate the US assume that the Chinese, Russians, Europeans, Cubans, Venezuelans ... would do better than the US.
    There are many people that would be delighted to be "subjugated" by the US.
    However, that does not excuse the US for the lunatic economic, foreign and domestic policies that it is practicing today.
    I believe that the US will not change until a great economic disaster occurs. It won't be long, the US dollar will collapse.
    Then, maybe, we'll have a revolution in the US that will take us back to rule by the original US Constitution (not the Articles of Confederation).
    In the meantime I share the experience of many of you in dealing with friends and family.
    Overwhelmingly they are clueless or in denial of what's happening.
    In conclusion, I think that it is going to get really ugly but it won't be the end of the world.
    It may even get better!
    Good luck

  80. The average American can't see far beyond their own face. American Idol, Football, and Lindsay Lohan. Disappointing.

  81. Concerned Canuck.Is there any connection with what is happening in the economically challenged usa and other 3rd world countries?What I mean by that is there a connection or similarity to what rogue nations are today?The usa second largest expenditure is the military and the military complex,the disturbing similarity that I see in comparison to(some)other rogue nations and 3rd world countries is that this expense comes at the expense of the well being of their own population in order to pursue the agenda of a VERY select few who are not a part of a mainstream ideology.Do the american people even know who dictates and controls the banking and financial policies that are currently tearing your once proud nation apart?I don't think so.I, as a concerned neighbor of the north, truly believe that the chaos and turmoil that is yet to come is totally by design.I envy your ideals and your entrenched rights and freedoms that you trumpet around the world,but you have to start 'practicing what you preach'for one in order to garner ANY respect from a global view-point.Quick question...Does anybody even know how the so-called IMF is funded? And where does their authority come from to just dictate to Sovereign and free countries that they must comply to their doctrine or else?

  82. It makes me remember one of the greenday song... "Don't wanna be an american idiot..." America is a great country, but if you watch carefully, china and india try to take it from you guys :) But I still really want to go to new york and watch sunset from the bridge :D


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