Porter Stansberry, 15 Oct '09

Consider these numbers:

Right now, today, without counting any of the unfunded liabilities of our government (which are very real obligations, by the way), our national debt is $12 trillion.

There are roughly 100 million American households;
So that's a national debt of roughly $120,000 per family – more than the average American owes on his mortgage.

Think about what this means in terms of interest payments. Even with interest rates at all-time lows around the world, the United States will spend almost $400 billion on interest this year to service our existing national debt – that's a 3.3% interest rate.

Currently, the US takes in roughly $2 trillion in taxes, half of which come from income taxes. So the interest on our debt is already consuming 20% of all tax receipts, or 40% of all income taxes.

It seems obvious to me this money will never be repaid – could never be repaid. The only real question is how much of a "haircut" our creditors are willing to accept in terms of the loss of purchasing power of the US Dollar. So far, inflation remains relatively benign. Our creditors don't seem to be losing very much. But we know this will change and could change rapidly, as the Fed continues to expand its balance sheet with less and less creditworthy assets.

At what point will our creditors finally decide they can't finance any more of our deficit spending because we're simply not worth the risk?

No one in Washington realizes you can't borrow money endlessly. By the time Barack Obama leaves office (assuming he is re-elected), the national debt will likely exceed $20 trillion. What will our creditors charge us to finance this debt? How will our debts compare to the value of our economy?

It is impossible to know what will happen. But here's the one thing that seems most obvious: Our borrowing costs will go up. A lot.

At some point in the next few years, our creditors are going to stop believing in our ability to pay our debts in honest money. I don't know what will break first, but we can't go on printing money to prop up our banks and spending money we don't have to prop up our culture of entitlement.

And I don't believe there's any way to avoid it – certainly not with the political system we have in place right now. To protect yourself, you'll have to be very good at managing your assets. You also need to make sure to take the advice we've been issuing for years:

Buy and hold plenty of real, honest money that cannot be debased by the government. Buy and hold plenty of gold and silver.


Porter Stansberry, 15 Oct '09

Porter Stansberry is founder and publisher of Stansberry & Associates Investment Research, a private financial publishing company based in Baltimore, Maryland, and editor of the monthly Porter Stansberry's Investment Advisory.

http://goldnews.bullionvault.com/gold_fed_101520092

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India just this week bought 7 billion in gold foregoing US Treasuries. What about China?

Ponder on some of the facts from the article....Read each word slowly.

"At some point in the next few years, our creditors are going to stop believing in our ability to pay our debts in honest money. I don't know what will break first, but we can't go on printing money to prop up our banks and spending money we don't have to prop up our culture of entitlement. At what point will our creditors finally decide they can't finance any more of our deficit spending because we're simply not worth the risk?

Ot this one:

"national debt of roughly $120,000 per family."

Or this one:

"No one in Washington realizes you can't borrow money endlessly."

Or this one:

"Our debt is already consuming 20% of all tax receipts."

If the US wants to survive, the spending via borrowed money has to STOP before it's too late.

"Culture of entitlement" and there lies the problem...

DON'T SEND YOUR GOLD OFF IN ENVELOPES.

we've always had a deficit and we always will

as an absolute number it is staggering but as a percentage of our economy it's not so bad

during and after world war two the deficit was three or four times more than it is now (as a percentage of the economy) and we recovered and survived

the deficit is not all that bad. it's the same as having a mortgage on your home and a couple of cars. The more money you make the bigger mortgage you can afford

it DOES have to be paid and shouldn't be allowed to get any bigger but it's not such a doom and gloom thing as people make out

oh. I just realized

that whole thing was just an advertisement to buy gold and silver

It could be sound financial advice ......and timely....

Never trust percentages....they r misleading...when I was 20 my brother was 10....I was twice his age. Ten years later...I'm not twice his age...always go with the numbers...and the numbers are REALLY STAGGERRING...

I've heard all that nonsense about the deficit being insignificant from politicians for far too long....

oh it's not insignificant

it's just a part of doing business

the deficit still has to be managed and should be reduced as much as possible

just like making a few extra payments on your mortgage when you can will free up money to be used later

we still should be paying it down. It's just not the apocalypse that some make it out to be

Look what happened to the banks and how quick....And to our economy and jobs...China is our bank....I respectfully disagree and trillions(and skyrocketing upward) will be hard even to ever repay 1 penny of it. Collapse is more of a possiblity than any repayment ever and creditor nations are just starting to realize that possibility.

sure it'll be hard to repay. I'm not trying to diminish the magnitude of it. But on the micro scale just like a million dollar mortgage is hard to repay, but if you have a ten million dollar income it's not AS hard to repay. And the American economy is MUCH bigger.

the deficit is $12 trillion dollars. We spent that in Iraq alone. Even the Medicare expenditure is bigger than that. The American economy in comparison is HUGE

It does need to come down incrementally over the next ten years or so and is something that needs to be addressed. but its not the end of the Republic and America is not gonna collapse because of it

But then on the other hand, in the last twenty years or so, America has morphed from a production society to a consumer society. We dont manufacture stuff the way we once did. Cars, steel, electronics, all that stuff is produced by Japan and Korea and increasingly China. While we as a people are buying stuff on credit and financing a life style that our income doesn't support

THAT worries me a lot more

http://online.wsj.com/article/SB10001424052748704107204574469073847604010.html

Asks the British....they have been where we are today.

Do you seriously think the debt will ever be paid ?.
I do not think so .

double post

The problem is, as with most analogies of what once happened, we are not the same nation we were in the late 1940s and through the 1950s. Then, we were the world power. Sure, russia was there, but we were #1 and they were #2. Third was so far back nobody even knew who they were. We had an enormous workforce returning from war with money to spend (read: houses and cars). We had zero competition.

And as a sidenote, after WWII, we also had to assist other nations rebuild and with them without factories, guess who supplied the goods.

fast forward to today: we are no longer the lone power. China, Japan and the rest of Asia are some of our largest sources for manufactured goods and China's standing in the world is growing. We have operated a trade deficit for far too long. We no longer have the strength to muscle our way out of a slump and on top of that, social spending (the once you give it you can't take it back stuff) is exponentially higher than it was 40 years ago.


We simply cannot save ourselves now on this path. We must bring manufacturing back here, but the businesses are just doing good business and looking out for the bottom line like a business is supposed to and the workers will not work for less. Government protections and regulations are increasing the costs of business here to unheard of levels, pushing more and more until the companies go overseas just so they can compete with foreign business.


We are in a catch-22 of epic proportions and nobody is willing to give. The businesses blame the workers, the workers blame the business. The poor demand more and the government takes from the rich and gives to them while the rich businessowner has to cut jobs and make everyone work harder to make the same bottom line or else face failure.

Greed is its own vice and virtue. Unfortunately, far too many from all walks of life have bypassed greed as a virtue and are heading back down the slope toward vice. In the end, we have nobody to blame but ourselves.

I'd also like to point out the catch-22 of our position:

in order to sustain, expenditures cannot exceed income. We can continue to borrow so long as our debt payments and domestic expenditures do not exceed the income.

however, debt is rising at a far faster rate than income. This means that as we take on more debt, more of our income has to be spent on debt and less on expenditures. We are not doing this. Expenditures are growing as well, causing us to borrow more. This leads to an even larger requirement to cut expenditures yet they still grow.

See where this is going?

http://news.xinhuanet.com/english/2009-11/11/content_12432529.htm

Could in 15 years the dollar be replaced by the yuan? Maybe that's where we r headed.