The U.S. is Facing a Day of Reckoning Over the Deficit (Excerpt)

The U.S. is Facing a Day of Reckoning Over the Deficit (Excerpt)

July 20, 2011

Bob Chapman, The International Forecaster - ...The US dollar has been a fiat currency for 40 years, and the result has been the dollar has fallen precipitously in value. Gold backing stability is non-existent, and government and the Fed have been free to create money and credit as they please.

Those in financial power know this game cannot go on indefinitely and that is why they create wars as a diversion, or cover, for a failing financial and economic system. Besides, war is very profitable for the Illuminists, especially when you are financing both sides.

The Fed’s answer to the problems that they deliberately created has been to supply endless supplies of money and credit. Thus, between 2008 and July 2010, they injected $16.1 trillion into world banking sectors — $7.75 trillion went to just four US banks, who happen to own the Fed. The remainder went to foreign financial institutions.

The US big hitters were Bank of America, Morgan Stanley, Citigroup and Merrill Lynch. The result is that these banks are still broke and allowed among others to carry two sets of books. The other recipients were Barclays UK $868 billion; Bear Stearns $853 billion; Goldman Sachs $814 billion; Royal Bank of Scotland $541 and $181 billion, or a total of $722 billion; Credit Suisse of Switzerland $262 billion; Lehman Bros. $183 billion and BNP Paribas of France $175 billion.

This was all done in secret and the Fed was forced to reveal these transactions under the Dodd-Frank bank legislation. After these revelations it is not surprising that current real inflation is 10.6%. We expect it to be 14% by the end of the year. Next year QE2 and stimulus 2 will provide us with 25% to 30% inflation.

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One of the dirty little secrets is that many other nations cannot hold sovereign bonds rated less than AAA. If the US has its credit rating lowered their holdings will have to be sold. We ask, to whom? Could it be the Fed? If it is that will quickly bring on hyperinflation.

We see that the escapades of the Treasury and the Fed have brought ire from the Chinese, who are telling them stop your foolishness with the debt limit immediately. In the Chinese Dagong the credit rating of the US has already been lowered to A+ from AA eight months ago. Light pressure will continue from China until the US gets its act together.

The US rating agencies have been under great pressure by the White House to keep their mouths shut and stop their warnings regarding US government credit worthiness. That was accompanied by a plea to them to not say anything about credit. The administration is scared, especially after government credit was put on negative watch.

A game of chicken is being run in Washington by two groups of politicians run and owned by the same group of people behind the scenes. They all want enabling debt extension with a small touch of austerity. They want a deal that has the legs to keep the economy going until after the next election.

The most important thing they want is a reduction in Social Security and Medicare, so those funds can be used to reduce debt and fund the military industrial complex. They also want starvation and the inability to buy drugs by the elderly to hasten their demise. That means less Social Security and Medicare spending.

In two years we will also have the Obamacare death panels, where massive elimination will be put into motion. There is nothing the Illuminists despise worse than useless eaters. There is ample evidence that these elitists, by their own words, want to reduce world population by 60% to 90%, dependent on which of these persons you listen too. Last week Ted Turner opted for 90% on CNN. That is what the fight regarding debt extension is all about.

The only forthright and honest person in Congress to call it the way it is, is Ron Paul. He says the bill sanctions the status quo and that it is impossible to balance the budget without cutting military, Medicare and Social Security spending, and that is impossible. The debt limit will be raised, but we fervently hope without Social Security and Medicare cuts.

You have to understand your adversaries. These people in Congress are almost all paid whores, and the people who control them with money are insane. If you can grasp that you can understand what really this is all about.

Watch carefully which members won’t allow military cuts and which want to cut SS and Medicare and then you will have identified the enemy.

One more view from Europe. We are probably near the end of the first wave of European problems. Still hanging in the balance is the 2nd bailout program for Greece. The EU approval is yet to come and the Germans are furious with the deal, Merkel and the CDU, Christian Democratic Union. If approved this will be Greece’s last bailout. Next comes bankruptcy.

Greece is a tiny part of the EU, but it could be the catalyst that brings down the euro. It would be precedent setting and deeply affect the future of the other five nations in financial trouble. The outcome for Greece, unless they have perpetual bailouts, is default. It could be months away, but could be 1-1/2 years away, but default is sure to come. Can you imagine the idiots in the ruling party of Greece took licenses away from taxi drivers and have had 10,000 of them striking for more than a week, and each day they demonstrate brings more chaos to the country.

As a result of what is going on, bond losses by the banks as a result of default could take some of them into insolvency. If all six nations defaulted, the loss would be $2.5 trillion. Then there are the derivatives as well. Of that Greek debt is about $500 billion. Such an occurrence could take down the European banking system, which would lead to the default of England and the US.

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LBJ greatly expanded the US welfare state with his “Great Society” program in 1965. The intent of the “Great Society” program was to eradicate poverty in the US. The poverty rate at the time was 14%.

After spending tens of trillions of dollars, the US poverty rate is now14.3%; US living standards peaked in 1973 and the middle class has been steadily eviscerated. Plus the US is now near bankruptcy.

The U.S. is "not a triple-A credit" and is running a "fiscal doomsday machine," David Stockman, former federal budget director under President Reagan, told CNBC Thursday.

"The system is totally broken. There is a complete stalemate," Stockman said. "They [credit agencies] aught to get it over with, cut the rating and begin to create some reality both in terms of the financial markets and the American public.

"The problem is not the ceiling, but the debt," he added. "It's the $6 billion a day that we're borrowing day in day out."

Stockman believes that Washington will come to some type of an agreement at the 11th hour, but it will only be a short-term fix.

"We are going to be facing a day of reckoning here, and I don't know whether it's six months from now or a year from now," Stockman concluded.