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What a US Debt Default Could Bring

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A US debt default could trigger a nightmare scenario that many economists have been warning about. Eventually this shit pile of debt will have to be dealt with but is this the moment ? One thing is for sure, this can easily be avoided but as usual politicians like to play Russian roulette.

The following are 12 very ominous warnings about what a U.S. debt default would mean for the global economy…

#1Gerald Epstein, a professor of economics at the University of Massachusetts Amherst: “If the US does default, that will make the Lehman Brothers bankruptcy look like a cakewalk”

#2Tim Bitsberger, a former Treasury official under President George W. Bush: “If we miss an interest payment, that would blow Lehman out of the water”

#3Peter Tchir, founder of New York-based TF Market Advisors: “Once the system starts to break down related to settlement and payments, then liquidity disappears, as we saw after Lehman”

#4Bill Isaac, chairman of Cincinnati-based Fifth Third Bancorp: “We can’t even imagine all the things that might happen, just like Henry Paulson couldn’t imagine all the bad things that might happen if he let Lehman go down”

#5Jim Grant, founder of Grant’s Interest Rate Observer: “Financial markets are all confidence-based. If that confidence is shaken, you have disaster.”

#6Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”

#7Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”

#8The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”

#9Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”

#10Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”

#11Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”

#12Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”

Source: theeconomiccollapseblog.com

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Government Creating Phony Crisis So They Can Pretend To Save Us

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Peter Schiff gives his take on the the Government shutdown.

Peter Schiff: US Inflation Figures Are Deliberately Misleading

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Peter Schiff explains how misleading the US inflation figures are, as it’s in the Governments interests to downplay the true figures.

Some of the main points covered:

  • Keynesian economists reference the Government CPI figures to justify QE but the true figures show high inflation.
  • Money printing is Inflation and results in rising prices.
  • Government methodology is designed to hide the effects of inflation.
  • Before the election a Fox poll showed people are most concerned with inflation (i.e. people don’t believe CPI figures)
  • Government CPI figures from 1970-1980 while compared to a basket of goods was accurate but was way lower from 2002 to 2012.
  • Government figures are wrong. An example of this is the CPI reports a rise of 37% in magazines and newspapers from 1999 to 2012 but when you look at the cover prices over that period, the average increase is 131%.
  • Government figures show healthcare costs only rose 4% from 2008 to 2012. That alone tells you the CPI is misleading. A Kaiser survey showed that premiums increased by over 24% in that period (5.5 times faster than the Government’s figures)
  • Healthcare costs only have a 1% weighting in the CPI figures despite the fact for medium families income it is almost 33% of their expenditure.
  • It’s the Governments vested interest to fool the world into believing there is no inflation. After all if they admitted true inflation then they couldn’t continue stimulating the economy and would be forced to deal with the deficit.
  • The clowns in Washington say the current inflation figures are too high and want to change the way its reported.
  • The true rate of inflation would be similar to the 1970s somewhere between 7-10%.
  • Foreigners are absorbing the excess dollars and buying US Treasuries causing a bond bubble (exporting inflation). Eventually they are going to want spend their dollars and goods will be going out and money coming in causing huge inflation.

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