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USA to be bankrupt by 2020


daredevil

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The US is in larger financial difficulty than crisis-hit Greece, believes researcher Jørgen Ørstrøm Møller.

 

The US is moving full speed towards a huge debt that will become impossible to repay.

 

The Danish researcher Jørgen Ørstrøm Møller believes that the USA will be bankrupt within the next ten years, saying that the US will have to cut its economic policies by two to three percent of the country's GDP by 2015 just to stabilize its debt. This is considerably more than the 17 euro countries, which should "only" have to cut by 0.9% of their GDP. Even crisis-hit Greece needs to cut by 1.3% of its GDP in order to stabilize its debt by 2015.

 

So far, however, the US has done just the opposite, continuing to lower taxes and raise government spending.

 

US interest payments alone will rise from 8-10% of the national budget today to 20% in 2020. It is impossible to see where all this money will come from, said Ørstrøm Møller at a top-level seminar according to business.dk.

 

States in Crisis

 

He points out that the situation in many states in the US are worse than in euro countries. 48 of 50 states cannot finance their expenses today. In President Barack Obama's home state Illinois, where Chicago is the largest city, the state can only finance 55% of its spending.

 

"California could receive the same junk status as Greece, and 50 to 100 American cities could go bankrupt. But the number of private companies and banks that are also threatened by huge debt and could go bankrupt is also huge," he said.

 

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US won't declare bankruptcy. We don't have to "declare" anything. Everyone knows we are broke anyway. Look at the gold market.

 

We are already printing money (QE 2) just to buy back Treasury Bills (US government bonds), since we do not have the principle on hand to repurchase our bonds when they come due.

 

We borrow money to pay the interest on the money we have already borrowed.

 

We can maintain this indefinitely as long as the Chinese buy our Treasury Bills.

 

The Chinese have to prop us up or their $2.5 Trillion in T-bills they are already holding would be devalued, and they don't want that lol.

 

As long as no one trusts the People's Republic with their life savings, they will be stuck relying on the US and EU. The EU is in bad shape too.

 

As the world's reserve currency, the US government has the global economy by the nads, for now.

 

We have been running a deficit since the 1980s, I remember everyone warning about this when I was a kid and Reagan was borrowing money to build up the military.

 

The US government spending will increase forever. The value of the dollar will continue to fall, even though we are having deflation due to unemployment and the $60 trillion in capital that evaporated in 2008.

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A lot of people like to compare the situation between the US and China to the Mutually Assured Destruction situation of the US and USSR in the Cold War. The US has a big red button (hypothetically), and in big bold letters it says "DEVALUE YOUR CURRENCY. PUT UP TARIFFS.".

 

If the US pushes this button, China loses trillions. And in this scenario, China also has a big red button, and it says "STOP BUYING T-BILLS". If China pushes this button, the US collapses.

 

It's a simplistic depiction and it appeals to people, but it is not very accurate. It's not like nuclear war, where it's all-or-nothing and whoever fires first gets the drop on the other guy. It is far more subtle and manageable.

 

Think of these two buttons as dials instead, with different settings that each country can choose. So, if China turns their dial, by decreasing the amount of T-bills they buy, the US increases the money supply ("quantitative easing") to make up the shortfall. This amounts to the US devaluing the currency slightly. If the US can't borrow enough money, they just print enough. This amounts to the US turning their dial, and slightly devaluing the currency through increasing the money supply.

 

In short, both countries are stuck. One dial gets turned and the other gets turned. It's like marriage.

 

In a way, it is the ultimate triumph of globalism that the US and China are so interconnected that anything they do to each other would harm their own interests. If we had a situation like this in the 1930s we would not have had World War II. Instead everybody closed their borders and shut off free trade and then the militaries took over in every country.

 

For now, the bankers rule the world, and they all owe each other money, or have massive investments they want to protect.

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