Friday, September 16, 2016

The Biggest Problem:
Massive Government Debt
"The biggest problem confronting the global monetary elite is sovereign debt. There’s too much of it, it’s growing fast and it cannot possibly be paid off in real terms. A default larger than any in history with trillions of dollars in losses for investors is coming sooner rather than later. The only question is what form the default will take. Once the form of the default is ascertained, it’s easy to estimate the winners and losers and the approximate timing. 
There are three ways to repay sovereign debt: default, growth and inflation. Obviously, growth is the best way, but it’s not happening. The U.S. has been stuck with sub-2% growth for the past 10 years. Europe and Japan are even worse. China’s growth has been higher, but much of that is smoke and mirrors because of wasted investment. Default is another way out of debt. That’s the usual path chosen by developing economies such as Argentina and now Venezuela. But for economies that can print money, default is unnecessary. The U.S. can print dollars, the ECB can print euros and the Bank of Japan can print yen. China has a problem because much of its debt is in dollars, which it cannot print. But China has a $3.3 trillion war chest of dollar reserves it can use. .. The third way out of the debt  - just inflate the currency .. Money printing eventually leads to inflation .. You still pay the debt in nominal terms, but the money’s not worth as much. That’s a good deal for the debtors (like the U.S., China, Japan and Europe) and a bad deal for the creditors (which could be you)."
- Jim Rickards*
LINK HERE to the essay

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