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jesusfreakinco (28.95)

Is America Too Big to Fail??? Got gold???

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July 20, 2008 – Comments (4) | RELATED TICKERS: FNMA , FMCC , GLD

IHT article asks this question.  Scary that the question even needs to be asked.

Many that understand long-term economics of this country believe that America's failure is not a matter of IF, but WHEN.  Even those that believe in the long-term prospects of the US believe that it has a significant hurdle to clear in the years to come.

Some believe we are in the middle of the eye of the storm - the financial crisis.  Only months ago it was labeled the sub-prime crisis and will likely soon to be labeled a crisisof confidence over the USD.  After all, isn't this what the Fed was trying to do - to give comfort to the sovereign wealth funds and foreign cental banks that holds hundreds of billions of FRE and FNM bonds that had the implicit guarantee of the US government.  As things continue to unfold, more and more cracks in the dam will be revealed - $1.6 trillion in losses, not $400 billion for the brokers; states and cities filing for bankruptcy; failure of the bond insurers;businesses and individuals filing for bk en masse; spiraling inflation; massive underfunding of PBGC, FDIC, and SIPC, massive deficits caused by ballooning Medicare and Social Security programs, etc...

We are looking at more than just a run on the banks as a possibility, but a run on the confidence in the US to repay its obligations in the long run.  If the USD loses its luster, what currencies will take its place?  Currency values are relative to one another, but they also have perceipton of absolute values associated with them.  Will the EUR hit over 2 to 1?

TDRH says "Those that will be at the top will have long term growth stocks that they are picking now, or have already picked."  I am betting both in CAPS and in real life that gold shares (especially juniors) will benefit the greatest as gold rises to multiples of where it is now.  History has shown this and history will soon repeat itself.

Gold is the ultimate anti-dollar.  It was dissed in the 70s and has lost its perceived value as a currency for the past 30 years or so.  However, over time gold has always been perceived as the ultimate currency, espeically when fiat currencies have shown they cannot be trusted.  

I remember reading a book in a college political science class called "The Rise and Fall of the Great Powers" which chronicles similarities in the fall of great nations thorughout civilization.  The US has held history's place as one of the greatest nations / powers ever to be built.  Indeed, it still has much going for it and if any civilization were ever to pull out of the death-spiral it appears to be in, America could do it.

However, it is scary to see reputable publications questioning whether the US could fail.  It may not be a matter of IF, but WHEN.  Food for thought...

JF 

4 Comments – Post Your Own

#1) On July 20, 2008 at 8:27 PM, IBleedConcrete (39.11) wrote:

"Is America too big to fail?" is the wrong question which is likely to produce nonsensical answers.  The real question is to what extent the US government, its corporations and its citizens are good for their debts (and as we have seen recently, also good for their stated assets.)

The US government has a great deal of room to raise taxes and lower spending so there is almost no doubt in my mind that they can continue pay their debt obligations.  Of course on the other hand many corporations and consumers are in very poor condition.

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#2) On July 20, 2008 at 9:16 PM, lquadland10 (< 20) wrote:

Rome,Japan,China,Soviet Union did. 9 trillion almost 10 trillion national debt. Now don't forget the debt of the gov running in the red. The former comptroller stated the other day we were at the time he left we were 53 trillion in dept. That was in (March???) Estements we will be bankrupt by 2057 If you missed our overtime briefing on
Friday, David Walker resigned from his position as U.S. comptroller general.
“As comptroller general of the United States,” says David Walker, the federal government’s top accountant, “there are real limitations on what I can do and say in connection with key public policy issues, especially issues that irectly relate to GAO’s client -- the Congress.”
Walker left his government post to lead the newly founded Peter G. Peterson foundation. As the head of the Peterson Foundation, Walker will oversee the
billion-dollar endowment of Pete Peterson -- former commerce secretary, the founder of the Blackstone Group and the Concord Coalition and legendary advocate
for government fiscal responsibility. Chief among Walker’s duties at the eterson Foundation will be the funding and advocating of projects that will enhance public awareness of fiscal imbalance, government deficits and nuclear
proliferation.

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#3) On July 20, 2008 at 11:13 PM, jesusfreakinco (28.95) wrote:

Bleed,

Raise taxes - no doubt that will happen, especially in the next four years under the Dems

Reduce spending - not gonna happen.  Our one party system (Repubs have proven themselves to have no more fiscal restraint than Dems) is ruining this country.  The reality is, if you listen to the likes of Walker, Rogers, Schiff, Sinclair, etc entitlements are going to KILL this country.   Even the often hated Pres Bush warned us in his first term (which fell on deaf ears...). 

Quad - Walker is the voice crying in the wilderness.  He is warning us, but no one is listening.  I fear for our country because of the type of information I read from Walker.

Unforntunately, our dependent, sheeple society will wake up to the reality after it is too late and wonder who is to blame.  The Dems will blame the Repubs.  The Repubs will blame the Dems.  And the masses will riot in the streets because they were 'misled' by the politicians and the big oil $.  Yes, we will see anarchy in the US in our lifetimes because of this.  The question is when.  Will it be sooner - caused by failed confidence in our financial system with a run on the banks.  Or, will it be later as the Fed liquidates this mess, skirts major failure, and is somehow after to quell the fears of those holding trillions of dollars in treasuries and FNM/FRE bonds.

As Alstry once said...' time will tell.'

I, for one, am betting big on gold and gold shares which, to me, is the best hedge. I like gold better than oil because of the currency nature of gold.  Gold will become the pre-iminent currency of the world once again in the next several years as the world loses faith in the USD and looks for some accountability from the central banks as to monetary growth (think helicopters...)

My two cents... 

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#4) On July 21, 2008 at 5:33 PM, jesusfreakinco (28.95) wrote:

The global economy is at the point of maximum danger

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/21/ccview121.xml

Another feel good article... 

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