Here’s a sobering detail: For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke.
Really, I hate having to deal with this much angst in the marketplace first thing on a Monday. It ruins the joy strong coffee and rude internet humor. Here are the items we’re concerned about (in no particular order):
1. One or more major hedge funds collapsing
2. The Paulson Plan passing in its present form (we’re not keen on a benevolent dictatorship via the Treasury Sec)
3. One or multiple bank failures that precipitate the bankruptcy of the FDIC
4. Commercial real estate experiencing the same level of “haircut” that the residential sector is undergoing.
5. Implosion of the $2.4 trillion consumer credit card industry
6. Implosion of one or more major state pension funds
7. The Paulson Bailout ‘inadvertedly’ allowing a confiscation of the US Treasury bills from the Social Security trust fund to satisfy bailout payments to banks.
8. Draconian measures meted out on individuals as a result of the above scenarios (debt peonage, forced relocations, termination of Social Security, Medicare and other social services)
9. Delaying the reality factor that the full bailout cost will be around $5 trillion or so, which will actually enlarge and prolong the losses upwards of $7 trillion.
10. Other non-productive activities designed to distract the populace from the financial issues (war with Iran, Russia, Cookie Monster, etc. , any other conveniently timed ‘terrorist activities’, or domestic detonation of nukes).
11. Failure to have an election or failure to transition to the newly elected president
12. Massive hyperinflation due to printing several trillion dollars without any corresponding value to back up that money. Or massive inflation from a run to redeem dollars from our foreign creditors before they devalue any further.
13. Massive shortages stemming from halted goods imports from foreign creditors no longer willing to accept devalued dollars (or from pricing shooting skyward from devaluation).
14. Cutoff in funding our debts from our existing creditors.
Yeek. If I go any further it gets all X-Files. Did I miss anything? Let us know.