Why a currency crisis is inevitable? When U.S. debt growth started to outpace our economic growth, that's when the problem crossed an invisible line into a coming crisis, however, when U.S. debt growth started to be funded by the Federal Reserve creating currency, that's when the problem crossed the point of no return. So, now the FED is in a situation where they are damned if they do and damned if they don't. You see private GDP hasn't risen in 14 years, GDP has been rising because of two factors, government spending and government manipulation. Obviously, everyone sees the problem with the government spending, especially when it comes from borrowed money. Remember, when the government borrows money, that money is not going into the private sector and when government spends money, it is creating unsustainable demand.
Now when it comes to the manipulation of the numbers, it's widespread. Hedonics, a low inflation application, and other government tricks have made our GDP number pretty much worthless. One of the big frauds was just discussed on 60 minutes last week, they discussed all of the money entering the economy from people not paying their mortgages. Billions and billions of dollars are entering the economy boosting GDP from people defaulting, yet it gets worse. The government in order to help GDP, creates a fake number to include into our GDP an application that includes imaginary income as if homeowners were paying themselves rent, so not only do these mystical rent payments enter our GDP number, but so does all this money from strategic defaults and honest defaults. So, when the government, especially the White House which is in re-election mode, comes out to celebrate a positive GDP, it's really a complete fraud, nothing more than window dressing. If you were to get rid of the window dressing, fraudclosures, hedonics, and an understated inflation application, you would see that our economy has been in a real downturn since the year 2000. Yes 2000, not 2007, and it continues because it never ended in 2009 as reported by the media.
You see by having artificially low interest rates and government backed mortgage lenders, the housing bubble made it look as if we actually had a growing economy when in reality almost all economic growth was credit driven. Especially towards the end of the housing bubble, we had waitresses making $1,200 a month buying houses in California. Now this keeps construction workers, realtors, loan officers, and all types of people working. The more money that was borrowed, the more money that entered the economy which spilled over into every industry. Remember, if a realtor is making more money, then they are spending and spreading that wealth all over the place, where they eat, shop, and when they make deposits at their local fractional reserve bank. To make matters worse, millions chose careers off of this fatality flawed economic boom in the first half of the last decade, just as many are choosing careers off of new economic imbalances today (courtesy of our government). So, not only do we now have record long term unemployment, we have jobs being created that are dependent on the government running trillion dollar deficits. As you can see, our economy is running full steam ahead into a brick wall.
Now, as far as our government cutting expenses, it is very unlikely. As of right now, a government shutdown could very well happen, of course in the U.S. that means we continue to spend, even a government shutdown isn't what it sounds like. The $40 billion draconian cuts that are being discussed is barely a drop in the bucket, $40 billion is 1.05% of the projected 2011 budget, it is 0.28% of the official national debt, and when looking at how much new debt we are going to add to our official national debt in 2011, $40 billion is only 3.3% of the 2011 projected annual deficit. In order to be taken seriously, we need a 1 trillion dollar cut in spending, instead $40 billion is being debated as if it will be the end of the world. Remember, it is THIS decade that our spending will accelerate as baby boomers enter the entitlement programs, THIS decade according to a leaked cable from the Saudi Embassy that Saudi Arabia will peak in oil production (2012), and it is THIS decade that China will fully and completely internationalize the Yuan. This decade we will see tectonic shifts and systemic changes in our global economy. Now the old saying is that the rich get richer and the poor get poorer, in our opinion this is true. So with this knowledge, we would say it is pretty important to make sure your not poor going into these massive changes this decade.
What you could see in the United States of America this Decade
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