DEATH SPIRAL OF DEBT

The world is a complicated place. Those in power want to make things appear complicated so that you will give them a blank check to do whatever they want. They don’t want you to connect the dots. Data about foreign holders of U.S. Treasury bonds came out this morning. It seems foreigners are dumping Treasuries, particularly Russia and China. Foreigners sold $18.2 billion of Treasuries in December. For some perspective, the U.S. issues $110 billion of new Treasuries every month to fund our $1.3 trillion annual deficit. In the last year foreigners only bought $300 billion, leaving $1 trillion to be bought by someone else. Would you buy a 10 Year Treasury bond yielding 2% or a 30 Year Treasury bond yielding 3% when inflation is running at 10%? Of course you wouldn’t. Guess who would? That’s right – Ben Bernanke. The Fed is buying the debt. Not only are they buying the debt, they are giving money to foreign central banks to buy our debt. Does it sound like a giant ponzi scheme?

The article below the charts from Niall Ferguson describes our pathway to becoming Greece. Our hubris blinds us from the fact that we are no different than the PIIGS. Our interest rates will spike at some point. You will not receive advance warning. It will happen over a weekend. Our time is coming. The death spiral of debt will consume everyone.

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