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By Dominique de Kevelioc, de Bailleul
Beacon Contributing Writer
With an agreement to cut the fat, bone and life out of the Greek government budget, traders have already moved on to easier prey of the Portuguese market in the week ended April 30. If anyone believes bloated government debt stops in Athens, well, look out, because the debt threat is coming to your hometown like a circus train of John Wayne Gacy clowns. Unless you happen to hold the Loonie, Kiwi, Aussie or any other currency backed by revenue derived from commodities production, Gacy’s clown show assuredly will arrive.
Greece’s 13.6 per cent annual projected budget deficit is of no comparison with the annual deficits forecast for the UK and the U.S. In fact, the U.S. debt situation is so grave, that global financial disruptions already witnessed from the fall of Bear and Lehman will be regarded as the pre-shock to the great financial earthquake, not the on-the-mend tremor now embarrassingly heralded by a disgracefully negligent media.
An honest look at the U.S. debt obligations would reveal a more massive problem than Greece’s comparatively meager budget shortfall. Economist John Williams of shadowstats.com said in a recent interview that U.S. government unfunded liabilities (not included in Obama’s cash-basis $1.6 tri! llion bu dget shortfall projection) add approximately $3 trillion on a G.A.A.P basis to a budget already in huge deficit. That’s more than a $4 trillion deficit for fiscal 2010 alone. And Williams says it gets worse as more baby-boomers retire and interest rates rise.
Greece’s 13.6 per cent is looking pretty good after this eye-popping estimate from Williams. For the first time, Social Security paid out more in entitlements than it received in tax. Raiding the Social Security fund has stopped only due to its insolvency. Williams expects hyperinflation in the U.S. within 24 months.
When the ax finally falls on Uncle Sam’s neck, there won’t be austerity measures imposed on Americans. No sir! The printing presses will rev up for another round of inflation, instead. This time, the bond market could hurl in disgust. Any cash flow from a world looking for a safe yield won’t find one in the U.S. Treasury market. There, the debasement will be especially acute, leaving only commodities to preserve what value remains in the world’s reserve currency and competing currencies such as the Euro, Sterling and Yen. The market, instead, will impose austerity measures on the American people through much higher interest rates and high inflation. In fact, that’s the plan. Inflate.
The only thing worse than the roaming eyes of a neighborhood tramp are the eyes of a bond trader, who nervously looks for a safe haven to sideline his mountain of cash. As soon as he sees a better deal, it’s switch-a-roo. Interest rates will rise in the U.S. along with consumer price inflation, and we’re soon off to the John Williams’ scenario.
The trade this decade will be to buy anything that’s real, like a railroad in the case of Warren Buffet, or gold bullion, in the case of John Paulson and George Soros. Promises, as witnessed in Athens in what is referred humorously as the Greek Tragedy, will eventually make its way to a theater near you in Americ! a. But, I’m afraid the tragedy in Greece will seem quite mild in comparison.
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