(snip)"LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009 (1), and that the size of budget deficits preclude any significant new expenditures.
If this public deficit « slip knot » which governments gladly placed around their necks in 2009, refusing to make the financial system pay for mistakes (2) is going to weigh heavily on all public expenditure, it is going to particularly affect the social security systems of the rich countries in always impoverishing the middle classes and the retired, and setting the poorest adrift (3).
At the same time, the general context of the bankruptcy of an increasing number of states and other authorities (regions, provinces, federal states) will entail a double paradoxical event of increasing interest rates and the flight out of currencies towards gold. In the absence of an organised alternative to a weakening US Dollar and in order to find an alternative to the loss in value of treasury bonds (in particular US ones) all central banks will have, in part, to « reconvert to gold », the old enemy of the US Federal Reserve, without being able to state the fact officially. The bet on recovery having been, at this point, totally lost by governments and central banks (4), this Spring 2010 tipping point is thus going to represent the beginning of the huge transfer of 20,000 billion USD of « ghost assets » (5) in the direction of the social security systems of the countries which have accumulated them. "(snip)
(snip)"The ten most vulnerable countries on a debt/GDP ratio (in blue; public debt; in orange: private debt) – Source: Crédit Suisse, 03/2009
Reality quickly fuelled GEAB N°39’s anticipation which indicated that 2010 would be a year noted for three trends, one of which would be state bankruptcy (7): from Dubai to Greece, via more and more worrying reports from the rating agencies on US and British debt, or the draconian Irish budget and the Eurozone suggestions for grappling with public deficits, states’ increasing incapacity to manage their debts is making press headlines."(snip)
(snip)"The Greek [ creditworthiness downgrade - sic ] case is rather the same. Not that there isn’t a crisis in Greek public finances (that is the reality), but the supposed consequences for the Eurozone are overestimated, whereas this crisis indicates increasing tensions surrounding sovereign debt, the Achilles heel of the United States and Great Britain (9).
(snip)"But with a country producing 2.5% of the Eurozone’s GDP (and 1.9% of the EU’s) we are far from a dangerous situation weighing on the single European currency and the Eurozone. By way of example, the California’s default (12% of US GDP) entails far more risks of destablisation of the Dollar and the American economy. Moreover, since the same analysts usually like to make lists of all the Eurozone countries facing up to a serious crisis in their public finances (Spain, Ireland, Portugal, to which we can add France and Germany), for the sake of completeness it should be pointed out that in the United States, besides the fact that the Federal State would be technically bankrupt (11) if the Fed weren’t printing Dollars in unlimited quantities for the purpose of buying, directly or indirectly, Treasury Bonds for an equal value, and besides California (the richest state in the Union teetering on the edge of the abyss for months), there are altogether 48 States out of 50 with growing budget deficits now (12). As summed up by the title of the December 14th edition of Stateline, an American website specialising in the US States and municipalities, said « Nightmare scenarios haunt the States », all the states of the United States are afraid of defaulting on their debt in 2010/2011."(snip)
with massive thanks to Leap2020 ...





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