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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
April 9, 2009
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The Real US Bottom Line:

This week, the US Congressional Budget Office (CBO) projected that the US budget deficit will balloon to $US 1.8 TRILLION or 13.1 per cent of GDP this year. The Obama budget is $US 3.55 TRILLION. That means that more than half (50.7 percent) of the budget will be borrowed.

The Global Bottom Line:

All of the rest of the world sees this bottom line clearly. If the US budget were to be funded solely out of incoming tax revenues and therefore brought into balance, about $US 1.8 TRILLION in artificial "stimulus" would be withdrawn. The US economic and financial house of cards would instantly cave in. Were the US budget to be honestly funded by US taxes actually paid, then US spending would instantly be cut in half ( by $US 1.8 TRILLION). That would be like taking the US economy out and shooting it.

The Obama administration is in a position where it cannot raise taxes and cannot cut spending. It can only borrow, Borrow and BORROW and spend the borrowed money to stave off a debacle.

The rest of the world now knows this. They are no longer prepared to go along and to pay the costs.

Full Scale US Stage Three Deflation:

In earlier issues, The Privateer has fully analysed the three stages of deflation which take place when any credit money system reaches its limits to debts and starts to implode. Stage three is where the economy falls out from under a government, drastically contracting the inflow of taxes while all forms of government social services see their costs explode because of increased unemployment. That causes the government's budget deficit to explode. And that is what faces the Obama administration - NOW!

To pile a further "stimulative" budget deficit on top of a stage three deflation is the height of fiscal insanity. It will accelerate the pace towards a situation where NOBODY either wants to or dares lend more money to the government because the accumulated debts are so high that they cannot be repaid. Once that is recognised, any ability of the Treasury to borrow caves in along with its global credit rating. A mad scramble ensues as current holders of the government's debt paper sell it off for what they can get.

The Dethroning Of The US Dollar:

The Obama administration is not at this point yet, but it is aiming straight at it. The Fed knows this, hence its March 18 decision to publicly start to monetise Treasury debt. A global buyers' strike of Treasury debt would expose the Fed as the "buyer of last resort" and lead inexorably to a global crash of the US Dollar. That would lead to the total financial and monetary bankruptcy of the US. Ominously, a worldwide debate has begun even before the G-20 meets in London about the viability of the US Dollar as the world's main reserve currency. That debate will not end while the US Dollar maintains that role…..


By its own 0.00 to 0.25 percent official interest rate policy, the Fed has boxed the US Treasury into a corner. From here on, US Treasury yields have only one way to go - UP! That means that all other holders of US Treasury bonds, bills, notes, etc. are staring at assured losses on their investments in US government debt when US yields climb. When yields climb, the principal value of bonds always falls.

Here, one could ask a kind of Three Stooges question: "Why do we have our money in US Treasuries?" The approved answer is: "For safety." "But how can our money be 'safe' there? When US yields climb we can only lose money!" At that point, any further conversation turns into total gibberish. The US Fed - The Hidden Enemy Of The US Treasury:

The US Fed, in its corner, can maintain these non-interest 0.00-0.25 percent official interest rates for quite a lengthy period of time. But they can do this only at the real financial and economic cost of allowing Treasury debts to soar ever higher as the US budget deficit widens because of slumping tax revenues combined with even more stimulus - piling US debts owed even higher. When US Treasury yields do climb, the matching climb in higher interest payments will eat tax revenue up from behind at a frightening rate. Here, in plain factual terms, with US Treasury debts already past the $US 11TRILLION mark, a climb of only 1 percent in US official interest rates will raise the US Treasury costs of servicing all past debts by $US 110 Billion. To borrow this additional interest payment will blow US Treasury debts into an exponential climb and that is always the final sign of a full blow-off!

Ó 2009 – The Privateer

(reproduced with permission)


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