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Sunday, December 27, 2009

US has abandoned all fiscal discipline

On Sept 6th, 2008, the US government took over Freddie & Fannie, I wrote a blog post titled "Financial Ground Zero", where I marked that event as the potential beginning of the end for the Financial system in America.

I have hoped, and continue to hope that America's Government decides to stop the insanity of trying to expand the US debt to any level, at any cost. The end result if left unchecked is US dollar collapse or interest rates soaring as the US government tries to defend its currency, and its legitimacy as the ruling government.

On December 26th, 2009, the Obama administration has announced the US government will take private investments in the Freddie Mac and Fannie Mae corporations and make the losses in those government institutions part of the public debt. Simultaneously, it also announced a 70 million dollar bonus for 12 executives running these companies over the next two years.

Making private losses part of the US governments budget is outright illegal, only the US Congress has the authority to appropriate funds. But the word legal is no longer defined as what the constitution reads, but what is enforced.

This one act, isn't the end of the US government, but it definitely puts the path ahead straight towards that destination. The US government has now made it crystal clear, that all losses, no matter how much, from banks, mortgage companies, car companies, are the public's responsibility.

This sets the tone in stone, that all large corporations should not fear insolvency, Uncle Sam has a printing press, and will use it.

Oh, to boot, since World War 2, all oil purchases have been made in US dollars, with some small percent as an exception. The four Oil gulf countries (audi Arabia, Kuwait, Bahrain and Qatar) announced their own currency to be created, presumably that the world will need to convert to the gulf currency to buy oil. As if that wasn't enough of a blow to the US dollar, the Central banks of the four Gulf countries will halt their lending operations next week in line with their landmark agreement to launch the world's second major monetary union, a Saudi newspaper reported yesterday.

So lets recap, the US is on a debt binge, passing universal health care, covering all losses from two companies that own 5.5 trillion dollars worth of mortgages and counting, and one of the strengths of the US dollar, being used for oil purchases, is on the verge of evaporating soon. This is ontop of my other Financial Ground Zero moments I have noted since the original Fannie/Freddie takeover.

I'll be posting my 2010 predictions, and at this point, its not going to be a fun read.
Fasten your seat belts, inflation, deflation, currency collapse, or interest rates soaring, something is going to give, and the masses will pay for it.

2 comments:

  1. Sounds about right. Have you seen "Collapse" yet? Very good. Caught it on Comcast movies on demand yesterday.

    It's not going to be good living in this crowded part of the country.

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  2. I havent, I actually try not to watch such things. But I did order the DVD "The Secret of Oz" from Amazon.

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