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Subject: Jessica a PS


Author:
Allen Currie
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Date Posted: 14:00:19 11/16/12 Fri


I just noticed I have not really answered your question, only through implication.

I haven’t really had time to work the numbers for a few years, but I certainly did not pay any attention to the US elections. Romney can thank his lucky stars he lost. History will certainly not treat Obama kindly, although mostly it is not his fault. In fact spending, as a percentage, has increased less under Obama than any other president since Regan. It is, in my mind, highly likely that the US will go down on his watch.

Two things make it certain for me that the trend I saw when I last worked the numbers, is reality.

1) The hoo-haw when the debt ceiling was last under discussion proves conclusively that there is no turning back. It was stated again and again by officials that “if the debt ceiling is not raised, the US will default.” If the US cannot service its debt at a lower level, how can raising the debt ceiling correct that situation. (sorry, I can`t figure out how to ``shift`` my puter back to give me a question mark) The US debt is now a Ponzi scheme requiring an ever increasing number of suckers to stay afloat. The magic of compound interest has caught up with the US. I don`t know if this is now true or yet to come shortly, but if the US were to stop ALL social programs AND military spending, and devote the entire resulting revenue to the debt, the debt would continue to grow. (even at todays low interest rates)`Think what would happen if the US were to go into recession and revenue were to fall. Or if interest rates were to go back up. (And no, the government has no tool to CONTROL interest rates in the market except moral suasion or jawboning. Something they are VERY good at. They even have most people convinced they CAN control interest rates. They can`t. The only thing they can control is the rates that they will lend money to the banks at. Normally the markets will efficiently convert that rate to the desired rate. But in abnormal times, like 1929, it did not and does not work.)

2) The world financial system went bankrupt Aug. 17, 2008. Central banks around the world grouped together to give money to the banks, and worse, to change the rules so the banks could both leave these failed assets OFF the books and to legally protect the banks from some of their own stupidity. The mortgage derivatives were blamed, and while certainly they were the trigger, they were only one small part of the estimated one and one half QUADRILLION dollars of risk in the total derivatives market. Total GDP of the US runs in the area of $15 trillion, and a quadrillion is 1000 trillion. Total GDP of the WORLD runs in the area of $50 trillion. Banks are banks in name only and most are not solvent by even the most lax normal rules. Even those who never touched a derivative ever, would be taken down by the zillions of dollars in daily clearings of checks written by customers and the resulting amounts that would be owed by banks who went under because of derivative exposure to those pure souls who had wisely never played with derivatives. We are today seeing the results of the derivative debacle in European banks and the fruitlessness of the attempt by governments to prop up their banking system which was more exposed than most. The US banks are not in much better shape, and then only because they did manage to sell a good deal of that risk to the European banks.

There are other factors and stories, but in my mind it doesn`t really matter who won whichever election, US or China. Mother nature is much more powerful than either, or both together, and it is not worth wasting time thinking about.

Allen

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Re: Jessica a PSJessica14:36:00 12/04/12 Tue


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