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Great Depression Online Archive Issue:

The Consequences of Default

Great Depression Online
Long Beach, CA
January 07, 2011

Inside This Issue You Will Discover…

*** Separating the Wheat from the Chaff
*** The Single Cause of Hyperinflation
*** The Consequences of Default
*** And More

Separating the Wheat from the Chaff

What a marvelous time to be alive.  Smart phones keep getting smarter, entertainment keeps getting cheaper, and the government keeps spending money it doesn’t have to bring prosperity to the people.  We stand in awe of it all.

Last Friday, while many were getting warmed up for the New Year, the U.S. Government surpassed an incredible milestone – they managed to run the National Debt up above $14 trillion.  Indeed, it took hard-work, dedication, persistence, and commitment to consume capital at this rapid rate.  What’s more, the rate seems to be accelerating…

Just seven months ago, $13 trillion was breached.  So, in no time whatsoever, the $14.294 statutory debt ceiling set by Congress will be hit.  That’s when we’ll discover the valor of the new Congressional class.

~~~~~~How To Prepare?~~~~~~

The shocking 1990 collapse of the Japanese Market.  The extraordinary U.S. economic boom of the ‘90s and early 2000s.  The devastating global recession that began in 2008.  These impacted everyone’s lives, investments, and fortunes.  The signs of their arrival were visible years and years in advance.  And yet…Almost No One Predicted Them.

The mainstream media didn’t.  The top economists didn’t.  The great financial advisers didn’t.  But One Man Did.

What’s coming Next?  When will it happen?  What should you do to Prepare for it?

Click Here for the Answers 


Overturning universal health care and blocking back door EPA cap-and-trade policies takes little bravado.  Not raising the debt ceiling and risking a U.S. Government default takes real courage.  That decision will separate the Congressional wheat from the chaff.

You can count on quite a spectacle as the debt pile up nears the current limit.  In the meantime, we’ll consider the government’s debt financing mechanism…U.S. Treasuries…

The Single Cause of Hyperinflation

“Investors in U.S. debt around the world are worryingly near a ‘psychological breaking point’ that could force a ‘run on the bank’ against Treasurys,” says Moneynews.

“If that happens, hyperinflation quickly follows and gold will soar much, much higher from its now record-setting levels, argues author and longtime trader Victor Sperandeo in the latest issue of Barron’s.

‘“Unlike normal inflation, which may be attributed to a variety of factors, hyperinflation has a single cause: It occurs when a government cannot borrow money because its debt has risen so much that investors believe they will never be paid back with close to the same purchasing power.’

“Historically, he writes, investors lose confidence in government debt when borrowing hits 40 percent of spending over an extended period of years.  The telltale sign will be non-annualized inflation of 50 percent or more in a single month.”

Are you curious where on the scale of borrowing to percent of spending the U.S. Government weighs in?  If you’re not, we’ll tell you anyhow…

In 2009, 40 percent of the government’s spending was with borrowed money.  Total spending was $3.5 trillion.  Yet actual tax receipts totaled $2.1 trillion.  The other $1.4 trillion – or 40 percent – was made up with debt.

From what we gather the final numbers for 2010 won’t be much better.

The Consequences of Default

So when will the whole debt shebang finally come unglued?

Who knows?  We’d be lying to you if we told you we knew when.

But occasionally someone with inside knowledge says something extraordinarily candid.  Yesterday, that someone was Treasury Secretary Timothy Geitherner.  In a January 6, 2011 letter to Congress, Geithner writes…

“I am writing in response to your request for an estimate by the Treasury Department of when the statutory debt limit will be reached, and for a description of the consequences of default by the United States.

“Never in our history has Congress failed to increase the debt limit when necessary.  Failure to raise the limit would precipitate a default by the United States.  Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.  Even a very short-term or limited default would have catastrophic economic consequences that would last for decades...”


M.N. Gordon
Great Depression Online

P.S.  The U.S. Government’s on the brink of disaster.  It seems things could spin out of orbit at a moment’s notice.  Now, more than ever, you need to know what’s coming next and how to prepare for it.

Find out here

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