An in depth analysis of WHY YOU ARE WRONG

Tuesday, August 04, 2009

Exits Blocked & The Real Pain Begins

Sorry, for not posting- hopefully I'm not needed to shout fire anymore. Peter Schiff has another great update video about what's likely the next leg down.

To recap- We all know about dramatic fall in asset prices, the pain from the debt bubble and the dramatic rise in unemployment. But it really looks like the real pain is just getting started.

The near total collapse of the private economy has been offset so far by a dramatic increase in federal spending that we only thought we could afford. The initial Lehman shock caused a massive pull back from almost every asset class except super duper safe-- US government debt which allowed team Obama to cheaply- if temporarily push out trillions in new bonds most of which are short term notes.

Meanwhile our real ability to pay off this debt has gotten much worse.

"The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.(or more)

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever."

As foreign economies seem to be leading the recovery, the conditions which made finacing the U.S debt so easy are going into reverse- exposing the country to far higher interest rates-- or galloping inflation.Our rising market has underperformed most and in fact has hardly kept up with the rapid decline in the dollar's value.

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