Happy “18th” USA!

Posted | 03/12/2014 / Views | 2641
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Friday was a special day for the world’s biggest (some argue China) economy.  It is now the proud owner of $18,000,000,000,000 (trillion) of debt (it’s actually much much more but let’s use their official figures).  If we look back at history it took the US over 2 centuries to reach its first $1t in 1981, then $2t in 1986 and now this new record of $18t just 18 years later!  In fact they have not reduced it in any successive year since 1957 through ‘vote winning’ spending in excess of receipts and stimulus to prop up an ailing economy.  The other mates at the party are no better.  Japan, China, Euro and others are arguably worse given their smaller economies, in fact parts of Euro had to be bailed out in 2012.  The problem is there is no good way for this to end; and it must end.  To quote Simon Black:

“And the people in charge of the system have backed themselves into a corner where there is no way out other than to default– either on their creditors [ala China, Japan etc] (creating a global financial crisis), the central bank [US Fed] (creating a currency crisis), or on the citizens themselves (creating an epic social crisis).”

When this happens, and it will, you will want to have hard assets of intrinsic value (gold, silver, fine art, good quality agricultural land, etc) as paper assets (shares, futures, ETF’s etc) will do as paper does when a torch is applied.  One last scary fact…

Against that debt of $18t on Friday, the US Treasury Dept had a total of $71.9b in cash.  Context?  That is 0.39% of the debt and less than Apple has….