Elaine Meinel Supkis
Thanks to the earthquakes and tsunami and above all, the nuclear disaster, Japan’s debt ratings are beginning the inevitable downward slide. But the entire country is heading this way due to internal social collapse. The US is seeing a return of depression status due to the government stopping all deficit spending due to no budget being passed. And the Federal Reserve is annoyed that it had to tell us, Bernanke gave Goldman Sachs and JP Morgan as well as a bevy of European banks that pay no taxes here, over a trillion dollars in ZIRP loans which is basically free money.
This free money has flooded financial systems and was used very cynically by the biggest international investment banks to bid up the price of food and fuel which is causing the present global fall into another stretch of this ongoing depression. Years ago, I fingered Japan as the key nation to lead the world into a deflationary cycle fueled by rising FOREX holdings which prevents money from circulating and rising government debts while the rich refuse to pay taxes. The US is following the Japanese model as far as debt is concerned: Fitch Puts Japan Debt Rating On A Negative Outlook – WSJ.com
“Japan’s gross government debt reached 210% of GDP by end-2010, by far the highest ratio for any Fitch-rated sovereign,” Fitch said in its release from London announcing the action.
But it added that “Japan is less of an outlier against other high-grade sovereigns on net debt measures, partly because the sovereign holds the world’s second-biggest FX reserves stockpile of over $1 trillion (end-2010).” It said this justified the one-notch higher AA it puts on Japan’s foreign currency rating.
Fitch said that the reconstruction spending after the March 11 earthquake and tsunami were not the primary drivers of its ratings action. It said that the extra spending required “is not in itself material for the ratings.” But it said that the still-unknown cost of cleaning up the stricken Fukushima Daiichi nuclear power plant and ongoing problems in finding alternate sources of power could force a downward revision in the 2011 growth forecast, currently at 0.5%.
.If it was 210% of GDP last fall, it is probably going to be at 250% of GDP this coming fall. It is ironic that the credit rating for Japan is kept artificially high due to a high FOREX holding and holding US debts. Of course, this is the entire problem and is why the US is entangled fatally in Japan’s nets and if Japan collapses, the US will collapse, too. The US is still Japan’s most profitable export market. The US pays in dollars, not yen, and this is also deliberate. It allows the US to let Japan enjoy a 40 year trade advantage with no US competition intruding into domestic Japan.
If Japan lets even one FOREX US dollar to escape from this Bank of Japan tomb in Tokyo, the entire economic system in Japan will collapse. Even hinting of dropping these dollars will doom Japan to economic collapse. IT IS A TRAP. The problem is, these dollars that support infinite Japanese government debt will have to recirculate eventually and the longer this takes, the more fatal the effects when it happens.
It was a catastrophe when Japan held $500 billion and is now a total catastrophe if Japan holds more than a trillion dollars. China holds a lot, too, even more so than Japan, but unlike Japan, China’s domestic economy is surging, not collapsing. A huge difference. If Japan has to use this FOREX money pile to shore up its debts, this would cause dollars to begin circulating and if that happens, the value of the dollar will collapse further and all other holders of dollars would disgorge their own FOREX holdings and $3-4 trillion will suddenly appear in world markets and the price of oil in dollars will shoot upwards to $1,000 a barrel in less than a few months or even weeks.
All of these gigantic FOREX holdings are new. We never had these before in any time on this planet. In the past, all global trade was valued in terms of gold holdings. This has ended though gold is still used as collateral just as other things are used as collateral (such as land, for example). The entire US public infrastructure is used as collateral for US national debt sold to foreign powers, for example. We borrow money from foreigners and they, in turn, must be paid back or we have to go to war against them.
One reason Hitler had to go to war with England and France was very simple: Germany owed both war reparations and also owed the US for debt money as we gave Germany loans to pay back England and France. Hitler tossed these out and this led directly to Germany going to war. It didn’t save Germany, this destroyed Germany. When Germany defaulted on loans, Germany had to loot its own Jewish population to get enough gold to buy, say, oil, and other necessary imports. This fueled the Holocaust, by the way. Looting to buy goods is a bad idea.
To any deranged people who imagine that the US can default on international debts and then use our military to prevent foreign powers from collecting this debt should review this history carefully. It is a bad thing to do and nearly impossible to do (if we can’t import oil, our war machine falls apart, if we ration oil only for war, our society collapses internally). The creditor power, the US, which was the creditor nation from 1914-1963, won WWII due to economic power as well as moral uprightness.
Debtor nations that use violence to get away with not paying up go down in flames since this is wrong, not right. Might may make right but only if everyone is very weak. China is no longer very weak and soon, not weak at all. Ergo: it is not a good idea to entertain not paying debts owed to China. We can skip out on paying back Japan but this ends our ‘alliance’ with Japan and Japan will be forced into bankruptcy and then, bailed out by creditor nations like China.
The housing bubble was very big so the housing collapse is equally big: Pending Sales of U.S. Existing Homes Drop 12% as Foreclosures Hurt Values. No bubble bursting ever ends swiftly or nicely. They all end up ugly messes which is why it is so important to identify a bubble and stop it by raising the reserve ratios and interest rates charged by the central banks.
In the midst of the global financial crisis in 2008, the Federal Reserve lent Goldman Sachs, Credit Suisse and Royal Bank of Scotland at least $30 billion each at interest rates as low as 0.01 percent with no public disclosure of the details, Bloomberg News reported on Thursday.
.This news is causing Bernake to wonder what the rage is all about. He basically secretly bailed out the very same PRIVATE international bankers, fellow Bilderberg gangsters, who needed easy credit and oodles of cash to cover bets and bad paper deals they made during a financial bubble they, themselves, created based on earlier easy Federal Reserve credit.
This cheap credit was possible due to several factors: the destruction of US jobs via free trade whereby wages collapsed and industries were removed. This, in turn, killed tax collection causing rising government debt which was made ten times worse due to GOP tax cuts, and fake inflation statistics due to cutting out medicine, food and fuel from inflation statistics. So, even as inflation surged to over 5% a year, the Fed pretended it was around 1% a year and the differential between the real stats and the cheap loans was gigantic and has only gotten worse, not better, in the last 3 years as Goldman Sachs and other investment gnomes profit from flooding commodity markets with this cheap money while this causes huge inflation which is totally hidden from the Fed’s bottom line statistics.
It took a global depression to cause our massive trade deficit to shrink a tad. Now, it is resuming its relentless drop into the dark pit of bankruptcy. This graph, too, should always be as close to $0 as possible. Instead, it is a nightmare of losses. Now that oil is costing us more and more, we can’t crawl out of the red ink hole at all. All we do is take on more debt and print more dollars and hope everyone stuffs these into FOREX holdings. Only Saudi Arabia isn’t doing this. The King has to spend lots of money to stay in power so the dollar buys less and less oil
.YIKES! This is money we pay in the form of taxes to all other trade partners who are sucking out profits from America. This is the debt payments which mostly are cheap loans today but will be very expensive in the future, trust me on this one. This definitely should never, ever be above $0. Instead, it is now around $50 bill in interest payments every year. Good lord. No country can endure this for long and this is an inverted hockey stick graph from hell.
. And creditor nation laughs all the way to the bank: China Tops India as Asian Country Most Likely to Maintain Economic Growth.
The Chinese are realists. India, to please the populace, has had fake fuel costs so India May Raise Diesel Rates to Cut $44 Billion Loss. This is running in the red, big time, for India! Which is a politically unstable country seething with class and ethnic tensions. Overdue for a real revolution. . The US is also seething with tension. The Supreme Court, as I fully expected, said that Arizona’s laws about hiring illegal aliens is Constitutional. As I keep pointing out, the left shot itself in the foot, big time, when it sided with illegal aliens against citizens who are losing jobs. This was a bad thing and nearly killed the left which is now reviving due to the GOP wanting to kill everyone by killing all social programs. . The US has a government which is supposed to protect us, not Goldman Sachs and Deutsche Bank or the Japanese government or heaven help us, violent Israeli Jews. It exists to bring harmony to this nation and to protect us from aliens. This is the function of a nation! The red ink graphs above shows clearly, this isn’t happening. And must be fixed or else. The ‘or else’ is, the US falls apart as Americans attack each other and try to steal from each other. Meanwhile, this country hopes China will fall apart. How insane is this? China is a creditor nation. It won’t fall apart. It is SOLVENT.
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