Stansberry: Bankruptcy of the US is Now Certain
This article concludes, as did my recent post Spiraling to Bankruptcy.
that the bankruptcy of the United States is now inevitable. Porter
Stansberry approaches the topic from a different angle, using cash
flows and borrowing capacity, to support his conclusion.
Stansberry has a great sense of urgency believing “the odds are very high you’ll be wiped out over the next 12 months.”
Whether he is correct in this prediction, only time will tell. Timing
is impossible to predict with any degree of reasonableness. Bankruptcy
could happen this week or not for many years.
The bankruptcy of the United States is now certain
Tuesday, November 24, 2009
From Porter Stansberry in the S&A Digest:
It’s one of those numbers that’s so unbelievable you have to
actually think about it for a while… Within the next 12 months, the
U.S. Treasury will have to refinance $2 trillion in short-term debt.
And that’s not counting any additional deficit spending, which is
estimated to be around $1.5 trillion. Put the two numbers together.
Then ask yourself, how in the world can the Treasury borrow $3.5
trillion in only one year? That’s an amount equal to nearly 30% of our
entire GDP. And we’re the world’s biggest economy. Where will the money
How did we end up with so much short-term debt? Like most entities
that have far too much debt – whether subprime borrowers, GM, Fannie,
or GE – the U.S. Treasury has tried to minimize its interest burden by
borrowing for short durations and then “rolling over” the loans when
they come due. As they say on Wall Street, “a rolling debt collects no
moss.” What they mean is, as long as you can extend the debt, you have
no problem. Unfortunately, that leads folks to take on ever greater
amounts of debt… at ever shorter durations… at ever lower interest
rates. Sooner or later, the creditors wake up and ask themselves: What
are the chances I will ever actually be repaid? And that’s when the
trouble starts. Interest rates go up dramatically. Funding costs soar.
The party is over. Bankruptcy is next.
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