Deutsche Bank Warns U.S. Drifting Into Debt Crisis (Podcast)
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Summary
- Deutsche Bank warns in a research report that the U.S. is on a path toward a debt crisis.
- Whereas past deficits were mainly based on the business cycle – deficits rose when tax receipts were down – today deficits are reaching new highs despite robust revenue.
- And whereas other counties with huge deficits, such as Japan and China, are simultaneously accumulating foreign assets, the U.S. is accumulating foreign debt.
- Thus, Deutsche Bank questions whether the U.S. economy bears the same lethal combination that has marked emerging market counties going through debt crises.
- Given this unpleasant trajectory, we need clarity as to what precise options we have, and what level of pain they imply.
Deutsche Bank warns in a research report that the U.S. is on a path toward a debt crisis. Whereas past deficits were mainly based on the business cycle – deficits rose when tax receipts were down – today deficits are reaching new highs despite robust revenue. And whereas other counties with huge deficits are simultaneously accumulating foreign assets, the U.S. is accumulating foreign debt. In this brief podcast (2:43), we consider the imperative for clarity as to what options we have, and the level of pain they imply.
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GIL WEINREICH - Author of "The Mentor," a unique parable for financial advisors and those who aspire to become one. I have worked in the FA arena since 1997, and during that time, the New York State Society of CPAs twice awarded its prestigious Excellence in Financial Journalism award to me for a monthly column I wrote on business ethics. Previously, I reported on international news for Voice of America (where I was awarded a newsroom writing award) and prior to that worked as an editorial assistant at U.S. News and World Report. I live with my wife and children amidst the verdant and vibrant hills and dales of Jerusalem.
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Comments (43)
Hardly anybody talks about our $125 trillion in unfunded liabilities! I'm all for the Feds using reasonable deficit spending during recessions. The problem is they never pay down fiscal debt when times are good!
DB is using a recognized concern and amping it up to drive down their costs at the next few treasury auctions. They are insanely well paid to "talk their book", think used car salesmen.
Of course they pick at the US economy. Europeans hate it that the US has suddenly become the high ROIC economy as a result of the new tax law. This will draw incremental investment away from Europe and toward the US. Next step should be for US to follow Europe's lead and implement a Value Added Tax designed to reduce the deficit while at the same time making imported goods more expensive.
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This would make the next collapse of the dollar the fourth one. Insolvency actually is inherent in the system itself a system called fractional reserve banking.
Short term fiat currencies contain the inevitable risk of containing no collateral and their ability to repay becomes more inevitable the longer they last and this one has lasted 103 years the first three didn't make it past the first 5 year Congressional renewal vote.
https://seekingalpha.c...If gold backed total global debt 100 percent, it would be valued at $33,900 per ounce because the total amount of gold exhumed in the history of the world is approximately 183,600 tonnes, or 5.9 billion ounces. If we take that figure and multiply it by the closing price on June 16, $1,181 per ounce, we find that the value of all gold comes within a nugget's throw of $7 trillion.This is an unfathomably large amount, to be sure, yet it pales in comparison to total global debt. The world now sits beneath a mountain of debt worth an astonishing $200 trillion. That's greater than twice the global GDP, which is currently $75 trillion.
If gold backed total global debt 100 percent, it would be valued at $33,900 per ounce. So Gold’s price, upon which the settlement of these debts ultimately relies is vastly understated compared to the debt that held against a fiat currency that contains no gold or any other real money. Including derivatives that would increase the price per ounce by another 6 times that amount because the global derivatives market is another $1.2 quadrillion, almost 90% is owned by the U.S. This figure is greater than the entire world’s G D P, 20 times the G D P to be exact, and should not be taken lightly. Why? Simply because of the fact that it is highly unregulated. It is so unregulated that the Congress has declared it illegal to regulate it.
https://seekingalpha.c...Most of exhumed gold isn't ever traded. It is a safeguard against loss through inflation. Most of the naked gold shorts issued are never transacted and just expire on expiration date. This manipulation does enable the price to continue to be fixed by the government through the federal reserve system, which is not a government agency
This would make the next collapse of the dollar the fourth one. Insolvency actually is inherent in the system itself a system called fractional reserve banking.
Short term fiat currencies contain the inevitable risk of containing no collateral and their ability to repay becomes more inevitable the longer they last and this one has lasted 103 years the first three didn't make it past the first 5 year Congressional renewal vote.
https://seekingalpha.c...If gold backed total global debt 100 percent, it would be valued at $33,900 per ounce because the total amount of gold exhumed in the history of the world is approximately 183,600 tonnes, or 5.9 billion ounces. If we take that figure and multiply it by the closing price on June 16, $1,181 per ounce, we find that the value of all gold comes within a nugget's throw of $7 trillion.This is an unfathomably large amount, to be sure, yet it pales in comparison to total global debt. The world now sits beneath a mountain of debt worth an astonishing $200 trillion. That's greater than twice the global GDP, which is currently $75 trillion.
If gold backed total global debt 100 percent, it would be valued at $33,900 per ounce. So Gold’s price, upon which the settlement of these debts ultimately relies is vastly understated compared to the debt that held against a fiat currency that contains no gold or any other real money. Including derivatives that would increase the price per ounce by another 6 times that amount because the global derivatives market is another $1.2 quadrillion, almost 90% is owned by the U.S. This figure is greater than the entire world’s G D P, 20 times the G D P to be exact, and should not be taken lightly. Why? Simply because of the fact that it is highly unregulated. It is so unregulated that the Congress has declared it illegal to regulate it.
https://seekingalpha.c...Most of exhumed gold isn't ever traded. It is a safeguard against loss through inflation. Most of the naked gold shorts issued are never transacted and just expire on expiration date. This manipulation does enable the price to continue to be fixed by the government through the federal reserve system, which is not a government agency
Sort of ironic.The performance of Deutsche Bank over the past 5 years has been dreadful. Someone should warn the people who run Deutsche Bank that their stock has been tanking for the past 5 years.But I do agree that the national debt in the United States of over 21 trillion is not good. At the rate that it is going up, it will be 42 trillion in 10 years.Just the way cities and states have always been required to balance their budgets, the United States should always have been required to balance its budget. No national debt at all should have been the goal. Zero national debt.An economic catastrophe will occur when the national debt reaches a certain amount. A don't know exactly what that amount is. Maybe 50 trillion.The way that the United States spends money, you would think that the politicians in Washington think that money grows on trees.They were obviously not brought up by my mother who lived through the Great Depression. She used to always tell me never to spend the principal.
The catastrophe could be triggered by interest rates.For example, 6% annually on 21 trillion squeezes the lemon until the pips squeak.
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