Debt and Platinum

A couple of days ago, the debt widget above clocked over $131,000 in national (US gvernment treasury debt) outstanding per taxpayer. Since installing this widget here at my blog (June 2011), it first went from under $119,000 to $131,000.

Feeling $12,000 RICHER, to pay your fair share, Mr. and Mrs. Taxpayer?

Me either.

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Platinum has been on a tear the past couple of days. Up about $70 per ounce.  The most likely explanation that I can offer is recent violence (police killing miners) at a platinum mine in South Africa.

Debt, Gold and Miami!

I note today that the Debt Widget above shows us that we are about to clock over $130,000 per TAXPAYER by the time many of you read this.  Soon after I started my blog in May, 2011, I took note that the widget turned over $119,000.  So in the 14 or so months since I noted the widget reaching $119,000 that debt per taxpayer has grown $11,000 more...

So how many here are ready, willing and able to cough up $11,000 MORE to pay "our fair share"?  Not me and not most of you.

I once again note that the above widget throws off a slightly different number than other sources.  But, so what?  In a sense, it is all imaginary...  The debt will NEVER be paid off, how can it be?  It will not be paid off.  It will continue to grow, and at some point it will be defaulted on, by inflation or outright default.

And if Treasury rates go up, the interest burden upon us will just get that much worse.  Yet 10-year Treasuries hover around 1.50%...  Weird.., hey, you tell me!

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Gold is moving up today, creeping up to nearly $1600.

I think that physical gold at $1600 is still way underpriced, I ate my own dogfood just yesterday by buying a little more.  When will I sell it?  Never.  It will be given away.

I read here and there that China continues to import lots of gold.  China is already the Number One producer of gold, yet they import more.  China now has about 1040 tonnes (official gold holdings, I printed out the chart from a Zero Hedge article yesterday), but many think they have more that they quietly buy...

Apparently LOTS of physical gold is moving from London to Hong Kong (and then to China).

FOFOA has a new article out: fofoa.blogspot.com.  He discusses why "paper gold" functions differently from physical gold as well as "paper corn" and other commodities.  FOFOA's previous piece is his concise interview with the newspaper journalist from India, and highly recommend that article as well.  FOFOA may be more popular in INDIA than here in the USA!

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Since moving here to Miami some 11 years ago, I have picked up some statistics on "The Magic City" that some of you may enjoy!  Hey, we're Number One!  Among major US cities, we are number one in (I am unable to cite sources, heard them on the radio over the years):

-- worst driving in the country!
-- worst road rage!
-- poorest city in the USA (nudging out San Antonio some 3 years ago)
-- stupidest city (lowest educational attainment)
-- VAINEST city (guys working out, women having "work" done on them)
-- and now..., the SEXIEST city (177 times per year, 73% sexually satisfied)

Update!  One of my "key readers" advised me that Miami is No. 1 in yet another way:

#1 in cannibal zombies too! 

http://www.ebaumsworld.com/video/watch/82617839/

/Update

"We're Number One!"


Miami is "The Magic City"!  Hey, I believe it, because it ALL happens here!

Two Short News Items -- Widgets and Molycorp

I often like to look at the US Debt Widget above.  If you look now, you can see that we have passed $126,000 of national debt per taxpayer.  Just a few weeks ago, we passed $125,000.  When I started this blog (May, 2011) I first wrote when our debt per taxpayer was $119,000.

Any of you taxpayers feeling like you can pay $7000 more?  Not me.

I rarely discuss short term movements in the price of gold and the other precious metals. But, since I have mentioned one widget, I would ask that you all glance at the PM price trackers above.  As of now (11:00 AM ET), the prices are all spiking somewhat.  As of now, I do not know why, but I'll look into it.  I think more about the long-term value of gold rather than the day-to-day movements.  But, it is fun to look at big moves too.  And (so far), that's a $30 bounce off its low around 9:30 AM.


EDIT:


Man those guys at Zero Hedge are very much on the ball re gold's spike (about GREECE, should have guessed, I post the link, and now will go read it):


http://www.zerohedge.com/news/gold-celebrates-formal-greek-cac-activation-40-intraday-move-higher


***


I read last night about rare-earth miner Molycorp's acquisition of Neo Materials, a Canadian manufacturer of alloys and other materials that use rare earth metals.  Neo Materials makes powders of Boron-Iron-Neodymium for example, this is used in permanent magnets.  Neo (and soon Molycorp) sells to Toyota and many other customers.  Molycorp (ticker: MCP) now is closer to its long stated goal of becoming a mine-to-magnet producer (a vertically integrated company).


This is a good thing, they are more in control of their business.  I wrote a short piece about Molycorp's new construction at its mine and processing facilities earlier, with a nice overhead video (with music) over its facilities there at Mountain Pass, California:


http://robertmixblog.blogspot.com/2012/01/aerial-video-of-molycorps-new.html

Debt And High Frequency Trading -- Two Bad Things!

^---  We have reached a new milestone in our National Debt!  Each taxpayer now owes $125,000 to cover it!

"Thought Experiment" time again.  Perhaps your family might be like mine.  My wife and I have one child, she is now out on her own and working.  In our case, there are two taxpayers in our family.  Two taxpayers who, theoretically, owe a cool quarter of a million dollars JUST to pay off our share of the National Debt!


I don't know about you, but our family doesn't have $250,000 just lying around to pay "our share" of this stinking debt!  And if presented the bill, well we will not pay...


Spending MUST be cut!  Will it?  Hmm...  Will spending be cut?  NONE of the front-runners for next POTUS give me ANY hope of that.  Spend and tax and borrow our way into oblivion.  How will this end?  Very badly is how.  My guess is they will inflate it away.  If that happens, inflation will hurt savers.  They could also default.  That would hurt anyone holding Treasuries, that would include pension funds...

UPDATE

Check out the video of painter Jon McNaughton.  He is the guy who also did the other (famous now, and second link):

http://youtu.be/oRxMQhn0WAg

http://www.youtube.com/watch?v=4KGlBHyVeYU&feature=youtu.be


*****


I got the below fascinating link from Mish's blog (globaleconomicanalysis.blogspot.com):


http://www.nanex.net/aqck/2804.HTML

This link visually chronicles "High Frequency Trading" (HFT) from 2007 - 2012.  The video starts out slow...  But keep watching, the robots come in BIG in 2008 and go crazy in 2010!

I believe that HFT now accounts for over half the trading on the stock exchanges now.  Goldman Sachs and others, all slaving away "doing God's work."  It still staggers me that Lloyd Blankfein (head honcho at Goldman) said that!

Mish commented that SOMEONE must be making LOTS of money with so much HFT going on!

Hardly anyone I know is buying and selling stocks now, except in very small amounts.  Why?  Because we ALL KNOW that the market is rigged!  Maybe it always has been (probably), but as they say now: "They don't even bother to hide it any more."

*****

So, what's a saver supposed to do to stay safe?  Here are two for you:

1) Take a look at today's price movement in gold.

2) FOFOA gives us some ideas on what will happen "after the reset": fofoa.blogspot.com.  His piece is excellent.......

Exponential Growth

Most of you already know most of what I will write and illustrate below.  Exponential growth of our money supply (roughly inflation) and of our US national debt will be the two examples of how exponential growth of these two is leading us into great financial peril.

In looking at the decline of the dollar (inflation) I use as a starting point 1913, the year the Federal Reserve was founded and a popular place for many in showing how the purchasing power of $1.00 in 1913 has fallen to about $0.03 today...  That is, 3 cents then is now what a 2012 dollar is now worth.  Because so many of you have seen those graphs and/or are familiar with this concept, I will follow that template.

All my graphs and comments below are not the exact numbers (which would be disputed anyway), but are close enough to make the lessons clear.

This first graph illustrates what happens in a constant 3% inflation from 1913 - 2012.  3% is close to the average rate of inflation since 1913, but is NOT the correct figure, but it is close enough.  A hammer that cost $1.00 in 1913 would cost over $18.00 today, given that 3% inflation (blue series data points).  The red data points show a 3 cent (not 3%!) fixed increase each year.  I put the "red" data in because that would be what would have been PERCEIVED by a hammer buyer looking at a price change over a year or two.  CLICK on any of the graphs for a better view.

The next chart is the "inverse" of the above and may be more familiar looking.  It shows the value of the dollar falling vs. the 1913 dollar.  Most researchers who have prepared a similar graph to the below usually arrive at a final end point of the 2012 dollar being only worth 3 cents.  In my case here (using a constant 3% inflation), the dollar has fallen in value from 1913 - 2012 to about 4 - 5 cents:

Again, I picked a close to 3% inflation as "about right" for the period 1913 - 2012, so my graph and end result is different than what other researchers have put out there (again, this for educational purposes here).

This next graph extends the first graph out to the year 2032 (twenty years from now).  You may be thinking two things:

1)  20 years, that's a long time.  My response, look how the last 20 years have flown by...
2)  That curve doesn't look so bad.  My response, please look at the vertical scale, a $34 hammer in 2032 vs. $18 now...

The red data points are the same, a three cent increase each year.

The next graph is an extension out to 2062.  Yes, I know that it is unlikely that we will see 3% constant inflation from now until then AND that 2062 is a year for our grandchildren, but it illustrates well what happens in "the out years" (note that the $1.00 1913 hammer is now over $80):

I now turn our attention to the US National Debt, a current figure that is in the Debt Widget above.  Again, this debt widget throws off a number which is different than the approx. $15.2 trillion typically seen elsewhere, but it certainly close enough.  The below graph shows what would happen if we allowed our national debt to grow at 11%, which by some rough-and-ready calculation is what I derive from 2007 until now.  This 11% growth is probably conservative (low) for the interval since 2007, and would be much disputed, but it is at least approximately right and useful enough to illustrate our plight.  Note that our debt would be at over $70 trillion dollars by 2026, a mere 14 years away (a mere 14 years for long-term thinkers anyway!).  Note that I started with 2007 debt at $9.8 trillion, it has grown a little faster up through today than my graph shows (that's why I said recent growth in our debt of 11% is likely conservative = a  low growth rate).

In the next graph I extend the time frame out some more to 2036:

We would have a $200 trillion dollar national debt in 2036.  Obviously that is not going to happen, unless we hyperinflate.  But, it is HARD for politicians to stop spending, so a scenario like the above (11% growth of national debt) is possible even if very unlikely.  Predicting things out to 2036 is really a fool's chore, I just illustrate here what would happen given 11% growth in the debt, even if this scenario will not happen.

Let's play pretend one last time (or have a "Thought Experiment" for finicky adults who do not like to play).  "Let's say" that in a moment of relative panic and seriousness that our politicians in 2017 (after Obama's second term or after Romney's first term) decide to get "really serious" about our debt.  I mean it, really serious!  And, let's say they are SO serious that they decide limit the growth of government debt by 5% per year (as the looming debt growing at 11% is starting to look scary even for politicians...).  They are SO SERIOUS that they get a Constitutional Amendment through limiting growth of the debt to 5% a year!  Wow!  That's pretty serious!  Well, that sounds pretty good, doesn't it?  And 5% is not so much, no?  Just a little bit over our projected economic growth rate.  Hallelujah!  Hallelujah!

Well, let's see:

Mmm.  In studying this one, we see the debt still going up at a 5% rate after 2017.  Look carefully at the "kink" in the graph in the year 2017 (just after the "2015" label).  The curve then grows markedly less steeply than just before in 2014, 2015 and 2016.  But, take another look at 2036 (when a lot of us may still be alive), the debt has grown to over $70 trillion.

*****

All of the above debt figures are just the US National Debt, and do not count "unfunded liabilities" (which are some very large numbers, many trillions MORE than our national debt).  Nor do these debt figures count other debts (states, municipalities, student loans, mortgages, credit card debt, etc., etc.).  And of course this is for the USA alone.

A Record Debt!

^---  The widget above shows us crossing the $124,000 line per taxpayer of federal government debt.  It was not too long ago when I put that widget up when we were at $119,000. (OK, yes, this debt widget shows slightly different numbers than the "Official Debt", but the difference is tiny).  We now owe more than 100% of our GNP!  This is usually the level when "SJGR".  Bad things happen at these (and marching ever higher) levels of debt

Do YOU feel more able to pony $5000 MORE as your "share"?  Are you happy about it?

The answer is: HELL NO!


The psychopaths running our .gov and our financial system have foisted over $5000 more per taxpayer just since Fringe Blogger Bearing started his blog!

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OK, let me put away the emotion for a moment.  Let us explore what is possible to do in order to resolve it.  There are three ways that could be done to bring down our debt:

1)  Cut spending and/or raise taxes to put us into a surplus, that money would then be used to pay down the debt.  But, we already know how likely that is, in one of my probability classes I learned what zero probability was.  There is a 0% probability that this will happen.  They may raise taxes, but they will NEVER cut spending, not under the R Team (Ron Paul now has no chance of winning the nomination) and nor (especially) the D Team.

2)  Formal default of our debt is another way.  Our Treasury debt (the $124,000 per taxpayer) is held both US investors (individuals, banks, insurance companies, etc.) as well as foreign (China and Japan for example).  In the past, Reinhart & Rogoff (This Time Is Different) have shown us that defaulting on either (or both) the local and domestic debts has happened many times.  Two variations of this is partial default ("haircuts") and debt re-scheduling (putting the debt off further into the future).

3)  Defaulting via inflation, in which our Treasury and the Fed could just print the money, and so the value of the US dollar would decline in real terms, and the debt would then be easier to pay off in more abundant dollars that are worth less then before.  This is tricky to do though.  There are BIG losers in inflation, and if they do it wrong, BIGGER LOSERS in hyperinflation.  History provides many examples of this kind of default as well.

To my knowledge, the above three ways of paying down the debt (or in combination) are the ONLY ways of doing it!  How are we going to do that?  NO ONE (of importance) is seriously talking about this.  Lending more evidence that we are run by a psychopathic system that is completely irresponsible, out of control and led by people of very low quality...

This will not end well.  Most of you already know that.

When the widget shows us $125,000 per taxpayer, in some 5 - 6 weeks from now, although it does seem to be happening a little faster now (that would be known as "exponential growth", a topic I will write about soon), I will re-visit this whole sham of our national debt.

And Europe, on the whole, is probably a little further down this awful road than we are.

And, of course, I have not even addressed the other debts (debts incurred by states like California, credit card debt, onerous student loan debt and so on and so on) that are crippling our Middle Class, our financial system and our entire way of life.

Scary!

ZH's own "Rocky Racoon" sent along this scary looking grphic:

Onward, Debt!

^--- What, with all the fun with MF Global and our pal Jon Corzine, not to mention the Euro-follies, you think that our debt has not grown?

$122,000 + / taxpayer.  When I first put up the widget (June I believe) I chronicled the debt crossing $119,000.  Hey, feeling $3000 richer anyone?

$121,000 / Taxpayer And Counting

^--- Check out the widget above, we just clocked over $121,000 per taxpayer. When I first put the Debt Clock Widget, it showed debt per taxpayer at $119,000. $2000 more in a pretty short time.

Who has $121,000 to pay the above? 1% or 2% or 3% of Americans? How do we pay this down?

By inflating it away is how.

Debt. Gold vs. Platinum. Banks sued.

^---  Note our Federal debt is over $120,000 / taxpayer (yes I know that this debt widget may not be the most accurate, but it is close enough).  $120,000, who has that?  Very few.  How do we resolve that?  Inflate it away always seems to be the easiest solution.

Which brings up precious metals.  Gold was up an impressive $50 + today.  Gold is now priced slightly higher than platinum.  That is historically rare (since Pt became seen as precious anyway).  Is this a sign that freegold may be coming?

I once asked FOFOA that by email (disclosure: I contribute), how quickly we could see freegold, what signs to look for.  He replied that it could happen at any time, soon or in the future.  I infer from him that it would most likely be a Black Swan event that would do it, something unexpected.  But, maybe just Chavez wanting his 99 tonnes of gold might do it.

Finally worth pondering this weekend is the fact that our government is suing a bunch of banks for doing whatever to Fannie and Freddie.  What a farce.  We bail them out, now we sue them.  We the taxpayers will pay again...  Some of the alarmists at ZH are saying the time has come to pull all money from B of A (and maybe the others).  I will settle for $500 / day at the ATM...

What a lousy week.  At least gold has helped me and many of you.  Imagine the hurt coming to those who do not have any...

Closing in on $120,000 of Debt / Taxpayer. Gold.

^---  Scary number just above!  I think I will keep this widget.  How many of us could pay the $120,000?  If .gov would let me make a One Time Payment and relieve me of further taxation (at least Income Tax), I would take it...  THAT will never happen.

Gold seems to be hanging in rather well, up again today even when the US$ was up as well.  See T. Ferguson's site for news on what moved gold today.

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FOFOA has a new article up at his blog.  There is about a new entrant in the buy gold and have it stored for you (allocated) business that appears to have a better business model than the current companies in that space.  FOFOA solicits comments!  My comment is that I prefer my gold right here next to me.

But, this new company is of interest because it is a little closer to being a better custodian of your gold.  But, you still have to trust them.  Check it out for yourselves!

fofoa.blogspot.com

Downgraded! Let's See What Happens Next!

^---- Well one thing happening is that gold creeps close to $1700.  Maybe by the time you read this, we will have crossed over.  While this MAY be good for me, it is NOT a good indicator that our country's trajectory is in the right direction...

Your congenial host can only presume that gold will go up, up and away until our country gets its act together re spending.  Each of you is capable of checking current financial info as I am (and most of you will read this after markets have moved for hours) so I will not try to update you re specific markets.

The MSM (CNBS) is saying, yeah, we all saw this coming, blah, blah, blah.  What they are NOT saying is what we have to do (for real anyway) to bring our country back: cut spending.  We all know it.  Maybe taxes do have to go up, but the real problem is SPENDING!


This whole thing feels so Lehman-esque, so September 2008, but with the kicker of bad sovereign debt (Europe, we can "just" inflate ours away...).   I hope that I am wrong.  I really hope that things work out OK for us, but they may not.

History shows that sometimes "SJGR", maybe we are there.  I'll see you on the other side friends.

$1626 And $14 Trillion Plus And a New FOFOA Article

I have been following with dismay that the Tea Party Republicans were not able to stop what looks like will result in a BAD DEAL for the American people re extending the Debt Ceiling and not making any spending cuts.  I am unable to comment on the machinations in Washington, but I doubt that many of us are going to like what we see perhaps on Monday

There is a nice image three articles down on what $15 trillion in $100 bills looks like.

The debt widget above shows we are soon to crack the debt per taxpayer to $119,000.

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So, gold continues up a bit, to $1626 now.

As you all know, I do not see an easy way out of our mess.  The main question is how the pain will come down on us, and who will suffer the most.

I would also like to know Cui bene (Who benefits)...

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FOFOA has a new article up at his blog:

fofoa.blogspot.com

News So Popping Fast and Furious Now

that I will have to deal with it very soon.

I am wondering if Boehner's failure to pass HIS bill might be a GOOD thing.

Tricky and scary times ahead.  Your congenial host will try to keep on top of things, FWIW.

GOLD still looks good in this kind of really uncertain environment.  Do not worry if Au comes down in price over the next few days or weeks...  They cannot print more of gold.

Even buying bearings for Peru looks better than leaving US$ hostage to the vagaries of DC politicians and NYC banksters...  My in-laws said that Obama (excuse me, Ollanta) Humala said nothing scary today as new President of Peru.  Well, we will see re that...

What Happens If We Default?

Before you read any further, please take another look at the Debt Widget above.  Over $47,500 owed per citizen...  Uhh.  Uhh.  That should scare us...

My best guess is that we will get some kind of sleazy deal on the US Debt Ceiling Extension that will likely involve fake spending cuts, some stealth tax hikes and letting .gov merrily go about "spending as normal."

If we get a BAD deal here (lots of taxes, no spending cuts, another kick o' the can down the road, etc.), then I would hereby declare to the world:

We now have the Biggest, Baddest, Slimiest, Sleaziest, Most Criminal Deal in World History!!!

I really hope that we get a GOOD deal from the negotiations between the Rs and Ds and Obama.

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But, the issue that I would like to explore with you is:

What happens if they fail to reach a deal, and we "default" in one or more ways?

Do we default on Treasury debt payments (with very bad consequences)?  Do we cut spending as Obama sees fit (ie, selective cuts at his own discretion)?  Will Obama find a (likely unconstitutional, but so what?) executive way to go beyond or extend the Debt Ceiling?

What will happen in the financial markets?  To gold?