Home > Current Affairs, Politics - Domestic, The EYE-BALL CommunityZone, The EYE-BALL FMZ - [Financial Markets Zone ], The EYE-BALL GURU, The EYE-BALL PoliticalZone > EYE-BALL Guru on – Soverign DEBT … out of control and soon to be worthless …

EYE-BALL Guru on – Soverign DEBT … out of control and soon to be worthless …

December 20, 2011
Sovereign DEBT – out of control and soon to be worthless …
D ebt is the burden killing the way of life we all know.   From mortgage stress, to credit card defaults, to leveraged investments, to margin lending for equities, you name an asset it will generally have so form of debt attached.An interesting chart appeared in a post from the linked ‘Gold, Stocks & Forex‘ blog site …  the chart appears below:

What was interesting is how similar this chart follows the growth of the US Equity Index – ‘The Dow Jones Index’ – that chart appears below:

Equities are the ‘supreme’ Debt market – it is there to provide owners of an idea, concept, business with cash for transfer of ownership. The equation is a zero sum game – Business sellers get the cash and shareholders put up the equity – most often the equity comes from Investment funds – who in turn have debt obligations to Superannuants and depositors – the ‘grease’ that makes this work is the return the Fund Managers receive – less their ‘management costs – and pass on to the depositors/contributors.

In the ‘leveraged world’ that now exists – every asset has the capacity to be turned into a debt instrument – and then leveraged via a ‘futures’, ‘forward’, or ‘swap’ transaction to enhance returns and give some protection in a disaster scenario.

The story told here is the measure of US Debt to GDP relationship and how closely it follows the indexed capitalism of the US Equity market.  In isolation and up to pre GFC times – and when GW Bush Jnr left office – [Jan 2008] – nobody thought DEBT was a big issue.  At that time the US Debt stood US$9.2 trillion and it currently sits above US$15 trillion within a single Presidential term.

When G W Bush Jnr took office in 2000 – the debt stood at US$5.7 trillion – he resided over a 61% increase in the Debt – Obama has resided over a 64% increase in Public Debt in a single term that still has a year to run.

Americans love debt as do all Western Governments – and they give massive tax breaks to ‘shareholders’ invested in equity markets.  They are are all guilty of shoving the debt problem downstream for the next occupier of the Office to deal with.

The numbers above relate to Public Debt – yet private debt is just as bad when it comes to management and the way lives depend on it. See Car below – [linked on-line here] –

The time frame on the copied chart is only 2004 onwards – but it is enough to give a clear picture. Everybody has mortgaged their liquid assets to live their lifestyle as they can afford. The National savings set aside for retirement is now being cashed in to meet obligations and living costs.

How are Governments going to meet their obligations undertaken on behalf of taxpayers – raise taxes – layoff staff – cut infrastructure spending – this has already happened yet the debt ceiling had to be raised another US$1 trillion just to get them to mid-year. Sometime soon the people will be told the truth – whether it be in an election year is still too close to call.

Perhaps they won’t have a choice as the ‘DEBT’ boat drifts out of control ever closer to Niagara Falls.


Guru  The EYE-BALL Guru … [click here to read recent GURU posts]

  1. the parable
    December 20, 2011 at 9:36 pm

    There is something kind of strange about aid. If you give it I will take it. I personally don’t take aid, but I am abnormal.

    For any reason, under laisse faire, if someone else shows weakness, don’t stop till you see the colour of their eyes. Kill or be killed.

    If I am well fed, when then someone else wants me to feast, should I say I have eaten enough, or should I say, geez I am hungry.

    It is a conundrum,

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