is the US the next Argentina?

I think most of us -- probably 80% or better -- believe it is when not if in terms of the debt load forcing the Western industrialized nations off the cliff. I'm curious as to what every one's opinion is on the timing. Do most of us believe the avalanche gets into full swing in a year or two, two to five or could governments pull off one more round of smoke and mirrors and push it off another five or ten years.

I think it is close. I think within the next year or two Europe will be in free fall economically and that the social and political ramifications will be horrendous. I think those in charge on the left, right and center will make every bad decision imaginable. I highly recommend reading LORDS OF FINANCE. It is about the heads of the world's key central banks in the late 20's and early 30's. It is ultimately a study in chaos and ad hoc decision making. I believe this time will be worse -- much worse.

 

it doesn't help if the dollar is depreciating and real assets are going up to match the depreciation.

 

The entire financial system...
Right down to the bazaar beggar...
Is all loaded up with EXPENSIVE puts and CDS and long vol...
Waiting for the next Deflationary Crisis 2007-9 Redux...
This is not a Black Swan if everyone is expecting it.

Conversely...
A Hyperinflationary Crisis would result in SPX rocketing to > 5,000...
Those July 2015 5000 strike Leaps are selling for, like, $0.01...
OTM long dated calls are dirt cheap... THAT is the Black Swan.

 

there are many investors who believe in hyperinflation. therefore it does not qualify as a black swan event.
it is doubtful that u can buy those leaps for .01.

 

Actually, not really true...
Only the "lunatic fringe" is buying guns and gold.
Hyperinflation scenarios are not taken seriously in Business Media.

My point was....
That long-dated OTM puts are 100 times the cost of long-dated OTM calls...
The Global Financial system is making trillions...
Selling insurance for an event that Central Banks have rigged against (deflation).

If the whole thing blows up... SPX goes to 5,000... not 500.
That's what happens when money is debased.

http://www.zerohedge.com/news/artem...end-deflation-hyperinflation-and-alchemy-risk

 

only the lunatic mainstream is not buying gold and guns.

 

Good point.

 

my 1st post on this thread
Argentina during its fiscal crisis went down because their federal government guaranteed the debt and pension obligations of their provinces.

will the US do the same for the states with the same results? the results were massive unemployment and massive inflation.

http://www:http://www.bloomberg.com/news/2012-06-17/california-s-bad-bet-makes-jpmorgan-s-look-minor.html


California’s Bad Bet Makes JPMorgan’s Look Minor
By David Crane - Jun 17, 2012

Congress ordered JPMorgan Chase & Co. (JPM)’s chief executive officer, Jamie Dimon, to testify about $2 billion that his bank lost on an investment bet.

Worrisome as that gamble was -- after all, the banking crisis was largely due to bad bets by banks -- it is unfortunate that Congress has never called hearings on a far bigger bet, one that has had more catastrophic consequences for millions of taxpayers.

The one I’m referring to was made by California legislators on Sept. 10, 1999. They decided that investment gains would cover 100 percent of the cost of retroactive pension increases they granted that day to hundreds of thousands of state workers.

The politicians made the wrong bet -- and the result has been a penalty to California’s budget that has averaged $2 billion a year ever since and that will cost the state billions more for decades to come.

Promising that “no increase over current employer contributions is needed for these benefit improvements,” and that the state pension fund would “remain fully funded,” the proposal, known as SB 400, claimed that enhanced pensions wouldn’t cost taxpayers “a dime” because of healthy investment returns. The proposal went on to assert that it “fully expects” the state’s pension costs to remain below $766 million a year for “at least the next decade.”
Pension Projections

The Legislature included cost projections provided by the California Public Employees’ Retirement System -- or Calpers -- in the description of the bill and passed it with broad bipartisan support. Governor Gray Davis signed it.

Since then, the pension system has earned only 75 percent of what it had hoped. Because the state is unconditionally on the hook, the state budget has had to make up the difference. As a result, the state has spent $27 billion on pensions, $20 billion more than Calpers projected.

Because the boosted promises last for decades -- for employees’ lifetimes -- and because the pension fund amortizes the difference between what it expected to earn and what it really earned during such a long period, just a small portion of the increased costs has so far been recognized. Far larger increases are in store.

To finance the $20 billion of extra cost for pensions, the state has cut spending on services and raised taxes. As one example, spending on the University of California and California State University systems declined 18 percent from 2002 to 2012, while state spending on pensions rose 214 percent.

The pension deal was a stunning example of nondisclosure. The legislators didn’t inform the taxpayers that:

1. The state was on the hook for deficiencies if actual investment returns fall short of assumed investment returns.

2. The assumed investment returns implicitly forecast that the Dow Jones Industrial Average would reach about 25,000 by 2009 (it barely made it over 10,500 that year) and 28,000,000 by 2099.

3. Potential costs to the state were uncapped.

4. Members of the Calpers board had received campaign contributions from beneficiaries of the legislation.

Ten years later, a journalist uncovered that Calpers had produced internal projections showing the risks to the state if the bet didn’t work out. The internal projections forecast that if the system earned half of what it assumed, state costs for the pensions would rise to almost $4 billion a year by 2010, close to where those costs ended up.
Negligent Politicians

This problem wasn’t caused by the public employees who receive the pensions but by the politicians who made the promises without setting aside sufficient funding. “Because the fuse on this time bomb is long,” Warren Buffett noted in 2007, “politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed.” Most of the politicians who made those promises in 1999 are long gone and keep their heads low whenever the issue is discussed.

In JPMorgan’s case, the losers of the bet were the bank’s shareholders and, according to Dimon’s testimony, some of the employees who made the bet. But in California, the losers are taxpayers and recipients of public services. None of the elected officials who made the bet will suffer any consequences. Perhaps we should require politicians to post personal bonds whenever they make bets with the public purse. After all, they are still making bets every day on new pension promises and counting on investments to cover the cost.

(David Crane, a former financial-services executive and a Democrat, is a lecturer at Stanford University .....

 

There is only about ~900 billion paper and coin dollars.
There is about ~14 trillion dollars worth of credit supplied by banks.
There is about ~55 trillion dollars in total debt, again, supplied by banks.
What backs the dollar is the faith that the 14 trillion dollars will some day pay the 55 trillion dollars off.
Looks like US is operating a Ponzi/Pyramid scam on global scale since Nixon Shock.

 

Good points Aug/1932

But i have some more good news/bad news for you.
The derivatives owned by US banks ...is $200 -700 trillion,So its much worse /complex than you stated...........................[source =page one Google searc h...]

But now the good news;
a] PIGS, Europe. have many more socialists than USA does;
growing conservative elections trends, for years[plural]

b] Both Argentina and America have plenty gold coins, silver coins, copper coins;
and ....WSJ[JUNE paper editions] noted our Argentina friends want paper dollars much more than pesos..............................

c]All kinds of silver, silver coins, gold ,gold coins, copper coins are conveniently priced in US dollars. All the dealers like US dollars.

And even a worse case scenerio like socialists try to [illegally] steal gold like FDR did, even that FDR law had a loophole one could drive a Wells Fargo Armoured truck thru.LOL

Seek wisdom like silver, Solomon said[4,000 year+ trend...]