Property Grunt

Tuesday, June 09, 2009

All American Bust Out

Think of this happening to America. Really.

I've covered the bust out concept a number of times on this blog and it surprises me how often it is popping up in our new economy.

A family member recently told me of a conversation they had with a well known financial blogger. According to this particular blogger, who I hold in very high esteem, they stated that we are heading for a hyperinflation, in fact there are certain parties in our government who want this to happen.

The reason is that when hyper inflation kicks in, it will devalue American currency and will cripple American Treasuries.

So why pray tell would the powers that be want to do this?

One word. China.

China holds a significant amount of our treasuries that we are all on the hook for. But what if those treasuries are completely worthless? You see where I am going with this?

Let me put it this way. Look at the wave of foreclosures, a lot of those consist of owners turning in their keys because they are so overwhelmed there is no point holding onto their homes. Even Banks are doing the same.

In a sense, those treasuries is the American house that we are barely able to hold onto. And China already has America on a very tight leash through this debt. So what can be done? We have ourselves a bust out by pushing everything over the edge an d We wipe our slate clean. Sure. America will lose its AAA credit rating, but I don't think anyone will notice considering the s**tstorm that is brewing up in Europe.

It goes without saying that if this does come to fruition, China is going to be really pissed that all that all of their cash went up in smoke. And if you think Tiananmen Square was a tragedy, then you better strap yourselves in. Don't worry about the Americans. We will be to busy with our food auctions.

Oh. I know what you are thinking. Grunt, whoa there, was there an X-Files marathon on last night? Drinking the bong water? Because what you are basically saying is that there are certain egalitarians who want the economy to self destruct. I assure you folks, this is not a paranoid delusion brought on by junk food and bad cable tv. From what I have read and learned all the pieces are in place for a nation wide bust out.

Let's take a look at the facts.

First we have this two articles regarding China.

Geithner tells China its dollar assets are safe

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as high.

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

Ye of little faith right?

Then we have this article which is quite telling.

Top Chinese banker Guo Shuqing calls for wider use of yuan

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.

Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.

Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency.

The Chinese know what is a foot and they are making every effort to protect themselves. They know that there are factions within the Obama administration that want to play slash and burn. And they do not want any part of it and want to make sure at least some of their cash is protected.

Obama’s Economic Circle Keeps Tensions High

If the Oval Office incident was meant as a lighthearted moment, it also exposed the underlying tensions that have gripped Mr. Obama’s economic advisers as they have struggled with the gravest financial crisis since the Depression, according to several dozen interviews with administration officials and others familiar with the internal debates.

By all accounts, much of the tension derives from the president’s choice of the brilliant but sometimes supercilious Mr. Summers to be the director of the National Economic Council, making him the policy impresario of the team. The widespread assumption, from Washington to Wall Street, was that the job would be Mr. Summers’s way station until the president could name him chairman of the Federal Reserve when Ben S. Bernanke’s term expires early next year.

I suspect the core reason for this hostility inside the Obama administration are arguments over whether to wreck an economy that is on the verge of being wrecked or keep it together with spit and bailing wire.

From my own experience, I recently had a series of conversations with an individual that I highly respect on a personal and professional level. This individual is a very well educated and successful in their particular field of finance and earned a reputation as a straight shooter.

Two very important points I took away from our talks were the following.

Hyperinflation is very real and should not be ignored.

U.S. Treasuries are to be shorted.

That is why I don't believe any of this talk about recovery or that the recession is over. We are on the path of no return, no turning back and any other cliches that refer to being unable to change the past. Whether we like it or now a new dawn is coming and is most likely going to occur through a very messy and chaotic bust out.

We have to accept the fact that a lot if not all of what we used to do or know is going out the window. We have to make the proper preparations for what will be coming for all of us. Ignore this at your own peril.

General Hummel: I'm not about to kill 80,000 innocent people! Do you think I'm out of my f**king mind? We bluffed, they called it. The mission is over.

The Rock

Don't take my word for it folks. Do the due diligence and see for yourselves.