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And the timing couldn’t be better, because, this was the week that changed virtually everything …
First, S&P downgraded Greece’s credit rating, effectively saying that
bonds issued by the Greek government are “junk” and warning that investors who own Greek bonds could lose up to half their money as this crisis unfolds.
Second, the IMF announced a Greek bailout will cost $160 billion — THREE TIMES the original estimate.
Third, S&P downgraded the sovereign debt of Portugal, citing unmanageable debt levels.
Fourth, S&P downgraded Spain’s government debt for the same reasons.
Fifth, bond experts worldwide began warning that Spain’s economy is FIVE TIMES larger than Greece’s … that a bailout of that nation could top $500 billion … and that the IMF’s resources are not sufficient to bail out these three countries — let alone Italy and Ireland, which are also up to their eyeballs in debt.
Worse: Since the U.S. is the largest shareholder in the IMF, the bill for bailing out these economies would eventually be handed to U.S. taxpayers.
Who Will Bail Out America?
If Washington were debt free and flush with cash, that would be one thing. But the alarming truth is that America’s debt and deficit levels are just as bad — or worse — than those of the countries now being downgraded.
Hard to believe? Then consider some of the comparisons Mike has presented in his reports:
- Spain, which just got downgraded, has 59.2 cents in debt per dollar of GDP. But the U.S. has far MORE — a whopping 94.7 cents on the dollar!
- Portugal, which also was downgraded, is running a deficit that chews up 8.3 percent of its GDP. That’s way out of line. But the U.S. federal deficit is significantly worse — gobbling up a whopping up 10.6 percent of our GDP.
- Even compared to Greece, America’s deficit level is only slightly less bad — 10.6 percent of GDP in the U.S. vs. 12.2 percent in Greece.
It makes you wonder …
Greece, Portugal, Spain and the other PIIGS countries supposedly have the IMF to fall back on.
The IMF has Washington to fall back on.
But who’s going to bail out Washington?
The answer, of course is that there’s nobody left to save America. We are the world’s richest nation. We are the safety net of last resort.
When America’s turn comes — when demand for our government’s debt craters and our interest rates skyrocket into double digits — Washington will have two and ONLY two choices:
Choice #1: Simply walk away — default on the $12.6 TRILLION we owe to bond investors — a choice that would utterly destroy the U.S. economy for generations to come, or …
Choice #2: Make massive, excruciatingly painful cuts in every major government program — including Social Security, Medicare and Medicaid — to bring the budget back into balance.
Either way, this great sovereign debt crisis promises us years of severe economic and market volatility … years of disturbing new threats to your wealth … and years of unprecedented profit opportunities for investors who understand this crisis and make the right moves now.
That’s precisely why we just published Mike Larson’s outstanding guide to insulating and growing your wealth through this crisis — and why we believe it is absolutely critical that you read it immediately.
The Great Interest Rate Explosion of 2010-2011 is your step-by-step roadmap to navigating this great crisis — and it’s yours, free:
Good luck and God bless!
Martin
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