I want to highlight another excellent report put out by Sprott Asset Management. In this one, they cast light, again, on the largest unspoken factor in the entire financial kingdom, namely that the US is insolvent, a theme I have been writing about for a few years.
The question emerges, if we all know this to be true, then the issue isn’t what the final result will be, but when the situation will change.
Here’s a snippet from the report:
Hemingway wrote that a man goes broke “slowly, then all at once”. We believe the same sentiment can be applied to governments. If fiscal abuses continue unabated, confidence eventually erodes until investors just stop lending. It happened famously to Lehman in September 2008, and it is happening now to the US government.
The Q2 Flow of Funds Report published by the Federal Reserve revealed that the Federal Reserve purchased as much as half of the newly issued treasuries in the second quarter.14 This means that the Federal Reserve isn’t merely supporting the market for US treasuries… it is the market for US treasuries. Printing new dollars to support an almost $9 trillion dollar budget deficit that stretches out over the next ten years puts the US on the road to ruin, and the major governments of the world have noticed and are taking action.
How could they not after all? Most of these countries have historically supported their own currencies by stockpiling an average of 63% of their foreign currency holdings in US dollars.
by ejanea