Traditionally, we have sought to inflate the debt away... pump the market with money to make the existing debt easier to pay off. Its all a balancing game of time and money inflation. The government seeks to outpace the interest owed, keep the economy growing so it makes yesterday's debt pale compared to today's budget. But today we are shrinking, not growing, and yet deficits are rising... I think these guys are gonna drown before they swim... there is too much debt coming at them, and it is coming too fast.

Let's look at the national debt - forget intra-govt debt - only outstanding debt requires a payment.

So, let's look at just the outstanding debt - money the govt owes other parties. In order to service the debt (the debt service paid by the annual budget) you have to cover the interest on all the outstanding bonds and you have to redeem those bonds which become mature. Generally, the debt service runs about one tenth the outstanding Treasuries. It is less than one tenth when the interest rates are the lowest they have ever been... which they are right now.

When Bush took office, the outstanding Treasuries amounted to just over four trillion. When Bush left office the outstanding Treasuries amounted to 6.5 trillion. Plus, we picked up 1.6 Trillion in GSE bonds, which are also at a higher interest rate than Treasuries. So Obama inherited just over 8 trillion outstanding debt to service. Obama will tack on 3 trillion in two years time. When it comes time to budget for 2011, the outstanding debt will stand at 11 trillion. So the trillion dollar deficits are here to stay, the debt will require a trillion just to service it, so even if they balanced the budget (hahahahahaha - they can't do that in robust economies) the deficit would still be a trillion dollars in order to cover the debt service.

Realistically, we are running half a trillion over budget before the special stuff, so the deficits will run at 1.5 trillion. By the end of his first term Obama is looking at a 15 trillion dollar outstanding debt to service. If his attempts to turn the real economy around succeed in the slightest, interest rates will rise as all this money parked in Treasuries moves back into the stock market. At that point, the budget is so out of balance, there's no way to service the debt. We are glutting the market with Treasuries, the demand will vanish, the bubble will pop, and the crisis is immediate. Fail to service the debt and the rating on the bonds will drop... sound familiar? Default on 14 trillion Treasuries and the central banks of the world will all collapse... it happens incredibly fast.

In order to inflate away the debt, we need to return to a robust market and reinflate the money supply. That's what we have always done before, but it may not be possible to pull off this time.The key moment in time will come when the stock market starts back up, at that moment, everyone will be dumping Treasuries - which means that you can't sell any new bonds to raise revenue, no one rolls over bonds (they all want redemption) and interest rates on all existing bonds rise together - that's when the budget crisis hits, and it hits you all at once. At that moment you are treading water, if lasts for months on end, everything comes crashing down. The budget is like a dam holding back this rising lake of debt, if the dam gives out, the whole lake empties, you can't get the water back...

prologue

...and when the foundation for all the central banks goes, then all their currencies crash with that collapse. That's when all the banks all over the world pull out their gold and start over. That's when we discover that our banks are not really rich. Fort Knox gave all that gold FDR stole away to Europe (SCAM - he confiscated the gold to supposedly stop it from going overseas ... and then America continues to back the dollar in gold ONLY to central banks overseas, so after 40 years Dick Nixon tells us that al the gold FDR stole from us is now gone... sent overseas) ... that's when European banks take over the world. Because when the paper money collapses, the banks return to real money, and there's plenty of real money out there.... but most of it is in Europe.