Strategic Investment

By James Dale Davidson

You don’t have to be a conservative, a liberal or anything at all to understand America as we know it is about to get flattened. The White House says the deficit will be $1.5 trillion—in 2010 alone. All up, the national debt is now racing past an astonishing $12 trillion.

In fact, if President Obama’s own economic projections are on target, he’s going to add $10 trillion on to the federal debt in the next 10 years.

That’s more than four times the deficits of George W. Bush’s presidency… and more than all of the other presidents – combined.

Whether you agree with them or not, or who you blame for them, one thing is clear, America is facing a fiscal train wreck—andit’s heading stragiht towards you. These are the largest deficits as a percentage of GDP since 1945, when the country was paying for World War II.

It doesn’t matter whether you talk best case (a recovery in 2010) or worst case (a Greater Depression). We’re merely talking about different shades of disaster.

When you’re dead you’re dead. There aren’t some people who are “more dead” than others.

The debt plague that’s coming will wipe out trillions more in Americans’ savings.

Millions of hard working people will see their precious last dollars wiped away as America teeters… and then loses her economic footing… a victim of the greatest accumulation of debt the world has ever seen.

This Is How America Ends

Last year alone the US government spent $433 billion of your money on interest payments to the holders of U.S. debt. The interest the government pays on its debt is the fourth largest expense in the federal budget. Only defense, social security and health spending eat through more public money.

Already, in this year’s budget, 21 cents out of every dollar of federal income taxes is needed to pay just the interest on the debt.

Very shortly, it will take all our income taxes just to pay the interest.

But long before your debt reaches “infinity” you go broke. You are unable to pay even the interest on your debt, much less the principal, and nobody will lend you money anymore. That’s what happens to people like you or me.

If you are a government, you have another choice: You print money to get out of your fix. Then inflation takes off… interest rates take off… and the dollar becomes worthless.

We’re closer than you think to these grim scenarios.

It’s too late to reverse the situation. President Obama’s spending program certainly does not do so. And the Congress—both Republicans and Democrats alike—show no sign of regaining their common sense and averting a looming disaster for America.

Unforunately, the United States government will be forced to default on such obligations as Social Security, Medicare and military pensions… Or the government will pay for everything in full – with worthless money.

In a moment, I’ll tell you more about which one it’s going to be.

We’re simply out of time.

Short term here are some events I expect to play over the next decade.

No matter who you are, your taxes will go up. The government will continue to raise taxes in an attempt to keep its spending programs alive. The Obama administration is already planning to raise corporate taxes, already the second highest in the world. The costs of this will be passed on to you whenever you buy something.
The US dollar is already being undermined as the world’s reserve currency as US debt holders led by China, Russia, India and Brazil move to protect themselves against dollar depreciation. Soon the dollar will lose its reserve currency status.
The Social Security Ponzi scheme will collapse. The government will be unable to borrow the funds it needs to replace all the money it has already spent from the Social Security trust fund.
Interest rates in the U.S. will rise to 6% plus as the government needs to raise the rate to stimulate foreign demand.
Excessive government borrowing will push up mortgage rates and trigger another leg down in the housing market. Huge numbers of prime borrowers have already begun to default on their mortgages, triggering what is destined to become another wave of toxic asset writedowns at banks.
The government will default on Social Security payments and Medicare and Medicaid obligations. It will not do so in an open way. Instead, it will fail to accurately index-link Social Security benefits to the cost of living… it will ration hospital stays and doctors visits… and it will deny expensive treatments and medication to state-insured patients (beginning with the elderly)
The US will enter a long period of economic stagnation coupled with inflation.
In years to come, the period between 2008 and 2018 will be known as America’s “lost decade.”
Oil prices fall to $25 a barrel before breaking through their July 11 2008 high of $147.90 a barrel.
Unemployment rates will rise to 20%.

It’s too late to stop these events.

But it’s not too late for you to protect yourself. It’s urgent that you take action now.

The purpose of this report is to help you decide what to do – and even help you get rich during the coming bad years.

GM’s Collapse Is a Preview
of Our Future Economy

They say history repeats itself.

This means that you can understand it well enough to profit from its predictable patters.

In other words, if you know what trends to expect you can reap huge wealth.

I’ll jump ahead here a little bit and tell you something else: The forces at work right now are the most powerful forces in over 500 years.

Terrible suffering will occur. Things most of us never imagine. But big money is going to be made at the same time.

Did ordinary Americans know they were in something called the “Great Depression” in 1930?

No.

They thought their problems would blow over. But they were wrong. US stocks didn’t reach their 1929 level for another 25 years – until 1954.

To understand where the US economy is headed, look no further than the collapse of General Motors.

“I think it is important to recognize that General Motors is a canary in this country’s economic coal mine; a forerunner for what’s to come for the broader economy,” warned legendary billionaire bond investor Bill Gross in a recent note to investors.

GM’s mistakes have been America’s mistakes… And its problems will be America’s problems.

Take the enormous unfunded health care and pension problems shared by GM and the U.S.

“Reportedly, $1,500 of every GM car sold in the dealer showrooms goes to pay for current and future health benefits of existing and retired workers,” Gross points out.

GM is liable for nearly $60 billion in health-care costs. But the total future healthcare liability for all U.S. citizens can be measured in the tens of trillions.

Just as GM’s debt problems lead to its collapse, Washington’s addiction to debt will lead to the collapse of America’s economic standing in the world.

Here’s something the Obama administration doesn’t want you to know: We cannot solve a debt crisis by issuing more debt.

It’s as simple as that.

Obama and his cronies in the Federal Reserve are on a fool’s errand. In the end, all debts – private and public – must be serviced out of earned income.

And since the country’s income is falling as its debt burden is rising, this debt must also come down.

The Bubble of All Bubbles

The US is the world’s biggest debt addict.

And government debt is now expanding faster than ever.

Most people don’t stop to think about it. But America has the biggest deficit of any serious country in the world.

The US deficit is 13% of total annual economic output. Compare that to Russia at 2.6%… Spain at 6%… France at 5%… Brazil at 1.3%… Even Argentina has a much smaller deficit than the US – at only 3.6%.

And that’s only the beginning…

Even if we ignore the relentless build-up of spending on Social Security, Medicaid and Medicare, the cost of bailing out the banks and failed industrial behemoths like GM and Chrysler will soon send the federal-debt-to-GDP ratio to well over 100%.

Then there’s Obama’s ambition to spend trillions more on health, the environment and education. Each of these programs will force the White House to borrow trillions more dollars from foreign powers such as China, Russia and Japan.

There come the “unfunded liabilities” of Social Security, Medicare and Medicaid.

It’s difficult to believe. But there is currently no funding mechanism in place for Social Security’s unfunded liabilities. They amount to $13.6 trillion – only slightly less than a year’s worth of US GDP (around $14 trillion).

This is small change compared to the gaping hole in Medicare funding.

There are three components to Medicare:

Medicare Part A covers hospital stays. Its unfunded component is $34.4 trillion.
Medicare B covers doctor visits. Its unfunded component is worth $34.0 trillion.
Medicare D covers the drugs benefit. Its unfunded component amounts to $17.2 trillion.

The total unfunded liability for Medicare is $85.2 trillion – just over 600% of US annual GDP. And Medicare and social security together have unfunded liabilities worth 700% of last year’s US GDP.

The Plague of the Black Debt
(Plus the Most Profitable
Investment in the U.S.)

In three years, from 1347-50, about one person out of every three in Europe died of bubonic plague.

This was the famous Black Death.

Whole villages were wiped out, left to return to the wilderness. In cities, thousands of houses were boarded up and deserted.

I call the coming disaster in America the Plague of the Black Debt.

The coming tidal wave… the ultimate collapse of this debt pile… is actually in plain view.

It’s right there in President Obama’s record debt projections… in the spiraling deficits and pork-laden federal spending programs.

Barack Obama knows… and Ben Bernanke knows… that as soon as the printing presses stop… the whole swindle will come to light.

That’s because the sucker’s rally in stocks… and the glimmer of hope it brings… is all based on the printing presses in Ben Bernanke’s basement stuffing those duffel bags with brand new, sequential dollar bills.

Investors are searching for fool’s gold: credit markets are improving due to the guarantees behind improvements in credit markets, not due to a reduction in risk… the government’s intervention is now distorting asset prices across all categories… sovereign CDS widening represents the shift of credit risk from private investors to taxpayers… the pulling of governmental guarantees would be akin to an earthquake just as the house of cards is getting higher and higher… and the political risk tornado will destroy whatever it is the earthquake leaves.

- Tyler Durden, Zero Hedge, April 3 2009

No, I don’t expect millions to die (although it’s possible if society collapses.)

What I do expect is that the world will be changed, totally and permanently. Things will never be the same again.

Let me put it simply as simply as I can. The coming debt plague will destroy America’s economic leadership.

Unless you prepare urgently now, it will leave you in indentured servitude. You will be left behind to pay the greatest accumulation of bad debt the world has ever seen.

Budget experts estimate that federal taxes would have to rise by 64% to cover the unfunded liabilities of the federal government. And that doesn’t even include your share of the cost of the ongoing multi-trillion-dollar bailouts and stimulus programs.

There’s no way to sugarcoat what’s happening.

Remember, the Congressional Budget Office’s own estimates say Obama will add almost $10 trillion to the total federal debt by 2019.

That’s about as much total debt as was outstanding at the beginning of 2007!

This will trigger the worst financial calamity in America’s history… far worse than what we’re experiencing now.

In fact, I believe it will become the greatest economic disaster in recorded history.

“We misread how bad the economy was, but we are now only about 120 days into the recovery package. The truth of the matter was, no one anticipated, no one expected that that recovery package would in fact be in a position at this point of having distributed the bulk of the money.”

Vice President Joe Biden,
July 5th 2009

Consider the following facts…

There’s roughly $11.5 in debt outstanding. Then there’s another $10.1 trillion for the on-balance sheet Obama spending. Another $99.1 trillion is coming for unfunded entitlement programs such as Social Security and Medicare.

That’s something close to $120.7 trillion by 2019.

And it’s roughly another $120,700 in debt for each of the 100 million families in America.

Now, I know this all sounds meaningless. The kinds of numbers we’re talking about are the kind of numbers that used to be used in astronomy, not economics.

But “120 trillion” has 13 zeros: 120,000,000,000,000.

To put that in perspective, in 1980 that national debt was just $930 million. Not even $1 billion!

This will have a devastating social impact:

I see social security benefits being cut to the bone. They’ll probably only go to the neediest.
I see at least 21 million unemployed or in make-work public assistance jobs.
Sick and elderly will be cared for at home. Almost nobody will be able to afford nursing home care.
I see millions more homeowners “upside down” – with a mortgage bigger than the value of the home.
Washington will continue subsidizing and nationalizing US industries. Government interference in commercial markets will have far-reaching repercussions that your average bureaucrat couldn’t fathom.

Now, picture yourself in a neighborhood where the houses on either side of you are empty and for sale.

Windows are broken out. Homeless and squatters break in and sleep there.

There are no police to stop them because local government is broke and the tax base has fallen sharply.

For the same reason, the streets are full of potholes and the streetlights are broken. Power outages are common. In this dark, menacing environment, crime runs wild.

Almost everyone drives a “clunker” because few people can afford a new car anymore.

Mountains of green garbage bags pile up, stinking to heaven, because it’s three weeks between trash pick-ups.

In short… The suburbs will become slums. It has already happened in communities that went broke. Just look at most of modern day Detroit.

It is going to happen in many more communities – perhaps even yours.

It doesn’t give me any pleasure to predict these things. But I want to get this information to as many people as I can… because you can prepare yourself.

You and those you love can avoid this catastrophe. And the more of us who preserve our wealth, the better it will be for our country when the time comes to rebuild.

THE PLAGUE OF THE BLACK DEBT:

How to survive America’s Next Bubble Collapse

Millions of middle-class Americans are about to suffer the biggest wealth wipe out in history as a $110.7 trillion debt avalanche buries the economy… It’s too late to reverse course… But it’s NOT too late to protect yourself and your family…

By James Dale Davidson,