The thirteenth stage in America’s Financial Endgame™ is the point when the government moves to socialize institutional retirement assets for the purpose of supporting bond prices. The reason for this will be a major collapse in bond prices that catapults the borrowing costs of the US government. it is certain that a move like this will be massively unpopular, and it will only occur after there has been sustained inflation, a sustained recession, and a spiraling economic crisis that generates public outcry for the government to take action.
It is important to iterate that I sincere hope that I am completely wrong, and that this does not happen. In many cases, a situation such as this represents the end of what America was created to be. The use of authoritarian power to seize large swaths of private wealth is ordinarily the province of petty dictatorships. The notion that this could happen in the United States of America is very frightening, and not particularly comfortable to contemplate. The purpose of this analysis is not to articulate any hope that these events will happen … rather to show how the current chain of events is pushing us toward the destructive cycle of America’s Financial Endgame™. As astute investors, we need to understand the dangers that we are facing and be ready to take the actions that will protect ourselves and our families from financial ruin.
The fourth phase of America’s Financial Endgame™ is the point at which drastic government action is taken in response to the turmoil that is ripping through the economy and financial markets. By the time this phase takes hold, the economy will already be a shattered mess of failed attempts so stay the inevitable collapse that each bring that very collapse closer to reality. As is the case with most failed regimes, the predictable cycle of scapegoating, blame shifting, graft, and corruption by the people in charge will play out until a breaking point approaches.
The most likely breaking point will be when the US government can no longer borrow for low rates of interest. Or possibly if the US government finds that after a certain point they cannot find more buyers for sovereign debt at all. When this happens, the unpopular initiatives that had previously been untenable will likely be instituted via “emergency executive powers” granted to the government.
The Twelfth state of America’s Financial Endgame™ is the point where the government debt spiral finally reaches the point where the global financial community moves away from US Treasuries as the world’s safest investment. This is the critical juncture where reductions in bond prices turn into a bond price collapse. It is the point where a spike in interest rates becomes an explosion in interest rates. This is the watershed moment where America’s Financial Endgame™ morphs from a national economic problem into a global economic crisis that precipitates widespread social unrest.
The reason for this is because current government spending rates are predicated on the assumption that the capital markets can be harnessed at near-zero interest rates for an indefinite amount of borrowing to finance government spending. Since this is a situation that is clearly unsustainable, the ultimate fragility of current government policy will ultimately result in its collapse. This collapse is all but certain to be brought on by an initial rate spike from bond price weakness that increases the total annual government interest expense to the point where a perpetually growing debt spiral ensues. Once this point is reached, there is almost no turning back
The eleventh stage of America’s Financial Endgame™ will be when the higher interest rates ripple through to the US government budget, expand the size of the annual budget deficit, and accelerate the pace of the US government debt spiral. The basis for this effect comes from the unbelievably large amount of government debt that is already out in the marketplace. The reason for this is because a very significant portion of this debt is financed with a maturity date less than one year away. Thus, any increase in market interest rates for government treasuries will eventually inflate the interest expense that the government is liable for as the debt is re-financed with the issuance of new treasury notes.
What makes this effect especially dangerous is the fact that government payments on interest are approaching the annual rate of growth for Gross Domestic Product. This is very significant, because when the liability for annual interest on government debt exceeds the rate of growth for the economy, then it will become almost impossible to “grow” out of the problem.
Historically, whenever a nation gets to the point where its annual interest payment obligation exceeds its annual rate of economic growth, the ultimate result is a default on their debt.