Abstract: Previous blogs by my person have emphasized fundamental imperfections in finance and debt in the US, UK and EZ and little has improved since my last series of blogs. The Fed has now lost control of the 10-year note as gravely predicted. This will hike government costs and force more debt. The US deficit continues to run out of control pushing the debt from its current 107% of GDP at a rate of about %6 additional debt increments each year to unknown heights in the next decade. Greece went down at about %145. The Obama Administration continues to fawn and coo upon the crashing European Union driven by mindless political dogma and the willingness to spend all they can grab or steal to save socialism; we follow these fools into the economic latrines. The Fed now stammers about its QE and that has sent the equity markets into a nose-dive. This blog also references a very good mathematical analysis of the world debt mess by Grant Williams as a special reference to watch. Things are not doing well --so prepare for worse times that we have seen.
Preamble: Published 6.25.2013
I have abstained from publishing any blogs for a few months since from an analysis of my previous blogs as I have continued to express my concern and issue warnings about such pertinent economic metrics such as interest rates and the intractable massive debt owed by the United States and Europe. Nothing has changed since then except for the worst. It is time to sound the alarms again if anybody is listening.
In this current communication I'm going to try to assemble a series of metrics from statements charts and other references that will support my previous predictions that things are not doing well and perhaps clarify a bit what is to come in the near future. We are heading for bankruptcy or default.
In previous blogs I have posed a probable problem where the Federal Reserve or other central banks and other countries might have initially directly influenced the interest rates much to the downside and trending toward zero but with the continuing possibility and probability that they might lose operative control of such measures and that people trading in those markets would dominate the Fed’s purchases and those interest rates might rise in in spite of any government controls. What has happened lately is that the Fed's 10 year note has risen in the rate from %1.49 to the current %2.63 today in spite of the Fed’s attempt to keep those interest rates as low as possible. A lower interest rate is supposed to stimulate the economy and it might be doing that, perhaps, but a more important factor must be considered and studies show, clearly, that it keeps government borrowing rates very low and also keeps the debt service very low because all the Western countries are running a relatively sick economies along with hefty deficits. These higher rates transform into higher government costs of all sorts. Thus, higher rates and higher deficits encourage government to increase revenues by any and all means and that hurts business and employment. Given the current socialist mind-set of the US there is no limit to high they would wish to tax us.
The US deficit is 40% of GDP and this 40% goes directly into debt and hikes the current 107% debt to GDP ratio 6% every year so it should be obvious that a mere decade of this performance will push us toward 180% debt to GDP, which is way beyond where Greece Cyprus, Argentina and other countries crashed in fiscal chaos. The loss of control of the Fed’s 10 year note, which was %1.49 last summer, and which is perceived and universally declared to be the cost of capital, is clearly due to selling-off by bondholders who, previously held some strange notion that bonds are “"ho, previously held armmer, and quite safe”, when they are clearly not, because the price of the bond varies inversely as the interest rate therefore if interest rates were to double, for example, the current price of the bond would fall 50%. This increase in the rate forces governments to pay higher debt service and ultimately to pay higher interest rates on their borrowings hence increasing the cost of government. Of the original intent of the Fed, we presume, was to, in the words of Tim Geithner, reflate certain assets by inflation that would then lessen the government's burden in borrowing and debt service because they would pay off the debt in the future at a much lower rate. Now, we currently don't have much “core” inflation—as defined by the Fed who ignores food and energy, but now we have high interest rates and this tends to suggest that we are proceeding toward a dark area of stagflation with the inflation yet to manifest itself as they saw the Jimmy Carter days. The debt rises to intractable levels. We have no meaningful growth projections to handle this debt in the near or medium term future.
The Mindless Adoration of the EU:
For some strange reason the United States favorably and dogmatically views the European Union, particularly the European zone where the euro is the single currency, in all they do and we stubbornly attempt to emulate their government processes, control regulations and banking practices. We wish for environmental controls that have broken several industries in the EU in the hope that we can have the highest cost energy prices on the planet. But given a cursory look at the cascading failure of several of the members of the easy European zone such as Greece, Cyprus, Ireland, Spain, Portugal--soon Italy and perhaps France in the not-too-distant future, clearly gives us critical information and theory on how not to finance a nation. Phony social panel follies almost busted Spain. In each of these cases the debts and deficits have risen to prohibitively high and dangerous levels which lead directly to intractable bank reserve levels, deteriorating bank assets and now multiple bank failures. The Cyprus mess is of more interest than that of Greece because in Greece they merrily performed haircuts on the bondholders, mostly foreign. But in Cyprus the European Union with Germany and France leading rolled the customer deposits into this dead pool and forced closure and failure in the primary Cypriot bank. 80% or more of customer deposits vanished. This is a new process known as a “bail-in” and was discussed recently on the Daily Telegraph in London by several authors. Added into this barbarian process is the notion, carefully being waved at this time, by the leaders of the EU to incorporate a phenomenon known as a negative interest rate. Such a process would attempt to put the tax on all deposits in excess of €100,000 point meaning that they would be asking the rich to pay for the bank’s failure, its reconstitution, rehabilitation, restructuring and reestablishment. The problem with this theory is that there are very few rich people and if all it takes to avoid having an account that could be attacked by such a wealth tax would be by moving half of that account to a different bank, thus going below €50,000, would be an obvious outlet. The people who brand such rules are raw ideological creatures, certainly, a bit vicious, but they're not patently senseless. They must realize that flight of capital is the very first issue to be scrutinized by the rich and such flights of capital destroy financial backing of whole countries and banks as they happen and must be avoided if possible. Negative interest rates will just drive away precious capital, bearing the necessary to real growth, into foreign accounts. People will stuff mattresses with their monies or buy small safes.
The EU is morally, financially, socially, politically and intuitively bankrupt; but the US admires their oppressive style. Nobody voted for the EU leaders. Even France rejected the phony Treaty of Lisbon with its rubber language.
The Fed Mumbles about Moderating QE:
With the Bernanke pronouncement that we might ‘taper’ the Fed’s QE [quantitative easing, a deceiving euphemism for bald printing of money] the stock market has reacted violently offering us some ugly options [but no good ones] to switch our assets from cash to gold or to bonds or out of bonds or whatever depending on whom you might listen to. This tightening of the purse strings also brings along the specter of deflation as well. A fear of deflation would prompt our government to spend larger and larger amounts of money to ‘fix the problem’ pushing the debt levels to stratospheric heights and leading to a terminal fiscal scenario.
A Special Mathematical Analysis of the world debt mess by Grant Williams:
Grant Williams is a mathematician of note who has prepared a series of ‘problems’ [May 21, 2013] with the current world economy and presents charts showing some devastating consequences. The case is well-presented and only conclusions are necessary here to prompt people from viewing this for themselves. He shows clearly that  China cannot possibly be growing at some %7.7 rate,  That France cannot sustain its fiscal position given the payments she must make to the EU and  That Germany is ‘screwed.’ Scroll down to Bart on the chart that says “Central Bankers know EXACTLY what they are doing.” This is highly recommended.
Taken as a whole, the future does not look good for the globe as rising rates and soaring debts via deficits are terminal as long as those annual deficits continue to exceed the annual rate of real growth, and they do. Governments depend on debt to fund their social programs to buy votes so they will not cease spending and growing government to preserve their power base. Thus, the debt, now used to fund these phony social programs that are expensive and inefficient, will continue to grow and sack the economies of the EZ and most US states and large cities. Perhaps our phony government will incorporate some negative interest rates on deposits or bail-ins in our banks to get more money to support the Party of Democrats. They are frantic for any more money they can grab.
Our financial system is crashing and if other measures to stimulate real growth, such as tax cuts and lower business regulations, might help the situation they are not presently politically acceptable. It appears that the left wing is ready to oversee a crash in the economy dwarfing what happened in 1929 and have an agenda to not only survive but to take over everything, a vision of Lenin we might recall. Beware.
 ryck'Z rantZ: The US Heads for High Inflation and Probably Default. Spending Must be Cut.
 More Big Government and Maniacal Mortgage Manipulation from The New York Times Posted by rycK on Wednesday, February 27, 2008 10:29:21 AM
This describes various attempts by government to allow bankruptcy courts to alter interest rates and adjust principal to levels that are politically advantageous to the progressive left.
 Known now as SICPIGS which stands for Slovenia, Italy, Cyprus, Ireland, Greece and Spain so far.
 Spain’s Solar Energy Bubble Bursts. California is Next. The First of a Series of GanGreen Asset Bubbles Bursting.http://ryckki.blogspot.com/2012/10/spains-solar-energy-bubble-bursts_18.html
Abstract: Well-meaning but idiotic government workers in Spain subsidized a hopeless solar power project that is now essentially worthless. The cost was astronomical and the government is now withdrawing the subsidies as even the most dedicated leftist can work the numbers and see that this project is terminal and will never work out. This is a classic debt-driven asset bubble formation folly and now it comes crashing down in disgrace. Clumsy excuses are offered for this mess by the Times and we are encouraged to hear that the government regulators in Spain are still ‘learning’ how to subsidize a worthless project. Maybe some of them can rush over to California and show them some new tricks before that state crashes in debt.
'Bail-in’ that throws the euro’s future into doubt. 'This sucker could go down.” So said George W Bush back in 2008, at the height of the global financial storm. http://www.telegraph.co.uk/finance/comment/liamhalligan/9963272/Bail-in-that-throws-the-euros-future-into-doubt.html
“At Laiki Bank [Cyprus], the island’s second-largest, deposits above €100,000 are being slashed by up to 80pc. Similarly, uninsured deposits at Bank of Cyprus, the biggest bank in the country, will suffer 40pc losses. All savers, meanwhile, are subject to stringent controls on withdrawals, including a €5,000 monthly limit. Cypriots travelling abroad can take just €1,000 with them and import payments must be approved by the central bank.
Cyprus marks the first eurozone banking crisis that is being “resolved” without a seemingly limitless reliance on taxpayers’ money from other member states. A distinction is being made between solvent and insolvent banks, with bondholders at the latter taking a very big hit. That is how it should be. Next time, such investors will pay more attention to the financial health of the institutions they back.”
 The Bernanke Fed is playing with deflationary fire
“I hope the Fed knows what it is doing.
It has chosen to tighten monetary policy even though core PCE inflation is actually lower right now than it was when the Fed previously thought it dangerous enough to launch further QE. America is one shock away from a slide into outright deflation, and the eurozone is half a shock away.”-- By Ambrose Evans-Pritchard Economics Last updated: June 24th, 2013.
 Grant Williams: "Do The Math!"
[scroll down to Bart character and push the arrow button to start the presentation.