CRITICAL THINKING FROM MEMPHIS

HERE ARE SOME THOUGHTS FROM MEMPHIS, I WISH FOR EVERYONE TO READ THEM AND DO YOUR BEST TO UNDERSTAND. THIS IS THE CALL FOR CRITICAL THINKING AND WE NEED TO ANSWER THE PHONE BEFORE WE MISS THIS CALL!

Today I have a message to share. A message that many people will find to be…refreshing.

There is an overabundance of people today who wish to tell us WHAT to think. This is actually a bigger problem than most realize as we are then handicapped from the onslaught of poor and incomplete information, wrong thinking, and even some actual deception as well.

In a small group that I take part in there was much discussion yesterday that touched upon this very real problem and today I would like to take folks much deeper into this discussion and my hope is that this will be a liberating experience for many as they (perhaps for the first time) begin to see things in a new light.
I will be brief in the introduction here but wish to 1st prepare the reader to absorb what is to follow.

For a few years now I have had a passion regarding helping others find new avenues into HOW we think for this offers us a great opportunity to gain confidence as we see matters not as we are told to but rather as WE see them for ourselves.

Telling others WHAT to think will never do and yet many of us have been content for years to unwittingly do just that. The television is a great tool of indoctrination and its use to control HOW we think goes much deeper than I care to get into here. We simply must recognize that the need exists for us to each see a thing for our self and the effort that this requires will pay us great dividends in the future.

In the discussion of misinformation and even deception I have taken issue with the many voices out there who have been preaching the soon coming death of our nation. In particular today we will look at the predictions that the US will soon default on its debt and that the dollar will then crash into nothingness. Many books have been written on this topic and very few of the authors have a deep enough understanding of the world to speak properly into the matter. The following blog written by Martin Armstrong will not only illuminate some of the deep realities into this subject but it will also give us an opportunity to see a better way to….think.

I often encourage others to drop the “domestic mindset” when thinking along economic lines. Any true understanding of economies must involve a global perspective and an understanding that it is the GLOBAL shifting of capital that bring change. As we read what follows here we need to view it with this important truth in mind. Only this broader view of things will help us to see clearly.

Another truth embedded here is the influence of our human nature. From the average person to the highest elected political office it does not matter. We always respond to things the same as we have done throughout all of history and THIS is the thing that then gives us confidence in predicting the future!

I have provided a link to the original writing on this by Armstrong but would encourage the reader to 1st read it as presented here. His style of writing, his sentence structure, is at times very convoluted and can often fall short of giving the reader the intended message. There are some numbers thrown about here but please be patient and see their importance as he is painting a picture for us that dispels much of the fear mongering.

Lastly, I always edit his work (for my own files) by inserting my own words [in brackets] to help complete the intended thought.
This blog was written in answer to one of his readers’ questions and as you study it you will likely come away with a much deeper UNDERSTANDING of how this process of sovereign debt defaults (in their many forms) will shake out in the years to come.

Changes are coming to the entire developed world as well as to America but it is also VERY important that we see WHY the sky is NOT falling tomorrow despite what others might tell us to think.

Memphis

From Armstrong on April 03, 2017

QUESTION: If the US debt bubble bursts, how does this not affect the banks and insurance companies, as they hold over $1 trillion worth of US debt? Wouldn’t these instances falter also? If they falter, wouldn’t that bring down the entire stock market as well? If this is the case, then how can the stock market rally as you have been stating?

ANSWER: Everyone focuses constantly on the US, and they tout how $20 trillion will all [suddenly] default. First [of all], this is just NONSENSE, and secondly, without looking at total global sovereign debt [it is also] a gross exaggeration. Total global debt stands at $230 trillion which is more than 300% of total annual Gross Domestic Product (GDP) of the entire world.

The United States recorded a government debt equivalent to 104.17 percent of the country’s GDP. If we look at the US debt and narrow the focus to just government debt, then we find that the US accounts for $20 trillion out of nearly $59 trillion [globally] or about 1/3rd. Those who keep ranting about the US debt level have said the same thing at every milestone. First it was $1 trillion back in 1980, Then, $5 trillion, $10 trillion and now it is $20 trillion. The whole reason big money buys blue-chip equities is because stocks survive such events as they did during the German Hyperinflation. If a government goes bust, it is the private assets that survive.
The banks and insurance companies hold far less than you may think.

The banks sold their Treasuries and are parking cash at the Fed who pays them interest in Excess Reserves. A default on the debt, EXTREMELY UNLIKELY IF NOT IMPOSSIBLE, would hurt the Fed, but far less the banks directly.

These people who [claim to have all the answers and] constantly say the dollar will crash because of the US debt are blind. They have a very myopic view of the world and never look outside the USA for a single second. They could never answer a single question about what’s taking place outside the USA when it comes to real net capital movements and this is why big money would never listen to them [for the simple reason that] if you do not even comprehend that capital is moving constantly around the globe, how can you possibly forecast anything no less answer questions of international investors?

No government pays off the debt; they simply issue new debt to retire the old. It’s always just a Ponzi Scheme and [so by extension we see that] historically governments ONLY default when people no longer buy debt (when they cannot sell the new debt to pay off the old). So the USA will NEVER default on its debt by itself. That’s just insane and historically impossible.

Intra-governmental Holdings of US Federal debt is rarely ever talked about, which includes 230 other federal agencies holding US debt totaling $5.554 trillion, or almost 28% of the entire federal debt. This includes the Social Security Trust Fund, which can only invest in government debt. As of December 31, 2016, here is the breakdown of who owns what:

1 Social Security Trust Fund & Federal Disability Insurance Trust Fund = $2.801T
2 Office of Personnel Management Retirement = $888 billion
3 Military Retirement Fund = $670 billion
4 Medicare Trust Fund = $294 billion
5 Misc. Government retirement funds = $304 billion

This is what we would call the asset balance sheet. If this were a business, we would then look to see how much cash it has on hand as well. That amounted to $580 billion as of December 31st, 2016. (Source: Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, U.S. Department of the Treasury, December 2016.)

Now, the remaining debt as of December 31st, 2016 held outside the government amounted to $14.403 trillion. Foreign governments and investors hold nearly half of that figure and 25% is held by yet other (non-federal) governmental entities which are state and local governments, but legally also includes the Federal Reserve since it is technically not an agency.

Now, looking to the private sector, about 15% is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. Businesses own only about 10% of the national debt, which includes the banks and insurance companies. This also would include various trusts and investors holding T-Bills on deposit for trading. Then we have about 30% of the debt that is held by foreign holders, which includes governments around the globe as part of their foreign reserves. So here is what this looks like:

1 Foreign – $6.281 trillion
2 Federal Reserve – $2.463 trillion
3 Mutual funds – $1.379 trillion
4 State and local government, including their pension funds – $874 billion
5 Private pension funds – $544 billion
6 Banks – $570 billion
7 Insurance companies – $304 billion
8 U.S. savings bonds – $169 billion
9 All Others = $1.349 trillion*

Now, a close review of this balance sheet shows that Social Security and all retirement/pension funds hold almost 50% of the national debt. [Keeping this in mind] let’s get to the bottom line. With about 30% of US Treasuries held [abroad] by foreign reserves [if we then argue] the proposition that the United States actually defaulted on its debt, then yes that would mean that the world monetary system would collapse. The USA has the biggest and the most viable economy such that if USA defaulted on its debt it would be lights out for the entire world however [if we pause to ask where the REAL pain would be felt we can see that] current and future retirees would be hurt the most and that would provoke civil unrest like you have never seen [leaving us with the inescapable conclusion that] it is highly unlikely that such an event would ever take place.

[Going one step further, if we hold up the US debt that is held by foreign interests we see that it] most certainly is even less than the total debt owed [externally] by emerging markets (which stands at a figure that is about 50% greater). The share of the global credit market going to Emerging Market corporate debt has been increased by 300% since 2005 and now accounts for about 18% of all U.S. dollar-denominated corporate debt in the world.

[If we now take a step back and also respect history here we find that] the risk is not that the defaults start in the core economy and so this is by no means [a discussion] that the USA defaults. The risk lies abroad for it ALWAYS begins from the outside and spreads inward to attack the core. The foreign bond defaults in 1931 is what created the Great Depression and it did NOT [manifest] because the US defaulted, but because the USA [responded improperly and] adopted AUSTERITY thus allowing deflation to dominate – the same mistake [we see being] made in Europe today.

I have previously warned that when dealing with government, he who has the guns makes the rules. When Italy could not pay 1919–1922 and was at risk of defaulting on their debt, they simply issued a law that the short-term paper you may have bought was now converted by government to 10 year bonds. Government can extend short-term debt into long-term without asking first. That will never happen with corporate debt. So what is touted as a default by these people preaching the end of the world is nonsense. These people have the guns and can write any law at any given moment to pretend they did not default. India just cancelled its currency overnight with no notice.

The real default will come by masking it with war, they will extend debt, call a moratorium on debt payments, and most likely [use this crisis as a perfect opportunity to also] alter the world monetary system swapping all currency for something new that is electronic. Kiss cash good bye. Re-Constructing the FUTURE is already in motion. The door is open and how government crosses [over] that threshold is not going to happen the way these people are preaching to sell their books.

[Rather than give these self-proclaimed “experts” a pass here let me add that] I seriously doubt that anyone who has never worked behind the curtain will ever truly comprehend what takes place [back there because simply] being asked for your opinion by some agency is not working behind the curtain. They are not interested in OPINION even though they ask a lot of people. They do not listen but are simply looking at what is going on outside their tower. Everyone has an opinion, but it is only as good as your experience. A man cannot write a book on how it feels to give birth. Not going to happen.

When a crisis hits, I get the call not for my opinion, but [to offer up two points:]

(1) What does the computer say and (2) what are your clients going to do.

So these people [selling books and such only offer noise as they] speculate about unrealistic events. NOTHING ever takes place until it is forced upon the actors [and so any discussion of the US simply unilaterally defaulting upon the world is meaningless].
https://www.armstrongeconomics.com/markets-by-sector/bonds/debt-burden-v-equities/

 

THANK YOU MEMPHIS FOR THIS POST I SURE DO HOPE EVERYONE IS STARTING TO UNDERSTAND THE ACTUAL WORKING OF GLOBAL ECONOMICS. FOR ANYONE WANTING MORE TRUTHS AND REALITY PLEASE JOIN OUR SKYPE ROOM BY CLICKING ON THIS LINK

https://join.skype.com/sptMNVQkPqM4

WITH ALL THE CHANGES TAKING PLACE THERE IS NO ROOM FOR SILLINESS, THE TIME IS HERE AND NOW FOR EVERYONE TO TAKE RESPONSIBILITY FOR THEIR FUTURES AND UNDERSTAND WHAT IS ON THE HORIZON BECAUSE IT WILL TOUCH EACH OF US IN SOME WAY OR ANOTHER.

LOVE TO ALL…MY LADIES

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