The US Banks Are Going to Take a BIG Hit

By Graham Summers

The situation in the US Congress marks a new low for politics in this country. I'm not going to bother going into details related to the various plans that have been proposed because all of them fail to be relevant.

What I mean by this is that all of the various cuts ($1 trillion or so over however many years) are in fact irrelevant given the fact that the US is running deficits north of $1.5 trillion PER year already.

As for the debt ceiling, whether we raise it or not is also irrelevant in the grand scheme of things. The US is broke and has been for a long time now. There is absolutely no way we will ever pay back our debts which now stand at $44K per man woman and child in the US.

This of course fails to include social security, Medicare and other unfunded liabilities which put the US debt levels closer to $60 trillion.

What I'm trying to say with all of this is that the US welfare state, or the notion of politicians dishing out handouts in exchange for votes, is soon coming to an end. Social security, Medicare and many other government spending programs will be cut in the coming years. Regardless of your feelings regarding these programs, they are not funded and with tax receipts falling (and will fall further as the Depression deepens) the US will simply not have the money to pay for these programs.

We will also see the US defaulting on its debts with some kind of debt restructuring included. This is absolutely guaranteed to happen. And THAT is the item of most import for the US financial system.

The reason for this is that the entire financial system is based on the ratings of specific securities with US Treasuries as the highest rated AAA. So if US debt takes a downgrade this will result in systemic volatility on a mass scale.

For one thing pension funds, investment funds, and other entities that are required to only invest in AAA-rated securities will have to move out of Treasuries when this happens.

On top of this, US banks will undergo another Crisis based on the fact that Treasuries are the senior most assets on their balance sheets. What happens when the bedrock of their balance sheets drops dramatically in value forcing system wide margin calls?

KA-BOOM!

Comment:

Comrades, on the one hand, I say, the Judeo-Capitalist system seems to be self-destructing. Good riddance!

However, something about things just doesn't sit right. No matter what Mr. Summers thinks, SOMEONE is always profiting from the misfortunes of others. So no matter how bad things get, no matter how many people lose their money, you can bet your boots that somebody is making an obscene profit somewhere.

What I'm getting at is that perhaps things have been manipulated to the point of disaster deliberately. Just to make a profit? Maybe. But maybe there's more to it.

I don't want to sound like those conspiracy kooks, like Dale Gribble from "King Of The Hill", but if things fall apart completely, something will take it's place. Just what, I don't know. Perhaps a replacement is already waiting to go.

That's why we must be ready as well. Comrades, we must keep up our work. Distribute those fliers/cards/stickers. Keep sending in those pledges. Talk to people. Attend our conferences. And next year, run for office. Our political advisory board is ready and willing to help you with all the details you'll need to run for office.

"If not us, who? If not now, when?" - President Ronald Reagan.