Will America go bankrupt in 2012?

According to the Mayan calender the year 2012 will be a most ominous one. The world will change dramatically in 2012, more so than any other year in modern history including 1939, the year World War II began. Current economic events in only the last few days have led me to wonder: will one of the tumultuous events of 2012 be the US government going belly up? In other words, will it default on its Treasuries?

Within one week the US government has: 1) taken on about $700 billion of complex debt securities (pending Congress’s likely approval) which should be difficult to unwind; 2) granted FDIC insurance for up $100,000 per Money Market account; and 3) approved a change of status to bank holding companies for the largest investment banks –Goldman Sachs and Morgan Stanley. Unlike the preceding bailouts with Fannie Mae, Freddie Mac, and AIG where the US government gained nearly an 80% equity stake, the US government will take on much risk with zero equity in exchange for guarantees and removal of bad debt off the Balance Sheets of financial institutions. Gone is the development of a massive SWF (Sovereign Weath Fund) model which I had hoped Paulson had in mind. The idea here is government bailouts through the SWF should cost the shareholders, who should be content to trade 50-80% equity to save the corporation as an alternative to a 100% loss due to corporate bankruptcy.

While I agree the billions of dollars of bad debt has to removed from the Balance Sheets of financial institutions to put an end to the credit freeze, the scale of passing on the moral hazard on to taxpayers may be too unbearable even for the world’s economic superpower. Now some of you will say, “America won’t go bankrupt! It can print money to solve its debt crisis.” To that I would reply, “Remember Germany in the 1920’s.” Effectively, this would put America in a rut potentially worse than defaulting on its treasuries. America would not be the first to default on foreign debt. A few years ago Argentina defaulted on its foreign debt, and, incidentally, without disatrous results for itself.

Getting back to the business-as-usual scenario of today…the US government is on a life support system substantially financed by foreign investment, particularly US bonds purchased primarily from the non-allies of China, Russia, and Arab states in the Gulf region. These countries can pull the plug, but cannot afford to do so until their economies are less dependent on exports to a dwindling American market. So for the next few years its safe to say their good money will continue to chase bad money (US treasuries).

In times like these it’s best to prepare for the worst. How do that is another topic.

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21 Responses to “Will America go bankrupt in 2012?”

  1. pastamanvibration Says:

    “And that’s not an accident: Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics. HUD, Fannie, and Freddie were their instruments, and, as is now apparent, the more unsavory the means, the greater the growth. But, as Paul Krugman noted in the Times recently, “homeownership isn’t for everyone,” adding that as many as 10 million of the new buyers are stuck now with negative home equity—meaning that with falling house prices, their mortgages exceed the value of their homes. So many others have gone through foreclosure that there’s been a net loss in home ownership since 1998.”

    http://www.villagevoice.com/content/printVersion/541234%3C/p%3E

  2. pastamanvibration Says:

    “Federal Reserve Chairman Ben Bernanke told Congress Tuesday the government should pay more than “fire-sale” prices for the toxic assets it would acquire under a proposed $700 billion bailout plan. That could mean both higher initial costs for taxpayers and reduced returns when the assets are later resold….”

    http://biz.yahoo.com/ap/080923/bailout_prices_bernanke.html

    So, we go from one mismanagement (financial institutions) to another (federal government)!

  3. pastamanvibration Says:

    “How to Ruin the U.S. Economy” by Ben Stein

    http://finance.yahoo.com/expert/article/yourlife/112984

  4. 747 Says:

    I don’t think the world will end AT ALL, I believe the world will drasticly change, I think everybody will realize the monetary system and all our old systems no longer work, and accuallly enslave all of us…

    Because they do, they keep the elete, Elete, and the working class, working class…it’s just an endless cycle, of building their empire, and the poor and working classes don’t even know it…

    But yeah, it will change, and maybe the elete will work for us in the future, like it should be…

    I was just thinking in the shower, maybe all the secerets and lies should be in the public, instead of in government. Idk, I had some weird dreams so I looked it up, and I found this…

  5. wendy Says:

    Heres a thought billions of dollars spent in Iraq when americans struggles with no healthcare and no homes. Every person on this planet should have a minimum a home and health care! Can you imagine no mortgage no stress and every human in america actually cared for. I
    instead the rich have millions in homes and property we become more in debt and miserable. Redistribute the wealth and giv eevery human a starter home. really if we bankrupt millions will die in starvation , lack of water health care shelter and riots. Then we wish we would have just taken care of our own people in our own land.
    How good will bush family live if we go into bankruptcy…..people will turn as barbaric as they were centurys ago…..

  6. vlim Says:

    The trouble we are in now is summaries on the following event…
    -Jobs – The unconrolled outsourcing of white and blue collar jobs.
    -Lending instutution – approved purhased of home to those un-qualified barrowers.
    -Big corporation – Dishonest CEOs spending billion of dollars of company’s money, that bankrupt the corporation.
    -Arthur Andersen – One of the biggest consulting service company in USA was closed not because of bankrucy, it was punished by the government and shutdown because of the few CEOs mismanagement, therefore losing thousands of jobs as a result.
    – Gas – the rise of gasoline from $2.50 to $4.50 on a short period of time which resulted to the lost of sale vehicle.

    The domino effect of the above events triggers the lost of consumer’s confident to spend therefore creating more businesses to close resulting to more unemployed people and it goes on and on until America becomes a third world country itself. And there will be a time when people here in America will cross over Mexico and Asia to get a job.

  7. tim Says:

    everyone needs an incentive to work.lets just give everyone a house,car food,pay there bills give them all that they need,lets just give everyone a million dollars than see how fast everyone starves to death because nobody goes to work.you should be carefull how much you hand out .who will put groceries on the shelf? who will farm the ground and harvest food?who will do anything at all?

  8. weton Says:

    December 21 2012 winter solistice at 11:11 PM
    Obama Signes health care bill spring eqinox march 21 2010 whicj is 11 seasons before te above date
    Passed he 111th Congress
    Chapter 11 Title 11

  9. Geoff Monsonis Says:

    You should read The Holy Bible. The rapture of the church will soon come…regardless if it is 2012 or not. If millions of people around the world vanished in the “twinkling of an eye” as the Lord says, how would the world react? I pray that everyone finds salvation before it is too late, yet it seems that many will not. Just remember that no one is righteous, no not no one, but if you accept the Lord Jesus Christ into your heart and believe he died for your sins, you will be saved.

    • Anonymous Says:

      Thank you so much for this message of the truth of what life should ultimately stand for. We can not continue the path of our flesh. We have to follow the Spirit, not the flesh. For He will lead the way.

  10. god Says:

    geoff monsosi is a n00b. Religon sucks. LOL ur all paranoid lol

    • goodman Says:

      Bible says logical and good things so it could never suck so bad. Somebody who reads articles and watches some episodes of whatever, told me that US, Europe, middle east will go bankrupt in 2012. They print moneys without worth. And those Illuminatis will try to control the people but there should be no way we’d give in! Pray, people. It’s no joke.

  11. Daniel Says:

    The answer might be YES, America will be going bankrupt because the stock markets might be falling from -200 points minus to -8,000 point minus losing battle against the recession, Libya and the Middle East including oil price, raising airfares rapidly and airlines to be out of business very very very very fast and this is not a good year in 2011, but next year it is going to get more and more worse in 2012 and I think the economy will come to an end and just like everybody says THE ECONOMY IS COMING TO AN END FOREVER AND AIRLINES ARE COMING TO AN END FOREVER.

  12. Russ Says:

    Firstly we have technology so we can autoate all our needs , secondly religion is no answer as the bible is a blueprint to control and in the founding of the monetary system religion was used to say do this or be punished. check out http://www.thevenusproject.com and also http://www.thezeitgeistmovement.com also watch the full length documaentaries on youtube, just search for zeitgeist.

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  17. Amine toubal Says:

    Baghé nemchi miricain 3afakoum lah ihafdek a obama

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