Tuesday, April 26, 2011

Our Little Bubble, Our Big Problem

Gold in New Zealand dollars: $1885.43 per oz
Previous all time high: $1955.10 per oz

Silver in New Zealand dollars: $58.76 per oz
Previous all time high: $48.58
per oz

The volatile run-up in silver last night came to an end when the New York exchange opened. However, it has since bounced back to around $47.00.

Let’s look at some of the sovereign debt worldwide, especially ours here in New Zealand.

Last week, Greece had to sell 2-year bonds at 19.3%. This is more than their GDP growth. This is simply unsustainable and Greece will default, soon.

So default you say? Well no, not unless you try restructuring first.
You see, with debt, someone has to pay. So if a country doesn't default (and default can be the best option), they restructure so that that someone else isn't a Banker or large powerful Investor.

Guess what, that someone else is you, me and Joe Sixpack next door.

With sovereign debt we are the suckers (and your children and grandchildren) that will pay. In New Zealand, we all now owe $42,500 per person. When are you going to pay yours? No, well who is? With incomes steady and interest rates negative (inflation rate to deposit rate) it looks like default is the only option.

But there is still time before that happens. The IRD (tax man) will go after every last cent they can squeeze from you. Maybe even to the point of asking your nice Swiss friends to cough up your account records.

The NZDMO (NZ Debt Management Office), successfully sold a record $1 billion of debt last Thursday. It could have sold 3 times that amount. People still like us.

That's another $250 that we all now owe someone else. We just keep adding to our own debt pile, because as long as we can sell bonds and raise debt, and raise more debt to pay for the repayments and interest on previous debt, the merry-go-round will continue.

Until the music stops and we can’t pay or raise any more money.

Greece is close, Portugal, Ireland, Spain, the UK, USA etc are close. The S& P downgrade on US debt that was threatened last week, is a shot across the bow for them.

The price of gold in relation to the falling US dollar is the canary in the gold-mine. It's not likely to hold at $1500 per oz for long.

Prepare for the next economic mess. It may be sooner than you think.

Our little debt bubble will pop. Our big problem will begin.

Articles of interest:

Jim Sinclair on Gold and the World Financial System

See article here

Debunking Anti-Gold Propaganda

By Doug Casey here
Casey Research

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