Is The U.S. Government Insolvent? Sorry, But Its Accountant Can't Tell You

Got gold?

http://www.investors.com/politics/editorials/is-the-u-s-government-insolvent-sorry-but-its-accountant-cant-tell-you/

Government Admits It Can't Fully Guarantee 51% Of Insolvent Pension Plans

http://www.zerohedge.com/news/2015-03-12/government-admits-it-cant-fully-guarantee-51-insolvent-pension-plans

An invaluable lesson for U.S. Citizens from the bank confiscation in Cyprus

http://www.sovereignman.com/finance/invaluable-lesson-bank-confiscation-cyprus-13858/

Insolvent Fed Decision To Cause Massive Market Moves

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/16_Insolvent_Fed_Decision_To_Cause_Massive_Market_Moves.html

The Fed is Insolvent

 USDollar hegemony is ending.  US Treasury holders are dumping Treasuries and buying hard assets.  Especially the Chinese, who are snapping up productive agricultural land, securing energy resources, buying mining assets, and physical precious metals.

As buyers of gold, you are also competing against 3 billion peasants in Asia.

https://stjosephusa.com/article-fed-insolvent.php

Jim Rogers: 'Britain is totally insolvent'

http://www.thisismoney.co.uk/news/article.html?in_article_id=519495&in_page_id=2&ito=1565

'Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.'

'Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.'

'You need to let Ireland go bankrupt. They are bankrupt, why should innocent Germans, Poles or anybody pay for mistakes made by Irish politicians and banks.'

'It's dumbfounding and stupefying to me that you have a central bank in the United States that thinks that all it needs to do is print money,' he said. That has never worked, never worked anywhere in the world in the long-term or the medium-term.' 

Moody's puts US AAA credit rating in question

One could argue the US government is already insolvent. Is it coincidental that Berkshire Hathaway's Warren Buffett is reducing its holdings in Moody's, the credit ratings agency? Berkshire, the American icon of capitalism, itself was recently downgraded.

http://www.nytimes.com/2010/03/16/business/global/16rating.html

Illinois is broke

First California, now Illinois--bankruptcy is right around the corner for the Land of Lincoln.

http://www.chicagobusiness.com/cgi-bin/mag/article.pl?articleId=32910&seenIt=1

Greece downgraded

Greek equities and bonds tanked as their government debt was downgraded by credit ratings agencies, as fears of a default were raised. I predicted that after Iceland's economy collapsed, other countries would follow suit. Other countries at risk of default include Dubai, Ireland, Latvia, Hungary, Argentina, Venezuela, Lithuania, Ukraine, Japan, Spain, Italy, the UK, and believe it or not, the US, as all these countries are technically insolvent, burdened with too much debt. The cascading dominoes have only begun to fall...

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6755179/Greece-put-on-standby-for-debt-downgrade.html

The USDollar will eventually share the same fate as the Drachma, as do all fiat currencies.

FDIC bailing out banks--er, or the other way around

In an interesting yet practical twist of fate, healthy banks may provide funding for the FDIC, whose charter is to insure bank deposits when insolvent banks go into receivorship.

http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=2

See my recent blog on funding concerns regarding the FDIC:

http://gregnguyen.blogspot.com/2009/09/fdic-insolvency.html

I guess that's what happens when the back stop needs a back stop.

Banking system insolvent

Jan. 20 (Bloomberg) -- U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

‘Bankrupt’ System

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Washington Mutual...what's next?

I posted this last week on WaMu:

Well, another shoe just dropped--the biggest bank failure ever. Washington Mutual was just seized over night, so good luck to any depositors with over $100,000 in their accounts. I'm going to guess there are many Californians, Floridians, New Yorkers, and Washingtonians who lost millions.

Hate to be the bearer of bad news, but this is getting ridiculous. I saw this coming a couple years ago, and adjusted accordingly, but my friends thought I was a doom and gloomer, when in hindsight, I wasn't gloomy enough.

So what's next? More bank failures, I assure you. Berkshire Hathaway's Warren Buffett (only the wealthiest man in the world), just mandated that one of their portfolio companies stop insuring any assets above the FDIC limit of $100,000. That should tell you something--get any amount over that limit out of there--now! Bank deposits, money markets, etc. are NOT the safe haven you thought they were. Check the capital reserves of your bank (banks are required to have reserve requirements to cover bad loans) to measure how healthy they are. I predict hundreds, if not thousands of banks will fail going forward. Heck, the biggest ones are failing before our eyes--expect this to cascade to other major money centers, as well as smaller regional banks. The Federal bailout programs may save some, but if they let big commercial banks like WaMu go under, and big investment banks like Lehman fail, should we have confidence that the local bank around the corner will be saved?

I hate to be an alarmist, but I can't in my conscious NOT give my opinions. As always, seek professional investment and tax advice from your investment advisor and tax advisor. But please, do your own research as well, because they are human and not infallible.

Looking further out, I predict General Motors will be insolvent within 18 months. Shareholders will be slaughtered. Their manufacturing costs are too high relative to their nimble competitors, and their obligations to fund the pension fund and healthcare will drive them to bankruptcy. Instead of building hybrids in the face of $5 a gallon gas, they continued to build gas-guzzling SUVs.

In between banks failing and American industry icons going under, everything else is Jim Dandy. :-) The economy will recover, but it's going to be a long time before things get better. I'm thinking we bottom out in 2010, which means we've got a few more years of pain.

Keep a cool head, stay the course, and tell your loved ones how much they mean to you.