The impending emergence of The Four Horsemen of the Apocalypse (Debt, Derivatives, Deficits & Dollar) may soon sound the death knell of the entire U.S. economic recovery [we have seen] since early 2009 and eventually and sadly morph into mass Unemployment, Home Foreclosures, Stagnant Wages & Shrinking Retirement.
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the FREE Market Intelligence Report newsletter (sample here; register here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Doolittle goes on to say in further edited excerpts:[Specifically,] The Four Horsemen of the Apocalypse are:
- Debt As A Percent of the GDP
- Derivative Growth (Worldwide)
- Deficits (Federal Budget Deficit)
- Dollar Devaluation
1. Debt As A Percent of the GDP
Since 2003 the U.S. National Debt as a percent of GNP has gone up dramatically with little probability of diminishing. Moreover, the implementation of Obama Care will most likely propel the percentage…[even further]. To date this translates into a Total National Debt of $17 TRILLION…and growing by the second:
2. Derivative Growth (Worldwide)
Derivatives are financial instruments whose value is derived from an underlying asset (stocks, bonds, commodities, etc.). Traders can swap interest rates, take bets on whether a firm will go bankrupt, safeguard against future asset price increases, etc—all under the ugly umbrella term “derivative”. The concept of a derivative has been around for centuries, but their use has recently exploded from an estimated $100 trillion in 2002 to over $700 trillion in 2011, according to the most recent survey by the Bank of International Settlements…[of which 4] U.S. mega banks—JPMorgan, Bank of America, Citi, and Goldman Sachs—have more than 30% of the worldwide amount ($214 trillion)
….Mega banks trade risk via derivatives contracts to another firm while keeping the underlying asset on their books. This way they can bypass capital requirements and take on more debt which, in turn, allows them to make more trades. [On the other hand, however,] it also means that if a sudden downturn surfaces in the markets, the firm which borrowed way beyond their means may quickly go bankrupt. Lehman Brothers experienced this after they’d borrowed 30 times more money than they had in reserve. In that case a relatively small loss of a mere 3% meant that Lehman no longer had reserves (i.e. capital), and they therefore collapsed…i.e. totally wiped out.
The leverage that derivatives allow is incomprehensible. The 4 mega banks mentioned above are betting 30 TIMES MORE MONEY THAN THEY HAVE. This is financially insane.
Try to comprehend the magnitude of $700 trillion in financial derivatives. To do this one needs a benchmark. We all know the U.S. National Debt today is more than $17 trillion. Well, today’s total worldwide financial derivatives is a number more than 40 TIMES LARGER than today’s Total US National Debt – 40 TIMES LARGER!
3. Deficits (Federal Budget Deficit)
The Federal Budget Deficit has been exploding since 2002.
The…U.S. Federal deficit has been on a collision crash course since 2002 – and is projected to suffer yearly budget deficits through 2017 – and this inexorable growth of yearly deficits will inevitably tank the U.S. dollar.
4. Dollar Devaluation
The total national debt is expected to exceed $25 Trillion by the time President Obama leaves office. Subsequently, U.S. total indebtedness may become so onerous that the government may not be able to borrow enough (via issuance of Trillions more in US$ T-Bonds) to finance the ever mounting debt. Consequently, the Federal government will be literally forced to print more money (or default on the debt)…which will end in the total collapse of the U.S. greenback and in this event interest rates will be fueled sharply upward, thus tumbling (again) the U.S. real estate market as mortgage rates soar (curtailing housing sales).
The impending emergence of The 4 Horsemen of the Apocalypse (Debt, Derivatives, Deficits & Dollar) may soon sound the death knell of the entire U.S. economic recovery since early 2009….[which] may eventually and sadly morph into mass Unemployment, Home Foreclosures, Stagnant Wages & Shrinking Retirement
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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