Tax Day

The USA Debt Clock as of Apri 19, 2008
The Debt now exceeds 11,000,000,000,000


Today is the deadline for all American citizens to file income tax (US income taxes are stranger than in most other nations).  No matter how much Americans may feel that they overpay in taxes, the truth is that their government more greatly overspends.

Anyway, the following seemed of interest:

The Time Bomb in Your Wallet

Money and Markets – April 15, 2009

Happy Tax Day! As you fork over money to the IRS, you might want to take a closer look at the U.S. dollar. It could very well be turning into a ticking time bomb inside your wallet.

To be sure, the dollar’s strength has surprised a lot of people, including me. And it’s tough to bet against the greenback when other currencies are looking even worse. Now, however, the dollar may be coming up against some simple but brutal math — foreign central banks may not be able to finance much of the 2009 U.S. fiscal deficit.

The U.S. needs to borrow $3.25 trillion this fiscal year, according to Goldman Sachs. President Obama is asking Congress to approve a whopping $3.55 trillion budget for 2010, and that may not be enough — the nonpartisan Congressional Budget Office estimated the deficit at $1.38 trillion, higher than the White House’s $1.17 trillion projection.

So, if foreign central banks stop or even slow down their purchases of U.S. Treasuries, the mighty greenback could be in for a humbling plunge.

And here’s where the worrying starts:

  • China is the top holder of U.S. Treasury bonds with approximately $739.6 billion as of January.
  • The Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released over the weekend by China’s central bank.

The Federal Reserve is clearly worried about the ability of foreign central banks to keep buying America’s debt. So now, the Fed is buying U.S. Treasury securities and completed its eighth purchase on Monday. As far as I’m concerned, a government buying its own bonds is like a snake eating its own tail.

Three Reasons These Dollar Worries Continue to Mount …

#1) Global demand for dollars is slowing.

Brad Setzer at the Council on Foreign Relations analyzed the Fed’s custodial data. He says central banks are still buying Treasuries but at a slower pace than in late 2008. And the demand isn’t keeping up with issuance. What’s more, the dollar’s share of reserves for reporting emerging economies, which does not include China, fell from 61.3 percent to 59.7 percent last year.

The year-over-year change is quite striking, as you can see on this graph …

[chart at ]

In the fourth quarter, the International Monetary Fund (IMF) found that the dollar holdings of countries that report data to the IMF fell by $110 billion. These emerging economies had to sell dollar reserves as investors fled their markets. The reserves of the countries that don’t report data to the IMF fell by $55 billion, and they likely reduced their dollar holdings proportionately.

This could mean hard times ahead for the U.S., because along with the ordinary budget deficit, we are issuing a LOT more debt to pay for various stimulus packages and to bail out the banks. And over time, central bank demand for Treasuries tends to track reserve growth.

#2) The world wants a new reserve currency.

The U.S. dollar is the reserve currency for the world. In fact, roughly 65 percent of the world’s foreign exchange reserves were in U.S. dollars at the end of 2008. China and Russia have expressed a desire for a new global reserve currency based on a mix of currencies and gold, and in the form of IMF special drawing rights (SDRs). Zhou Xiaochuan, the governor of China’s central bank, is calling the new currency a “super-sovereign reserve currency.”

Such a process would take years. But even the first steps down the road toward that goal would start to cut away at support for the dollar.

#3) The money supply is exploding.

The “broadest” measure of the quantity of money sloshing around the economy measured by the Fed is known as M2. This is all the currency in circulation, plus deposits the banks have on account at the Fed, money market funds and CDs, etc. In other words, it’s the measure of money that will rise along with inflation.

And the M2 is exploding …

[chart at ]

So what’s driving the U.S. dollar higher now? Basically, short positions against the U.S. dollar continue to unwind. And while the dollar isn’t winning any beauty contests, the sad-sack economies of Europe make the euro the dollar’s “uglier sister.”

When those short positions are unwound, unless there is a coordinated devaluation in key currencies, and unless the U.S. economy starts to show real improvement, the U.S. dollar index will probably test support and fail.

I will add a fourth: Bible prophecy.

The reality is that the USA is accumulating debt and the Bible prophesies the destruction of the great debtor:

For the vision is yet for an appointed time; But at the end it will speak, and it will not lie. Though it tarries, wait for it; Because it will surely come, It will not tarry…
6 “Will not all these take up a proverb against him, And a taunting riddle against him, and say, ‘Woe to him who increases
What is not his–how long? And to him who loads himself with many pledges’? 7 Will not your creditors rise up suddenly? Will they not awaken who oppress you? And you will become their booty. 8 Because you have plundered many nations, All the remnant of the people shall plunder you (Habakkuk 2:3,6-8).

While this will take some time, the Bible shows that it will happen.

Several articles of possibly related interest may include:

Anglo – America in Prophecy & the Lost Tribes of Israel Are the Americans, Canadians, British, Scottish, Welsh, Australians, Anglo-Southern Africans, and New Zealanders descendants of Joseph? Where are the lost ten-tribes of Israel? Who are the lost tribes of Israel? Will God punish the U.S.A., Canada, United Kingdom, and other Anglo nations? Why might God allow them to be punished first?
Who is the King of the North? Is there one? Do biblical and Roman Catholic prophecies point to the same leader? Should he be followed? Who will be the King of the North discussed in Daniel 11? Is a nuclear attack prophesied to happen to the English-speaking peoples of the United States, Great Britain, Canada, Australia, and New Zealand? When do the 1335 days, 1290 days, and 1260 days (the time, times, and half a time) of Daniel 12 begin? When does the Bible show that economic collapse will affect the United States?
Does God Have a 6,000 Year Plan? What Year Does the 6,000 Years End? Was a 6000 year time allowed for humans to rule followed by a literal thousand year reign of Christ on Earth taught by the early Christians? When does the six thousand years of human rule end?
Prophecies of Barack Obama? Eight reasons why Barack Obama is apocalyptic and eight reasons why Barack Obama is not the Antichrist. Here are there biblical and non-biblical prophecies, from around the world, that seem to discuss Barack Obama. Did Nostradamus predict Barack Obama dealing with the Antichrist? Might Barack Obama set the stage for the kings of the North and South as at least one Shiite prophecy suggests? This is the longest and most complete article on this page on Barack Obama prophecies.
Barack Obama, Prophecy, and the Destruction of the United States Some claim that Barack Obama is the prophesied “son of Kenya”, based up an early 20th century writing.
Barack Obama in Islamic Prophecy? There is actually a 17th century Shiite prophecy that some believe that Barack Obama will fulfill that will lead to a rising up of Islam.
Barack Obama Carries Hindu Monkey God Although there are some strange and false stories about Barack Obama, this one seems to be true.

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