Cram Down the Ultimate $100 Trillion Bailout, U.S. Dollar Value Fast Meltdown Ahead

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Johnny Oxygen's picture
Johnny Oxygen
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Cram Down the Ultimate $100 Trillion Bailout, U.S. Dollar Value Fast Meltdown Ahead

Cram Down the Ultimate $100 Trillion Bailout, U.S. Dollar Value Fast Meltdown Ahead

http://www.marketoracle.co.uk/Article23100.html

 

When debtors go deadbeat, they can't even pay the interest, let alone the principal and the U.S. Government might be approaching that point soon, according to B4IN contributor Karl Denninger:

Here's the math.

This fiscal year (2010) we have approximately $13 trillion outstanding in debt (including "intergovernmental borrowing", that is, Social Security and Medicare.)

Our total debt service is projected (it's not quite over!) to be 4.63% of the budget, or about $165 billion. That's approximately 7% of revenues, incidentally.

That's an effective interest rate of about 1.27%.

Yes, 1.27%.

Now what happens if we take no more debt at all but rates normalize to 5%?

That would be $672 billion, or about $500 billion more than it is today. Incidentally, that's fifty-two percent of all (personal and corporate) income taxes, up from today's thirteen percent.

Of course the CBO says we will run about $1 trillion in deficits for the next ten years. Let's presume it's five years, and we'll give it the $1 trillion, although I think that's low - maybe by 25% or more.

So let's add $5 trillion to the total, for $18.5 trillion, and apply a 5% rate to it.

That comes to $925 billion, or dangerously close to all personal income taxes, which are $1.061 trillion.

Got it folks? All personal income taxes, or if you prefer all FICA and Medicare taxes, will go only to pay interest.

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docmims
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Posts: 644
Re: Cram Down the Ultimate $100 Trillion Bailout, U.S. ...

The Iraqi coalition govt is being backed by Al Sadr as of today.  If the Iraqis put together a legitimate govt the Dinar will be revalued at 50 to  80 cents on the dollar.  Everyday Iraqi's will rejoice as their pocket change goes up 8000 percent.  Chinese, Russians, English, German, French and US central bankers will rejoice as their 10 trillion Iraqi dinar reserves split the Iraqi oil reserves among the major powers.  Can gets a major kick down the road.

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