Bonds down. Gold up $17.
Someone seems to think there is a whiff of inflation in the air.
Sniff...sniff....
We're not so sure. It seems too early to us.
But we're not even going to think about it. Today, we've got to make tracks. We're traveling.
In light of our voyage we're turning today's essay over to guest host Ian Mathias, of Agora Financial's 5 Min. Forecast. He'll take over from here...
Your family's share of the government debt is now over half a million dollars. A record $546,668, to be exact.
That cheery Monday stat comes courtesy of a USA Today study, which claims that each American family's share rose 12% in 2008. That's $55,000 in new government debt last year for every US household - thousands more than the median household annual income. Here's how it breaks down:
Last year's spike is the biggest since the Medicare prescription drug benefit was added in 2003. According to the rag, the government garnered $6.8 trillion in "new obligations" in 2008, bringing the total US tab to $63.8 trillion. Given our spending record so far in 2009, it's safe to say your family's burden is already much, much larger.
And you ain't seen nothin' yet... the Social Security program will grow by 1-2 million beneficiaries every year until 2032 as baby boomers retire. Medicare will add just as many each year starting in 2011, when that same demographic starts turning 65.
Unless the US becomes a net saver, "another global financial crisis triggered by a dollar crisis could be inevitable," forecast former Chinese central banker Yu Yongding over the weekend. (Oy... Beijing is 7,000 miles from Washington, and even they can see this coming.)
Yu's comments were purposefully timed - US Treasury Secretary Geithner embarked on a sudden PR tour of China this weekend. His mission? Keep the cash flowing from America's No. 1 creditor.
"No one is going to be more concerned about future deficits than we are," said Geithner, whose government's budget deficit will exceed $1.75 trillion this year. "As we recover from this unprecedented crisis, we will cut our fiscal deficit [and] we will eliminate the extraordinary government support that we have put in place to overcome the crisis."
In the meantime, Geithner assured students at Peking University that China's investments in US paper are "very safe."
"I doubt the Chinese believed him," says friend and currency expert Chuck Butler. "Of course, I'm not a Chinese official, so I don't really know what they are thinking. But I've watched them smile and tell former US Treasury Secretary Paulson that they were going to allow greater currency flexibility, and after he would board his plane, it would be business as usual... Same thing for Graham and Schumer, who thought their prestigious status as lawmakers would get them someplace with the Chinese.
"It all comes down to the fact that the US needs China more than the other way around."
Bill Bonner and Ian Mathias
for The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Paul Tredgett on 4 June 2009:
I hear that the US plans to print lots more dollars.
Please print in on much softer paper to make it much more useful.
Comment by Ross on 4 June 2009:
And these are only the non current liabilities. The Current Account Deficit countries depleting tax bases are an almost equal threat. The tax collectors were clipping the inbound cheap funny money & asset bubble ticket. New Zealand, Australia, Ireland, Spain, & UK will go deeper down than the US on the latter. In the US where alot of tax was avoided with the funny moneys sent offshore as equity investment and lending. On the equity side profits were recycled offshore tax free. The US was an international pitcher as much as a domestic catcher.