Tuesday, December 28, 2010

QE... do the math.

Yesterday we talked about how the US Federal Reserve has to keep increasing the amount of Quantatative Easing (QE) it must pump into the American economy.

QE means only one thing: more US Debt.

And the numbers are getting stupid.

Should the current conditions persist, where will the United States be in 4 short years (2015)?

Usdebtclock.org is a fascinating little website that allows you to extrapolates future US debt at current rates of advancement.

The current US debt ceiling is approximately $14 trillion. That's the level at which goverment (supposedly) won't allow debt to pass. Mind you everytime they get close, goverment simply raises the ceiling and will do so again in spring of next year.

Small wonder.

If you thought $14 Trillion was bad in 2010, by the time 2015 rolls around the US national debt will hit $24.5 trillion.

Compounding that is the fact US Unfunded Liabilities are estimated at $144 trillion.

That, btw, is roughly $1.2 million for each and every American taxpayer.

These are numbers that cannot be ignored.

And when you consider how Washington fell into virtual gridlock earlier this month at the mere thought of ending the Bush tax cuts (and increasing government revenue to offset debt), there is no way you can even remotely believe government is going to be able to tackle the looming problem.

As you watch the travails of Greek and Irish bondholder, it is self evident that those problems will be nothing compared to what those unlucky enough to be in possession of US debt in 2015 will have to go through.

No one is going to wait for 2015 for the sh*t to hit the fan.

Moves are already going on behind the scenes to get out of US debt.

In fact some believe this is the real reason behind QE2. America had no choice but to monetize all debt issuance for 6 months because no one was willing to buy it.

This trend is going to intensify in 2011.


Email: village_whisperer@live.ca

Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.


  1. It is difficult to even comprehend what continued QE means for the average person in Canada.
    I thought things would be relatively quiet between Christmas and New Years, however gold and silver are up strongly today and oil continues it's march to $100/barrel. In addition, commodities have gone apeshit in 2010.
    Yet, the deflationistas continue to pull excuses out of the air as to why commodities and precious metals are rising. They tell us that gold is not an inflation hedge, or that commodity increases are only the work of speculators. Well I would like to ask them, who in their right mind would not speculate in commodities given the insane amount of money printing? Of course, they say that the trillions in money printing is much less than the trillions lost in asset values and credit. However, they ignore that the massive money creation will not necessarily find it's way back into say real estate, but will go to real assets, that were not just pushed up in value by the biggest credit fiesta in world history. Naturally, new money today will move into stores of value. Sure, had the bailouts and QE to infinity not occurred we would have deflation and depression. Instead we get cost push inflation and a hyper-inflationary depression, which provides the added bonus, above a debt depression, of killing the dollar. The Ben Bernank will go down in history as the biggest financial fool. This brings up the question; who does he work for?

  2. totally agree with what you are saying.

    debt clock link is broken by the way.

  3. Thanks pipewrench. Link should be fixed now.