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By Robert Fitzwilson of The Portola Group

October 6 (King World News) - “We Owe $220 Trillion, How Long Can The Fantasy Continue?”


The conflict in Washington, D.C. Is not about politics.  It is about mathematics.  We have  finally come to the end of the road of over-promising and under-delivering.  While not unique to the United States, it is particularly problematic given the dollar’s reserve currency status....


Continue reading the Robert Fitzwilson piece below...  




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The current crisis has been predicted for at least 30 years.  What was not fully comprehended by those making the prediction in the 1970s was the insatiable demand for dollars by a rapidly industrializing world.  Decades of printing, combined with globalization and financial engineering, secured a dominant place in the capital and goods markets for the currency.


We remember the “megabuck”, millions.  It then became the “gigabuck”, billions, before you knew it.  Denominating assets and revenues in billions became almost a badge of honor in an electronic world where adding a few zeros was a trivial task.


In the stock market, the definitions of large, mid and small capitalization stocks have drastically increased over recent decades.  A handful of companies have even begun to challenge the $1 trillion market cap level.  It is not all due simply to inflation.  This has also been due to the emergence of a truly global marketplace.  Brands such as Google, Apple, Amazon and Priceline are no longer restricted by geography.  The size of their customer bases has dramatically increased, resulting in a much larger financial opportunity for those companies as well as others with the right combination of goods and services.


As the economic pie continued to grow, in current dollars, politicians found virtually unlimited capacity to make promises to their constituents.  In California, the amazing success of high-tech companies and the enormous wealth creation also coincided with the dramatic expansion of public sector benefits.


A lottery winner who had squandered the newly found money once said that “winning the lottery is like Miracle Grow (fertilizer) for character defects”.  Silicon Valley is certainly prone to that.  To be fair to the public sector employees, it probably became a bit intolerable watching enormous wealth being created along with the unavoidable arrogance that can often accompany such success.  They wanted their piece of the pie.


As we draw closer to the time when the benefits and promises must be paid, we are finding that the prosperity on which the commitments were made was insufficient, illusory and delusory.  Taking into consideration the $220 trillion of obligations, let alone the annual spending deficit as examples, one can easily see that the mathematics do not work.


We are at the end of the road.  It is a choice between the brake or the accelerator.  We can either accelerate into financial oblivion and a new global currency system, or tap on the brake to provide time to deal with the pain in an orderly manner.  Our preference is for the former, but there is little evidence that the politicians around the world will concur.  Slamming on the brakes is an option, but would be needlessly destructive.


Hanging on to power is one-and-the-same with handing out goodies.  The debt ceiling in the U.S. will be raised and the fantasy that Bill Fleckenstein outlined will continue.  The mathematics will require larger and larger amounts of printing just to maintain the status quo.


While we wait for events to unfold in Washington, the good news is that the global economy continues to generate opportunity for those willing to look.  We find high-technology, medical/biotech, productivity and energy to be very attractive sectors at this time.  For example, the U.S. Energy Exploration and Production sector is undergoing a very powerful renaissance.  It is very unusual to see such dramatically positive outlook for an entire industry.  There is real value being created there, and it looks to be very sustainable.


Gold and silver have performed reasonably well and should continue to be accumulated by long-term holders.  The mining companies continue to be the “whipping boys”.  Several times in the last quarter, the HUI has been outperforming other asset classes only to be smashed down.  The end of the quarter was no exception.  In the last week and a half, the outperformance of the HUI was reversed.  There is little doubt that the value represented by quality companies continues to be quite tremendous, but holdings should be maintained for the long-term as it is impossible to know when that inherent value will be realized. 


IMPORTANT - One of Bill Fleckenstein’s best KWN audio interviews ever discussing the coming collapse in stocks, gold, the end game and more is available now and you can listen to it by CLICKING HERE.


Update - The KWN audio interview with David Stockman discussing financial collapse, a coming flight to gold, the end game and more is available now and you can listen to it by CLICKING HERE.   


© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The audio interviews with Bill Fleckenstein, David Stockman, Robin Griffiths, Jim Grant, Gerald Celente, William Kaye, Dr. Paul Craig Roberts, Chris Powell, Michael Pento, Eric Sprott, Andrew Maguire and Grant Williams are available now. Also, other recent KWN interviews include Marc Faber and Felix Zulauf to listen CLICKING HERE.


Eric King

KingWorldNews.com

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