With the uncertainty of the world’s global economy, credit raters are questioning the ability of countries to fulfill their obligations that they have to debt holders. Moody has just put Japan’s Aa2 local and foreign currency bond rating on the list for a potential downgrade. Japan has already been dealing with long-term fiscal concerns for years and the situation escalated during a series of unfortunate events in March. “The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government’s ability to fashion and achieve a credible deficit reduction target,” Moody stated. Last month, S&P cut its outlook on Japan’s sovereign rating from stable to negative to reflect a higher potential of a downgrade after the disaster.
Europe is leading the way for where the U.S. will be soon. European leaders are working out a deal that would lead to unprecedented outside intervention in the Greek economy. This agreement is designed to spur private debt holders to voluntarily extend Athens’ repayment, of course this is done by fudging the free market and having to deal with the unintended consequences of centralized intervention. Plans are to attempt to obtain up to 50% of its $86-$100 billion in new financing needed by Athens until the end of 2013. In the latest setback, the Greek government failed on Friday to win a cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.
Beat Wittmann, CEO and Partner of Dynapartners LTD, expresses his thoughts on Greece and the likelihood of this nation defaulting in the near future. Visit our front page for interview, CLICK HERE!!!
What’s interesting to note is that historically most countries with a centralized monetary system eventually lead to inflation, theft, and default. This happened in the Roman Empire, Weimar Republic to the German marks, Hungarian pengos, Zimbabwean dollars, Greek drachma, Brazilian cruzeiros, Polish zlotych, U.S. continentals, Chinese yuan, Nicaraguan cordobas, Peruvian soles, Angolan kwanzas, Russian rubles, and Argentine Pesos with the list going on. In 1932, Argentina had the 8th largest economy in the world until its currency collapsed. If history is any indication of the future, global default and debasement of global currencies are imminent. Governments commonly steal the purchasing power of its citizens though the hidden tax of inflation rather than the more unpopular method of raising actual tax rates. It’s a vicious cycle that enables the governments to spend even more recklessly. Then of course is the “protection” of everyone’s currency from drastic devaluation through international agreements that only delay the facts.
The temptation for leaders to go down the fiat road as a quick fix for temporary results, is a major factor as to why countries resort to centralized money. Failure of the generations prior still does not provide enough motivation for governments of today to act responsibly with the people’s wealth and savings like they are supposed to. Ironically, the main protection that our currency has is the fact that all other major currencies in the world are inflated too.
For many, this summer is not going to be the same as what they’ve enjoyed in prior years. The Associated Press reported on grim summer numbers for the youth in urban cities. These youth are facing cutbacks in their summer camps, pools, libraries, and jobs. Swimming pools are being closed, recreation centers are shutting down, and library reading programs are being taken away. New York City’s youth employment program is facing a cut of more than 15 million dollars. Huge impact to the local communities that benefit from these programs, none of which is surprising us the least. The short end of the stick is held by the taxpayers who pay into a system that doesn’t put out. Reform/abolishment of draining agendas should be of supreme importance to our leaders, but in the end, the powers that be do as they please and socialism prevails. However, programs that encourage reckless living and irresponsible behavior go untouched and continue to tap into the tax revenue supply regardless of the events on main street America.
On a more positive note…
Gold is currently breaching new highs of $1,539 and silver is on a upward conquest at $38.67. Don’t forget to protect your wealth with something other than fiat paper money that is under the care and protection of individuals who are eager to inflate, devalue, and steal.
Upcoming Union VIDEO!!!
This week, CrushTheStreet.com will be releasing a video that is a must see! Public unions are bullying the unorganized taxpayer. This mini documentary is bound to receive a lot of attention and really stir the pot of people’s emotions to stand up against these inefficient entities that encourage minimal production and wasteful spending. Stay tuned for its release later on THIS WEEK!!!
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