Archive for May, 2010

Why the World is Going Broke. Does Anyone Care ?

Friday, May 21st, 2010

Why is the world going broke, and how did we get into this mess.

Start with a homeowner who was granted a mortgage even though he did not deserve one, and couldn’t afford one.

During a dip in the economic cycle, he looses his job, and can’t keep up with his mortgage payments.

He falls behind and ultimately defaults on his loan.

The mortgage company that brokered his loan  to the lending institution , takes a loss on the bad debt and goes broke.

The lending bank has a growing number of  defaulting  mortgages, and fails.

The failed bank had previously packaged and sold its mortgage loans as “derivatives”, to another bank.

The larger bank which bought the first bank’s derivative debt “bomb”, now goes broke.

The government springs into action, bailing out the failied bank, and assumes their bad debt.

As the derivative bombs continue to explode, they turn into a “blitzkreig” which threatens our entire financial system.

The government steps up and spends trillions of dollars to bail out and prop up the “entire world” .

While spending all of this bail out and now stimulus money which it does not have, the government continues to :

Provide Social Security, money , which it does not have.

Provide unemployemnt insurance  for upwards of 20 % of the population for almost 2 years, money , which it does not have.

Provide Medicare and Medicaid and other free health care services, with  money that it does not have.

Provide another trillion dollar health care reform coverage, with money, that it does not have.

Bail out the Bankers with TARP funds, which it does not have.

Bail out the auto industry with money it does not have.

Bail out and protect labor unions, with money that it does not have

When smaller countries, governments, states, counties, and municipalities can no longer afford the growing tide of the social welfare state, they turn to larger governments and countries to bail them out.

Investors seeing the dangerous rising tide of debt and insolvency in the world, buy big government bonds because they are “safer”.

When big governments run out of printers ink, the Ship of State finds inself sailing in rivers of red ink.

Red ink is not as buoyant as clean clear water, and the Ship of State is in danger of sinking.

Disaster lurks !