US going to be bankrupt?

It is more fun criticizing

Is US going to be bankrupt?  Many pundits say yes.

What are the factors that may lead to this?

1.  US $38 trillion debt. Its debt service is over $1 trillion much more than US spending on military and health.    Its ratio of debt service to GDP is 121% and many say the threshold is of 120% has been crossed.

2.  End of US as reserve currency.  The pegging of US dollar to gold was ended in 1971 when fmr Richard Nixon ended convertibility of US dollar to gold.  France collected US gold and so with many other countries and Pres. Nixon saw it fit to end the Bretton Woods agreement in 1944 that pegged US dollar to the gold.  This meant less US countries are using US dollar as reserve and that means more US dollar coming home to roost

    Another cause for dumping of US dollar from its reserve currency status were:  weaponizing the dollar vs Russia.   Every country is vulnerable to such sanction and thus avoided the dollar.  

    BRICS countries are dumping the dollar as reserve currency and having their own electronic transfer system bypassing SWIF

3.  End of the 50 year Petro dollar.  There was so called Petro dollar agreement between Henry Kissinger  where the deal was for making KSA ask for payment in dollar, and in return US would support KSA by arms and security.   KSA also would invest petro dollars in US treasury.   It was seen, like the Japan  Yen, KSA recycling the payment by USA back to US (even when the oil was purchased) thus supporting the US cheap lifestyle (as with the Plaza accord for Japan)

    Thus US printed more US dollar to support this oil purchase in dollars. US exported inflation to KSA and supported US debt

4  What this means:

     The cheap US Petro dollar coming home to to roost and US mainland will be flooded with dollars and hyperinflation will be the tune of the day.  Currency debasement is prelude to collapse:   it has happened to Roman denarius, Spanish pesetas, UK pound sterling.  It can  and will happen to US dollar

5.   Japan is now selling off its $1.3 trillion holding of US treasuries (to finance it QE to support the moribund Japan economy.   They are raising  the local bonds to near 2% (from negative) pausing Japans appetite to US treasury.  That means less  buyer for US treasuries, and less liquidity for USA.  Japan is probably reeling to US Trumps 50% export tariff to Japanese goods (despite the Plaza accord)

6.  What are your alternatives?  (Survivalists were right)

    1  Invest in commodities:   food supplies, bottled water, canned goods:   meat fruits and vegetables

    2.  Invest in farmlands as Zuckerberg,  Bill Gates.

Philippines is a safe haven after all.   Rich natural resources:  seas for food, plenty of farmlands.  Many may see Americans escaping difficulties at US homeland due to this forthcoming collapse:  US bankruptcy.  It is expected that life will be hard in USA. 

Has Japan dropped an atom bomb on world's financial market?

It is more fun criticizing

The world financial market is in turmoil after Japans bonds prices increased, after its QE to the business people to perk up economy and its currency went into a free fall.  Shall we survive this financial tsunami  

Is it Japan's revenge on US dropping A bomb at Nagasaki and Hiroshima?     

US Japan debt addiction for 4 decades has ended; higher borrowing rates for US, $20 trillion carry trade in danger of collapsing

It is more fun criticizing

This is not going to be good for US market and Japan.  Japan has more than 250% of its debt vs GDP and for a long time has fed US with less than market % for its debt.  Japan accumulates trade deficit with US over.  It has increased its bond rate up to 2% ending the period of free source of funds for arbitrage (borrowing yen for higher yield investment)  Japan supported both deficits of US:   trade and  budget.

What has happened?   Japan has decided to grant stimulus package to companies because of static growth of the economy.  To finance this QE, Japan has to unload some of its treasuries   (Which will not go unnoticed by the world financial market).    This puts pressure on US borrowing, now saddled with $37 trillion in debt, higher servicing of its debt, now at 15% of GDP and $1.2 debt servicing.   With the QE, the Yen is devaluing and Japan has to prop up its currency

Its now over, the yen is on free fall and very likely its going to be devalued and Japan economy could collapse.  Japan was a big headache for IMF for a long time according to former boss Lagarde.

Japan used to be the 2nd largest economy in the world after US, and was the hotbed of manufacturing.  But now its famous brands have fallen:   Toshiba, Sharp, National, Sony.    Now Japan is campaigning itself as a tourist destination.   Do you  think that this is Karma for Japan, following its atrocities in WW 2.?

What are the other consequences.   The carry trade.   Arbiters and currency traders, borrowed from Japanese banks at zero or near zero interest and used the same to hedge:   buy other currencies, invest in foreign stocks etc to gain some tidy profit.  However this feast is over, as the Japanese bonds are now more expensive.   So companies on carry trade have to cash out or drown under water.  This business, totaling $20 trillion could cause massive strain on world financial liquidity, even for US

This also means that US debt US treasuries will mean more interest expense for US homebuyers and consumer finance from credit cards.  

China is also dumping US treasuries due to political and trade tensions And with both China and Japan US two biggest creditors dumping US treasuries, US will find itself paying more for debt and even a liquidity crisis

Also note the end of US Petrodollar and Chinas payment system bypassing SWIFT and BRICS nation bypassing the US dollar altogether.  When Eurodollar and Petrodollar start coming home to roost, watch how more US dollars coming home means hyper inflation for USA.

More explanation on this week's bloodbath: BOJ increase in interest rate and rising yen detonates world markets

It is more fun criticizing

The BOJ decision to increase interest rate and rising yen has hammered the carry trade.   And it is no longer wise to hold on to carry trade.    Thus hedge funds and other money funds are disgorging their carry holdings to stave off losses.   The two events are causing the carry trade to be unprofitable.  

Is this revenge for the nuke bombing of its two cities vs USA and the world (no basis)

We just wonder how this event would:

1.  Affect Japanese yen loans to the Philippines;

2.  Budgeted/approved yen loans to Philippine projects

Global stock market just crashed

There is greater uncertainty with USA because of huge debt.   Its a $36 trillion now.  And USA adds $1 trillion every 100 days.  The idea now is not to pay the debt and just keep on printing more money.   But all will come crashing soon.

Questions:

1.  How is this crisis going to affect our relatives living in USA?

2.  How is this going to affect local banks and businesses.?

All ready local stock markets are down?  How about local banks?  Will this crisis affect remittances and our OFWs