QUESTION: Hey Marty,
If the US debt bubble bursts, how does this not affect the banks and insurance companies, as they hold over $1 trillion worth of US debt? Wouldn’t these instances falter also? If they falter, wouldn’t that bring down the entire stock market as well? If this is the case, then how can the stock market rally as you have been stating?
Thanks
J
ANSWER: Everyone focuses constantly on the US, and they tout how $20 trillion will all default. This is just first, NONSENSE, and secondly a gross exaggeration without looking at total global sovereign debt. Total global debt stands at $230 trillion which is more than 300% of total annual Gross Domestic Product (GDP) of the entire world. The United States recorded a government debt equivalent to 104.17 percent of the country’s GDP. If we look at the US debt and narrow the focus to just government debt, then we find that the US accounts for $20 trillion out of nearly $59 trillion or about 1/3rd. Those who keep ranting about the US debt level, have said the same thing at every milestone. First it was $1 trillion back in 1980, Then, $5 trillion, $10 trillion and now its is $20 trillion. The whole reason big money buys blue-chip equities is because stock survive such events as they did during the German Hyperinflation. If a government goes bust, it is the private assets that survive.
The banks and insurance companies hold far less than you may think. The banks sold their Treasuries and are parking cash at the Fed who pays them interest in Excess Reserves. A default on the debt, EXTREMELY UNLIKELY IF NOT IMPOSSIBLE, would hurt the Fed, but far less the banks directly. These people who constantly say the dollar will crash because of the US debt are blind. They never look outside the USA for a single second. They have a very myopic view of the world and this is why big money would never listen to them. They could never answer a single question about what’s taking place outside the USA when it comes to real capital net movements. If you do not comprehend even that capital is moving constantly around the globe, how can you possibly forecast anything no less answer questions of international investors? Historically government ONLY defaults when people no longer buy debt. It’s always just a Ponzi Scheme. All governments issue new debt to retire the old. They do not pay off the debt. So the USA will NEVER default on its debt by itself. Historically the default comes only when they cannot sell the new debt to pay off the old. That’s just insane and impossible historically.
Intra-governmental Holdings of US Federal debt are rarely ever talked about, which includes 230 other federal agencies holding US debt totaling $5.554 trillion, or almost 28% of the entire federal debt. This includes the Social Security Trust Fund, which can only invest in government debt. As of December 31, 2016, here is the breakdown of who owns what:
- Social Security Trust Fund & Federal Disability Insurance Trust Fund = $2.801 trillion
- Office of Personnel Management Retirement = $888 billion
- Military Retirement Fund = $670 billion
- Medicare Trust Fund = $294 billion
- Misc. Government retirement funds = $304 billion
This is what we would call the asset balance sheet. If this were a business, we would then look to see how much cash it has on hand as well. That amounted to $580 billion as of December 31st, 2016. (Source: Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, U.S. Department of the Treasury, December 2016.)
Now, the remaining debt as of December 31st, 2016 held outside the government amounted to $14.403 trillion. Foreign governments and investors hold nearly half of that figure and 25% is held by yet other governmental entities non-federal, which are state and local governments, but legally also includes the Federal Reserve since it is technically not an agency. Now, looking to the private sector, about 15% is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. Businesses own only about 10% of the national debt, which includes the banks and insurance companies. This also would include various trusts and investors holding T-Bills on deposit for trading. Then we have about 30% of the debt that is held by foreign holders, which includes governments around the globe as part of their foreign reserves. So here is what this looks like:
- Foreign – $6.281 trillion
- Federal Reserve – $2.463 trillion
- Mutual funds – $1.379 trillion
- State and local government, including their pension funds – $874 billion
- Private pension funds – $544 billion
- Banks – $570 billion
- Insurance companies – $304 billion
- U.S. savings bonds – $169 billion
- All Others = $1.349 trillion*
Now, a close review of this balance sheet shows that Social Security and all retirement/pension funds, hold almost 50% of the national debt. Let’s get to the bottom line. In the proposition that the United States actually defaulted on its debt, yes about 30% is held by foreign reserves and that would mean that the world monetary system would collapse. It is highly unlikely that such an event would ever take place and it most certainly is even less than the total debt owed by emerging market which stands at about 50% greater than that figure.
Emerging Market corporate debt share of the global credit market has been increasing and now accounts for about 18% of all U.S. dollar-denominated corporate debt in the world. Emerging Market debt has increased 300% since 2005 alone. The USA has the biggest economy and the most viable. Yes, if USA defaulted on its debt it would be lights out for the entire world. However, current and future retirees would be hurt the most and that would provoke civil unrest like you have never seen.
The risk is by no means that the USA defaults. The risk is that the defaults start not in the core economy, but it ALWAYS begins from the outside and spreads inward to attack the core. The foreign bond defaults in 1931 is what created the Great Depression and it did not NOT because the US defaulted, but because the USA adopted AUSTERITY and allowed deflation to dominate – the same mistake made in Europe today.
I have previously warned that when dealing with government, he you has the guns makes the rules. When Italy could not pay 1919–1922 and was at risk of defaulting on their debt, they simply issued a law that the short-term paper you may have bought was now converted by government to 10 year bonds. Government can extend short-term debt into long-term without asking first. That will never happen with corporate debt. So what is a default touted by these people preaching the end of the world is nonsense. These people have the guns and can write any law at any given moment to pretend they did not default. India just cancelled its currency overnight with no notice.
The real default will come by masking it with war, they will extend debt, call a moratorium on debt payments, and most likely alter the world monetary system swapping all currency for something new that is electronic. Kiss cash good bye. Re-Constructing the FUTURE is already in motion. The door is open and how government crosses that threshold is not going to happen how these people are preaching to see their books.
If you have never worked behind the curtain, I seriously doubt you will ever truly comprehend what takes place. Being asked for your opinion by some agency is not working behind the curtain. They ask a lot of people. They do not listen. They are simply looking at what is going on outside their tower. They are not interested in OPINION. When a crisis hits, I get the call not for my opinion, but (1) what does the computer say and (2) what are your clients going to do. Everyone has an opinion, but it is only as good as your experience. A man cannot write a book on how it feels to give birth. Not going to happen.
So these people speculate about unrealistic events. NOTHING ever takes place until it is forced upon the actors.
- * Individuals, brokers, dealers, bank personal trusts and estates, corporate/non-corporate businesses, various government-sponsored enterprises, and other misc investors. (Sources: “Factors Affecting Reserve Balance,” Federal Reserve, January 18, 2017. “Treasury Bulletin,” Table OFS-2, Ownership of Federal Securities, U.S. Department of the Treasury, June 2016.)
- https://www.armstrongeconomics.com/markets-by-sector/bonds/debt-burden-v-equities/
Today at 2:18 pm by Rocky
» utube MM&C 4/26/24 Iraqi Dinar - US Treasury Exchange Rates- Focus - Banking Partnerships - Rate C
Today at 2:17 pm by Rocky
» Parliamentary efforts to transform Iraq into a global market for transferring Internet capacities
Today at 2:07 pm by Rocky
» A parliamentary committee that enriches the political forces: Stop plundering Iraq’s wealth and work
Today at 1:56 pm by Rocky
» Politician: Salem Al-Issawi is the most likely to assume the presidency of Parliament
Today at 1:55 pm by Rocky
» The price of the dollar is close to 145 thousand dinars؛ how much is $100 worth of transactions؟
Today at 11:57 am by wciappetta
» Al-Sudani: The world today is witnessing crises whose impact has been reflected in the global econo
Today at 9:50 am by Rocky
» The Federal Court responds to an inquiry by Al-Sudani regarding the powers of the provincial council
Today at 9:40 am by Rocky
» Among them are the Iraqis... a list of the most sought-after immigrants to America
Today at 9:38 am by Rocky
» An expert talks about the "biggest barrier" and the positives of merging Iraqi and Arab banks
Today at 9:29 am by Rocky
» The House of Representatives adjourns its session
Today at 9:24 am by Rocky
» Parliamentary demands to expedite the legislation of the Eid al-Ghadir holiday law (documents)
Today at 9:23 am by Rocky
» Parliament adds the paragraph “Electing the Speaker of the House of Representatives” to its agenda
Today at 9:21 am by Rocky
» Alsumaria publishes the text of the law against prostitution and homosexuality
Today at 9:20 am by Rocky
» A parliamentarian reveals the reason for the failure of the Speaker of Parliament to pass during tod
Today at 9:19 am by Rocky
» Al-Sudani: The government has launched many strategies and initiatives that will improve the reality
Today at 8:42 am by Rocky
» International Business: Iraq has made progress in supporting businesses through investment and priva
Today at 8:33 am by Rocky
» Association of Banks: Iraq is witnessing great development in the transition to electronic governmen
Today at 8:25 am by Rocky
» The House of Representatives votes to add an item to its agenda (election of the Speaker of the Hous
Today at 8:22 am by Rocky
» Parliamentary integrity: Combating corruption requires parliamentary legislation
Today at 8:15 am by Rocky
» Al-Karaawi: America is trying to restrict Iraq
Today at 8:13 am by Rocky
» The State of Law coalition moves to form the local government in Diyala
Today at 8:12 am by Rocky
» The Sudanese and his battle against corruption.. Where is the fault with the government or with the
Today at 8:11 am by Rocky
» Prime Minister's Advisor: We will see the dollar fall on the black market soon
Today at 8:09 am by Rocky
» The Sunni blocs are resolute. The presidency of the Council is ours, away from Al-Halbousi
Today at 8:08 am by Rocky
» Al-Sudani discusses with a workers’ organization his government’s steps in this field
Today at 7:58 am by Rocky
» Parliament holds its session in the presence of 170 deputies
Today at 7:57 am by Rocky
» In the presence of Nechirvan Barzani and Al-Sudani... the State Administration Coalition holds an “i
Today at 7:55 am by Rocky
» The UAE company ADNOC resorts to Iraqi oil. Find out the reasons
Today at 7:53 am by Rocky
» The Iraqi Parliament votes to add an item to elect a president to its agenda
Today at 7:52 am by Rocky
» The Federal Court responds to an inquiry by Al-Sudani regarding the powers of the provincial council
Today at 7:51 am by Rocky
» Al-Sudani: It is necessary to attract women to work as a productive energy that cannot be disrupted
Today at 7:47 am by Rocky
» Zebari regarding targeting the Kormor field: a systematic attack on the economy of Kurdistan
Today at 7:46 am by Rocky
» Saudi Arabia tops, and this is Iraq's rank... a list of major suppliers of crude oil to South Korea
Today at 7:45 am by Rocky
» With a value of 125 million dollars.. Iraq is at the forefront of countries importing Iranian textil
Today at 7:44 am by Rocky
» More than a billion dollars in sales from the Iraqi Central Bank within a week
Today at 7:43 am by Rocky
» Al-Sudani stresses the need for the expertise of the International Labor Organization to legislate a
Today at 7:29 am by Rocky
» Including the return of 21 wanted persons.. The Iraq Money Recovery Fund counts its achievements in
Today at 7:27 am by Rocky
» The path to development is the criterion between true patriotism and political clowning.
Today at 7:25 am by Rocky
» The file of the Presidency of Parliament is on the state administration table... this evening
Today at 7:22 am by Rocky
» Director General of the International Labor Organization: Many challenges in the world of work and t
Today at 7:20 am by Rocky
» Al-Sudani: The world is witnessing crises that reflect negatively on the Arab and international peop
Today at 7:11 am by Rocky
» Prime Minister: Our government has provided great support for the success of the activities, program
Today at 7:08 am by Rocky
» Al-Asadi: Iraq places the social protection file among its priorities
Today at 7:07 am by Rocky
» Al-Sudani: Iraq is one of the first countries in the region to join the International Labor Organiza
Today at 7:05 am by Rocky
» In the presence of Al-Sudani and Barzani, the State Administration Coalition holds an “important” me
Today at 7:03 am by Rocky
» Appreciating the presence of Al-Sudani... Director General of the Arab Labor Organization: Here from
Today at 5:29 am by Rocky
» Prime Minister: Our government has provided great support for the success of the activities, program
Today at 5:28 am by Rocky
» Al-Sudani: The world is witnessing crises that reflect negatively on the Arab and international peop
Today at 5:24 am by Rocky
» The Parliamentary Development Institute organizes a workshop on the political role of the representa
Today at 5:22 am by Rocky
» With Arab and international participation. Tomorrow will be the start of the Fourth Baghdad Internat
Today at 5:21 am by Rocky
» OPEC Secretary General: The end of oil is not on the horizon
Today at 5:19 am by Rocky
» Closing a number of unlicensed offices and companies south of Baghdad
Today at 5:16 am by Rocky
» Repercussions of the bombing...intensive government movements to resume work in the “Kormor” field
Today at 5:15 am by Rocky
» In the presence of Al-Sudani...the opening of the Arab Labor Conference in its 50th session in Baghd
Today at 5:14 am by Rocky
» Al-Sudani: We are working on drawing future visions regarding the “green and digital” economic secto
Today at 5:13 am by Rocky
» Barzani after the Kormor attack: We are ready to coordinate with Baghdad to put an end to these atta
Today at 5:10 am by Rocky
» Al-Sudani directs the formation of an investigative committee into the circumstances of the Kormo fi
Today at 5:08 am by Rocky
» Bismayah is confused about the new electronic portal.. What about the landlord and the subcontracts?
Today at 5:07 am by Rocky
» Kurdistan Government: Loss of 2,500 megawatts of electricity due to targeting the Kormor field
Today at 5:06 am by Rocky
» Crisis in Kurdistan: 12-hour daily power outage and complaints of “confusion”
Today at 5:05 am by Rocky
» The Supreme Anti-Corruption Commission demands Nineveh for the contracts concluded by “Najm Al-Jubou
Today at 5:04 am by Rocky
» Al-Khanjar, Al-Samarrai, and Abu Mazen are hosted by Shaalan Al-Karim to discuss accelerating the se
Today at 5:03 am by Rocky
» Iraq asks the countries of the world to respond to its requests to extradite wanted persons: We have
Today at 5:02 am by Rocky
» “It is coming soon.” The Sudanese advisor sets the date for the referral of the Baghdad metro and th
Today at 5:01 am by Rocky
» Al-Mubarqa: Iraq reserves its full right to respond to the Australian behavior
Today at 5:00 am by Rocky
» Dollar exchange rates on Iraqi stock exchanges... recorded a decline, and this is the list
Today at 4:58 am by Rocky
» Mr. Al-Sadr supports the position of American university students
Today at 4:56 am by Rocky
» Iraqis are ranked 7th in the Arab world on the list of those most seeking immigration to America. He
Today at 4:55 am by Rocky
» Soon.. 3 new hospitals will open in Baghdad
Today at 4:52 am by Rocky
» Sponsored by Al-Sudani...the opening of the Arab Labor Conference in its fiftieth session in Baghdad
Today at 4:51 am by Rocky
» Al-Shammari chairs a meeting at the controlling headquarters to review the results of the security o
Today at 4:49 am by Rocky
» Arab Labor Organization: We commend Iraq's interest in the Arab Labor Conference
Today at 4:48 am by Rocky
» Al-Sudani: The development road project will provide many job opportunities
Today at 4:47 am by Rocky
» Sudanese advisor criticizes Kuwaiti analyzes regarding the development road project
Yesterday at 2:21 pm by Rocky
» Al-Mandalawi stresses the need to strengthen economic and trade cooperation between Iraq and Poland
Yesterday at 2:04 pm by Rocky
» Power maneuvers: America provides defensive weapons to Kurdistan in exchange for withholding from Ba
Yesterday at 10:26 am by Rocky
» Kuwait is drilling an oil well near Umm Qasr, towards Iraqi territory
Yesterday at 10:24 am by Rocky
» In the document... the first Iraqi ministry identifies the obstacles to changing the new official wo
Yesterday at 10:22 am by Rocky
» Italian Institute: Iraq is stuck in its own crises, including Baghdad’s efforts to undermine the “au
Yesterday at 10:21 am by Rocky
» The head of the Integrity Commission announces the holding of an international Interpol conference i
Yesterday at 10:18 am by Rocky
» Planning: Iraqi companies are not efficient in conducting the population census
Yesterday at 10:14 am by Rocky
» MM&C 4/25/24 National Bank of Iraq goes live with Temenos core banking and payments
Yesterday at 8:06 am by Rocky
» A banking official indicates a "danger" to Iraq by depriving more than half of its banks of dollars
Yesterday at 7:55 am by Rocky
» With the participation of the Association of Private Banks, investment opportunities are on the tabl
Yesterday at 7:45 am by Rocky
» Within a month... an Iranian border crossing recorded a noticeable increase in exports of goods to I
Yesterday at 7:44 am by Rocky
» The Association of Private Banks appreciates the efforts of the government and the Central Bank to c
Yesterday at 7:43 am by Rocky
» Al-Maliki's coalition presents a third candidate for the position of governor of Diyala
Yesterday at 6:57 am by Rocky
» Arab gathering: The Kirkuk problem is getting complicated and the Sudanese must intervene
Yesterday at 6:56 am by Rocky
» Next week.. a Kurdish delegation will visit Baghdad to meet with the Minister of Finance
Yesterday at 6:54 am by Rocky
» Under the pretext of salaries... Al-Party refrains from handing over port revenues to Baghdad
Yesterday at 6:53 am by Rocky
» Association of Banks: For the first time, we are witnessing a clear targeting of depriving half of t
Yesterday at 6:51 am by Rocky
» Parliament does not know the reason for the delay in sending the 2024 budget schedules: Voting takes
Yesterday at 6:49 am by Rocky
» Applicants for the 2024 Hajj are demanding that the Central Bank secure the dollar for them through
Yesterday at 5:09 am by Rocky
» Governmental and private banks will showcase their services tomorrow during Financial Inclusion Week
Yesterday at 5:08 am by Rocky
» Iraq's oil exports rise despite OPEC+ cuts
Yesterday at 5:06 am by Rocky
» A study explodes a "surprise"... Iraq is among the countries that export oil to "Israel": How is the
Yesterday at 5:04 am by Rocky
» Al-Araji emphasizes working to strengthen national identity
Yesterday at 5:02 am by Rocky
» Al-Sudani visits Saudi Arabia to participate in the World Economic Forum in Riyadh
Yesterday at 5:01 am by Rocky