The Fiscal Cliff

Some summary observations based on my understanding and supported by past blogs:

By 2004, the U.S. budget deficit was out of control.

Using Generally Accepted Accounting Principles (GAAP), the deficit of 2004 was $11.0 trillion versus a reported $412 billion cash-basis deficit.  The true annual deficit is running about $5-7 trillion per year since 2004.

No amount of spending cuts or tax increases could ever bring forth a balanced budget unless you slash the “entitlement” programs that remain politically untouchable.

Unless there is a miracle, the United States will have hyperinflation by 2020, where the Fed will have no practical choice but to the print the money the U.S. needs to cover its obligations.  The U.S. dollar will be highly inflated and will be worthless, reflecting a full loss of purchasing power.

The U.S.Government and consumers have been living beyond their means supported by excessive and unsustainable growth in debt.  The Federal Reserve’s Alan Greenspan strongly encouraged the excessive growth of consumer debt as a way to support economic activity, continuously borrowing economic growth from our children’s future.

A day of reckoning must come.  In September of 2008, the U.S. financial and banking systems came to the brink of collapse.  To prevent the collapse, the Fed and the U.S. government created, spent, loaned, guaranteed, and gave away whatever money was necessary to counteract the impending collapse in order to keep the system afloat.  This only served to delay the inevitable.  

The economic and systemic-solvency crisis is still occurring.  The ultimate costs for saving the system will occur through inflation and the eventual full debasement of the U.S. dollar.  The timing for the highly likely hyperinflation is between 2013 and 2020.

The official double-dip Great Recession is at hand and a hyperinflationary great depression should be in the works by the end of 2014, where disruptions to the normal flow of commerce from the hyperinflation will push the economy into a great depression.

To prevent the loss of global confidence in the U.S. dollar from evolving into a hyperinflationary collapse of the U.S. currency, the federal budget needs to truly be balanced, in terms of GAAP-based accounting.  The probability of this happening is virtually zero.  Those receiving entitlements will remove any politician who attempts to cut their primary support for existence.  The extreme economic pain that would follow such attempts will keep politicians from stepping up to the painful task.

There is no possible way of balancing the deficit without a major restructuring of the “entitlement” programs.  There are not enough taxes that can be raised, or enough spending that can be cut otherwise, that would balance the actual deficit.  In the current structurally-impaired economy, there is no way of generating enough new economic activity to grow out of the deficit. 

Holdings of physical gold and silver and other stores of wealth may be the best defense for the difficult times ahead.  Real estate and gold-mining stocks may prove beneficial in the longer term.

I do not give investment advice but I have personally invested in hard assets and stocks as mentioned above.  More importantly, I recommend de-leveraging by paying off debt and purchasing with cash rather than using new debt.  You should make your own determination of how to invest by seeking counsel of a qualified financial consultant.  Most importantly, you should seek the guidance of Our Heavenly Father in how to position yourself in the near future.  If these events do occur, those who have been prepared by Our Heavenly Father will be used to bring forth HIS Kingdom as the current system fails.  Man’s reliance on Mystery Babylon will evoke some level of chaos, rage, and anger.  The Love of Our Heavenly Father will counteract the fear, uncertainty, and doubt brought on by the collapse of the former system.  Thy Kingdom come, Thy Will be done.

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