We regret to inform you that your U.S. Treasury Bill is now worthless....... and may be written off as a tax deduction.
Supersizing Ronald Reagan & Everett Dirksen for Modern Times:
"A Trillion here, a Trillion there, pretty soon you're talking real money." -- Or unreal fiat paper money anyway.
With # 6 you get bank-rolled !
So how will the U.S. Government eventually pay off the National Debt 5, 10 or 20 years from now? Via higher taxes ? Perhaps. But taxes on whom ? The baby boomers will be fully retarded, demented and earning nothing -- or working part-time at the local McDonald's at minimum wage to make ends meet. What taxes can they pay?
By taxing young Americans? No, there will not be enough of them to pay enough taxes to make a material difference, even if American tax rates rose as high as Sweden's.
Allow huge annual waves of highly-skilled immigrants, and then tax them? That's a good solution -- if the social fabric of America can tolerate millions of new immigrants a year, a la 1890 - 1930. It probably can.
Even so, the hard fact is the National Debt will never be completely paid off. Rather, it will be annulled. Zeroed out. Who will be left holding the bag of cow manure when the M80 firecracker inside goes off ?
Not any foreign holders of Treasury bills and notes, that's for sure. Otherwise America could never borrow again internationally. Rather, as one of my economics professors in MBA school said 30 years ago: "The beauty of the national debt is that it is money we owe to ourselves. So we can always just agree not to pay each other back."
Of course, since the early 1980s, U.S. Gov't debt has become the favorite fentanyl lollipop of China, Japan, Taiwan and the Gulf States. The trillions of Treasurys they hold must surely be paid back.
But we project that by 2012 or 2015 it will become manifest destiny that the U.S. Gov't will be unable to make principal and interest payments on the National Debt and will therefore default on notes and bills held by American citizens. To compensate the losers, the U.S. Gov't will give them a tax deduction for their loss, probably spread over a 5- or 10-year period.
The moral of the story? If you are an American citizen and you invest in U.S. Treasury instruments, do be left holding the bag after approximately 2012 - 2015.
To be continued.......
To learn more about DekaDrakma Investments™ thinking on the current investment environment and the outlook for the next 5 - 10 years, please contact:
David A. Palella
Co-Founder
DEKADRAKMA INVESTMENTS
San Diego, California
tel: 858-793-0741
email: dpalella@san.rr.com
http://dekadrakma.blogspot.com
*****
Tuesday, March 31, 2009
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