Two of the biggest stories in the United States over the past few weeks have been the battle over the federal government’s budget and the U.S. government’s mounting debt. This past week these issues gained further attention when Standard and Poors (S&P) assigned a “negative outlook” on the U.S.’s AAA Credit Rating, which serves as a warning that they may downgrade the U.S.’s credit rating in the next one or two years.
- The impact of downgrading a country’s credit rating is akin to your credit score being lowered. The lower your credit score is the more costly and difficult it is for you to borrow money from others. Thus, it would become more expensive for the U.S. government to borrow money from others if its credit rating receives a downgrade...
Yesterday, Boston University economics professor Laurence Kotlikoff stated on U.S. television that he believes that the U.S. bond market could crash at “any day now” and warned that the U.S. would see something akin to a Weimar Germany-style hyperinflation if/when it transpires. The reason behind Kotlikoff’s forecast is that the U.S. has too much debt and too many obligations that it cannot realistically payback or meet without having to resort to large-scale money printing, which devalues the U.S. dollar. The following video is Professor Kotlikoff’s appearance on U.S. television yesterday.
- If you are somehow unable to see the video below, you can access the video at the following link
I share this particular interview for a couple of important reasons.
1. Professor Kotlikoff is one of the leading experts on the U.S.’s debt and fiscal woes. In fact, the St. Louis branch of the Federal Reserve enlisted Kotlikoff to study whether the U.S. was bankrupt a few years ago. Kotlikoff stated in that report that the U.S. is effectively bankrupt:
2. Professor Kotlikoff took a different tone in this interview than in past interviews I've heard which feature him.
- Kotlikoff has warned about the U.S.’s debt problem and unfunded liabilities problem for the past several years, but he has often expressed some optimism/hope that the U.S. can avoid disaster when discussing these issues with the media. I did not detect any real optimism from Kotlikoff in this interview. He sounded fairly certain that the U.S. is in big trouble...
A U.S. bond market crash and/or Weimar Germany-style hyperinflation in the U.S. would be very destabilizing to the global economic and financial system. The resulting global economic and financial instability could easily lead to tremendous global political change and global chaos-the type that would enable an Antichrist-type of figure to eventually arise…
