If Congress goes on their one-month vacation in August without coming to a deal on the United States public debt, I think the stock market goes into a downward correction. We may not even need to wait that long. Congress has about 6 weeks to come together and reach a deal to raise the debt ceiling.
United States Public Debt Scam
What Democrats did was to run up the national debt so high, that austerity would be forced on the next administration which would all but assure that person a one-term President. We know this because Democrats admit asking Yellen to keep interest rates low and to not raise them until after the election.
Credit Suisse said that they think markets may well be able to continue without too much consternation through most of July, but if it becomes apparent that Congress will head out on its August recess – which lasts the entirety of that month-having made no progress, then fears of a delayed or missed payment should start to build.
Why is Congress going on a one-month vacation before raising the debt ceiling? You don’t use the debt ceiling to enforce austerity. That’s like using Accounts Payable to control spending costs.
In 2016, foreign countries have dumped a shocking $192 billion worth of U.S. Treasury bonds. This dumping of bonds is the biggest selloff of U.S. debt since 1978.
China, Japan, France, Brazil and Colombia are the leading countries that are dumping U.S. debt.
U.S. Treasury bonds are the safest investments in the world. Countries often hold large portions of their cash reserves in U.S. Treasury bonds. Countries are dumping U.S. debt because they need the money.
Most countries are selling everything including the kitchen sink to come with the money required to pay the bills and to try and stimulate their economies.
Foreign sales of U.S. debt appear to be primarily driven by economic necessity.
Debt Sales Also Driven By Record National Debt
The U.S. debt held by China is $1.243 trillion, as of April 2016. That’s 30% of the $4.046 trillion in Treasury bills, notes, and bonds held by foreign countries. The rest of the $19 trillion debt is owned by either the American people or by the U.S. government itself.
Between 1789 and 1992, the entire national debt was about $4 trillion. Today, $4 trillion is just what we owe other countries. The total $19.3 trillion national debt could be spooking U.S. debt buyers. At what point do debt buyers begin to question the ability of the U.S. government to service the $19.3 trillion national debt? The U.S. government can’t even hike rates more than a quarter-point some seven years after the last recession because the economy is so weak. If the U.S. economy goes into another downturn, that will mean more stimulus and spending that will drive the national debt beyond $23 trillion in the blink of an eye.
U.S. government debt as a percent of GDP has recently broken above 100%.
[graphiq id=”4iWDyD7B3YF” title=”Gross Government Debt of United States in Percent of GDP” width=”440″ height=”582″ url=”https://w.graphiq.com/w/4iWDyD7B3YF” link=”http://country-facts.findthedata.com/l/1/United-States” link_text=”Gross Government Debt of United States in Percent of GDP | FindTheData” ]
With the U.S. consumer’s buying power destroyed by years of offshoring at the hands of corrupt political parties taking money from foreigners, what value does the U.S. have beyond its natural resources? At some point holding U.S. debt becomes too risky and not worth the low yields paid as shown in the chart below.