On the Matter of American Economic Trouble

Has anyone any idea what really happened to American Gilt issues last week? Several people have started suggesting to me that China wasn't buying.

The implication is that the federal reserve and some of its client banks had to buy the US government debt. If so, a serious landslip may be beginning in the market, and one much greater than Britain's serious trouble last March. We're running on air.

By the end of September, the US will have to find the better part of two trillion, or raise taxes, inflate the currency, or slash spending; or, of course, just walk away from the global market.

Separately, there seems to be a distinct possibility that the Federal Deposit Insurance Corporation, the guarantor of American banks since the last Depression, will itself need a bail-out, even though Congress recently moved to allow it to borrow up to half a trillion on its own.

Things became so bad earlier this year the House of Representatives even proposed restraining the FDIC from acting as though there were an economic emergency whenever it wished, without declaring one, so serious were its actions becoming. Think about that; it exposes the quality of politicians as much as anything else. The firemen are now appearing so regularly that the legislators want to stop them shouting fire in case it frightens anyone.

I can't believe that the disaster I keep predicting will happen but, well, watch this space. They say to understand the world one should follow the money; well, it seems to be attached to the big rock that's just heading over the edge of the cliff.

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