These indicators will give you anywhere from a few days to a few months of warning that things are about to change drastically.
1) Interest rates on US Treasuries go up steeply, and/or suddenly
The definition of ‘defaulting’ on it’s debt means the US Gov’t isn’t able to pay the interest on the almost $16 trillion it owes. Currently interest rates are at all-time lows – as many homeowners are enjoying by re-financing their homes at lower rates. Interest on the debt is currently the smaller of the four biggest expenses the US Gov’t has. As interest rates rise, the interest expense will get bigger – and this will be very difficult for a Gov’t that is already deficit spending way beyond its means.
You want to keep an eye on the current rates on Treasuries for two reasons:
a) Increasing rates will require a debt laden Gov’t to barrow more and will accelerate inflation and the date of collapse. This is a 6-12 month red flag. As of today, rates are slowly rising although they are still very low.
b) A sudden and sustained spike in the interest rates indicates that there are fewer buyers of US debt. Without the ability to barrow more money or rollover the (Read more....)
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