Don’t focus on making money; focus on protecting what you have……Play great defense, not great offence….THEN The profits will follow’ - Paul Tudor Jones

The western world’s debt burden is growing exponentially and is desperately necessitating the search for creditors in order to supply the capital to support these crunched economies. Sovereign debt in the form of Treasury Bonds and Gilts will be the predominant method of raising this capital. A large chunk will have to be sought from foreign countries.

This was the case in the 1970’s when the huge rise in oil prices transferred the world’s excess wealth to the Middle East. This excess wealth was then distributed mainly to the USA. The USA promptly allowed inflation to take hold in order to pay back the loans with cheaper dollars. This was a double whammy against the creditors as when the US dollar falls US Treasury yield rises with a fall in Bond values. Eventually the Arabs after taking the bait suffered losses in excess of 30%.

No doubt the debtor nations were hoping to repeat the trick this time round. Almost certainly this theft would have been a major factor in their calculation to repay the debt over the next 40 years or so. However this trick is unlikely to be allowed again by creditor nations. Already their answer to the dilemma has emerged with the issue of Wal Marts $1.1 billion dollar Samurai Bonds where the issue is lent and repaid in Yen and NOT US dollars! Politicians in Japan are already calling for no more loans in US dollars but only in Yen. They are expecting the US dollar to fall by 50% against the Yen!

The question is whether creditor countries will protect themselves by following the same approach. This could have serious consequences on the debtor nation’s economies especially the UK.      

There are reports that a Chinese delegation has recently visited the USA after the US financial condition teeters towards bankruptcy disguised by interventions, lending insanity, insane bond leverage, bogus packaging by Wall Street, corrupted debt rating agencies more fraud and more phony money. Apparently the Chinese are laying the seeds to insist on future US Treasury Bonds to be repaid in Yuan in lieu of US Dollars. The rumored title is Dragon Bonds.

The effect could be catastrophic for the Debtor Nations. Why?

The UK and US among other debtor nations have just taken on astronomical amounts of extra debt on top of their already historically massive debt burden accumulated over the last three decades.

It can safely be assumed that within their calculations to repay their obligations they intended to repeat the inflationary slight of hand. They have also factored in that the current ‘recession’ will be controlled and the economies will recover…fat chance of that! They also anticipate repeating the trick they played on the Middle East a generation ago but it appears their game has already been rumbled.

So what could be the consequences for us?

The debtor nations will have to borrow from foreigners unless they can generate huge sums from their own population…fat chance of that.

The shysters at the Bank of England have already introduced the historical fraudulent trick of printing unprecedented amounts of fake money unaccompanied by vital economic growth. The effect is always high or hyper inflation accompanied by a collapsing currency.

Dragon bonds are specifically designed to keep this theft in the hands of the perpetrator. Of course, the cronies of this discredited Labor government, at the B. of E. with the full collaboration of our proven corrupt politicians will deliberately keep interest rates artificially low as they did in the 1970’s along with high taxation (98%) to extract as much as possible from its population to pay for its negligent practices.

This will not be anywhere near enough to even dent the atronomical debt resulting in the need to pursue capital from abroad. Low interest rates will not be acceptable to foreigners when the UK competes with other debtor nations. It looks like repayment will not be allowed in a collapsing sterling. This will be disastrous for the UK economy along with the US and Europe. There is the alternative of an appreciating pound which would reduce the debts but this seems highly unlikely and is possibly impossible.

Over the last decade I have consistently warned in seminars of the likelihood of either hyper inflation to repay an accumulating debt burden along with a devalued currency. The alternative would be liquidation of the debt by default. It now appears we will probably have a combination of both with Dragon Bonds cutting out the inflationary threat to foreigners which will then necessitate the liquidation of debt as the UK did in the early 20th century with consuls and war bonds.

You may find all this disturbing and find it hard to believe. However, in support the private investors bank Society General are anticipating a world ‘global economic collapse’ They refer with concern to Japan with its public debt expected to rise to 270% of GDP along with the US public debt of 350% and rising! They see a US dollar slide; global equities falling to new lows; property prices tumbling and oil back to $50. Incidentally the debt burden is already higher than it was after the Second World War. Worryingly today’s aging populations will make it harder to erode debt through growth with historically unprecedented public debt looking untenable with the point of no return closing in fast.     

However there is no need to despair. There are practical financial solutions to combat this accumulation of banking and political fraud. They will be discussed in our subscribers December ‘Where to from Here’ This feature will be as important as our October 2007 report and our special seminars that warned of all the horrors of 2008 to March 2009. A bubble was in its later stages at that time and coincidentally the current bubble could now be about to burst in 2010.

Don’t miss the predictions and solutions to the anticipated 2010 problems in the December 'Where To From Here?'.




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