Actual Real Money

It should come at no suprise that Italy is now facing debt issues it was predicted several years ago that they amongst the other PIIGS would be facing a financial crisis.   Extreme austerity measures would be the only outcome with every country in the world not having anything backing their currency and the United States dollar the illogical cornerstone that each currency is pegged to.

This maddness  in no small part due to the ECB and the financial terroism perpetrated by them and the Federal Reserve.  But what is ironic is the difference in spreads between the 10 year bonds for Germany and Italy.

For instance On Wednesday November 2nd the Italian 10 year bond yield reached a Eurozone-era high of 7.48% and finished the day at 7.25%.  The  spread between the German and Italian 10 year bond yield had reached a record  553 basis points. There is no reason for such a huge spread between their bonds because both countries are denominated in the same currency.

In addition last weeks rally was pure folly and people were bullish in Italy for no real reason.  During the last two trading days of last week, the Italian 10 year bond declined 103 basis points from its peak to finish Friday at 6.45%.

 

At the same time, the German 10 year bond yield bounced from 1.72% on Wednesday to finish Friday at 1.89%.

The spread between the German and Italian 10 year bond yield is now back down to 456 basis points, a massive decline of 97 basis points in just two days.   The spread between Germany and Italian year bond yields has signinficantly more to go in the weeks and months to come.

All this hype is due to the hope Italy’s steep Austerity measures will work.  I hold my breath if they do but one things for sure the ECB will not let Italy fail especially with the trillions it has to loose if they let it fail.  Bonds are nothing but iou’s backed by the faith and ability for people or in this case countries to pay.  I am not sure how they will be able to.

On the U.S. front the situation is considerablly worst The White House budget for fiscal year 2012 currently projects a U.S. budget deficit of $1.101 trillion.

 

The deficit is projected to decline in 2013 to $768 billion and to a low in 2015 of $607 billion, before rising back up to $774
billion in 2021. These projections are based on pure optimism and not realistic.The  U.S. will see substantially higher budget
deficits over the next decade than what is currently being projected.

The bottom line is moderate inflation if were lucky and possibly hyper inflation if were not and this is hopeful. 

IF YOU HAVE NOT STARTED PURCHASING PRECIOUS METALS YOU STILL HAVE TIME: