How Much is a Trillion?

It seems a week doesn't go by when I don't hear of someone warning us that the U.S. debt is out of control and unmanageable, even for our "wealthy" country.  I saw an article on CNBC's website that quoted an editorial from the Washington Post.  Sheila Bair, the chair of the FDIC thinks the "Next Debt Crisis May Start in Washington".

The U.S. debt is now estimated at about 14 trillion dollars.  How much is 14 trillion?  According to website http://100777.com/node/455, "The U.S. government spends more than the entire Gross Domestic Product (GDP) of Australia, China and Spain combined. If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills."

There are several great videos out there, but attached is my favorite that helps put this into perspective. Keep in mind that 1 trillion is less than 1/10th of our nations debt!




Just some stuff for you to chew on.

That Didn't Take Long - What Does it Mean?

The U.S. Dollar is the "world currency", and is the currency oil is traded with; has been for many many decades.  It is estimated that China has about $1 Trillion dollars in reserves in order to purchase oil and other commodities that trade in U.S. Dollars. Russia is likely in a similar position. If these countries don't need the dollar to purchase oil and commodities, they will dump it, and fast. That potentially means a glut of dollars surging into circulation that lower it in value quickly.

Because the U.S. continues to print our money (fiat currency - not linked to any standard since the early 70's), China, Russia, and several other countries have threatened and even encouraged others to drop the dollar as the world currency.  There has been talk of using a "basket" of currencies that include the Yuan (China), the Yen (Japan), and the Euro (though the Euro is also experiencing a lot of trouble due to several Euro-nations huge in huge debt crisis).

What does that mean? It means that the U.S. will no longer be able to sell our supply of U.S. treasuries to pay for our its deficit spending. Of course, QE2 had the Fed creating the money and then using that money to buy their own treasuries! I still haven't figured out the math on that one. Either way, we have no way of paying our debt or paying the interest on our debt.

So what does THAT mean?  It means that they'll have to raise interest rates to gather the money back in.  They'll also have to print even MORE money so they can make the interest payments on our national debt. Bottom line: INFLATION!  Some experts believe it may even lead to hyperinflation.

What does THAT MEAN?  That means we need to prepare so we can still function when bread costs $10 a loaf (or more?), gas is $10 a gallon, and your monthly grocery bill triples or quadruples. 

So what am I suggesting?  Stock up. 

Why am I saying this now?

On November 23rd, in the China Daily News, there was an article that China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade.  While it is not a wholesale quitting of the dollar from a world-wide perspective, it is two of the more powerful countries making their first HUGE step towards the eventual destruction of the U.S. Dollar, which I believe will have a domino effect on other countries holding U.S. dollars.

Here's just some examples of what I've noticed lately about rising prices.  In some cases these increases haven't hit the consumer yet, but they will once the companies can no longer sustain the losses:

Sugar prices already rising over 70% this year alone
General Mills and Kraft to raise prices due to grain price increases
Rising Corn prices
Cotton going up

Where is the U.S. Dollar Headed?

 Things have really changed in the U.S. economy since 2007.  The real estate we've held has dropped dramatically, cutting into our networth in the hundreds of thousands. I am thankful for a good job that pays me well, but I don't even begin to assume that I'll have that forever.  I've seen some amazingly talented workers get laid off in the last 2 years.  I've watched them struggle to find jobs, make mortgage payments, and many have filed bankruptcy or simply lost their homes.  We've all heard the stories.  The lines at the food banks get longer each week while our country's leaders borrow more in a misguided effort to stimulate the economy.  Most of us know that with our own household budgets, you cut spending when you can't meet your bills; borrowing more simply leads to a bigger fall in the end.

So what do we do?  Do we sit back and passively wait to see what the Federal Reserve and the White House comes up with to try to save our economy?  Or, do we do some legwork of our own to find out what history can tell us about other countries that have struggled similarly?  How did the people survive when their monetary system crashed?  How can we personally avoid adding to the problem and actually become part of the solution?

Just some questions and thoughts that have been on my mind lately.  I'll post more with links to some research I've done of late.  I know that this is not a popular subject.  We all would like life to go on as it has for decades.  I just really don't think that is going to be the case.  I think the next 10 years is going to look dramatically different than the last 10 and I want to be as ready for it as I can possibly be.

Image: Salvatore Vuono / FreeDigitalPhotos.net

Barcelona

We spent three days in Barcelona touring the main sights like La Sagrada Familia, the "Cathedral" and Park Guell. The architecture of the buildings are a beautiful blend of the old and the modern. The shopping in Barcelona was some of the best.

The main promenade, Las Ramblas, is about a mile of shops and street performers. We must have walked up and down that street a dozen times. Some of the street performers were very unique and would have huge crowds around them. There were angels, Atlas with the world on his shoulders, unknown characters, ogres, headless chefs, magicians, and artists. Every time we went down the street there was always something new.

We did try out these GoCars which were like two-seated mopeds that toured us around to famous sights. That didn't go over so well though. The one we had had a messed up GPS which meant we couldn't follow the route so we went back to get it fixed. It also had trouble starting. Once we got going we found that whichever one of us was following the other had to breathe the nasty exhaust of the other. We originally had reserved a full day, but one hour turned out to be more than enough.

The famous La Sagrada Familia, which started construction in the 1800's with Antoni Gaudi as the architect, was mind blowing. I have no way of describing the grandeur of the still unfinished church. It is likely to take another 50 years to finish. Gaudi died at the age of 76 after being hit by a tram. He knew he would never see it finished but said "God has all the time in the world".

Sent from my iPod

Bye Bye Les Baux

Yesterday we visited the Pont du Gard, the famous Roman aqueduct, and then on to Nimes. There we took about an hour whirlwind tour in a mini train that showed us the main sights in the city: the Roman arena, an ancient temple, and more. We walked around a bit, found a self service laundry, so made a beeline back to out car for our laundry bags so we could finally get some fresh clothes.

We decided to hurry back to Les Baux in order to catch the sunset on the town, hopeful for amazing photos. We were not disappointed. The town glowed.

The town, emptied of the day trippers, felt like it was ours alone as we wandered the empty stone streets. Our new suite was beautiful, had it's own terrace, and was very unique; very pleasant for our last night. We watched the stars from our terrace and drank in the night.

It did not rain.

After our breakfast, we took one last shopping trek through town before heading out. We drove East of Avignon to see some caves, but they were closed for a two hour lunch break which put us off schedule for exploring Avignon, so we left and headed for our last bit of sightseeing in France.

We toured the Papal Palace, the nearby gardens and two churches. We have found that the old churches have some great art: frescoes, paintings, sculptures, carvings, and more, so we try to wander into most we see. One in particular had a mass starting in one of the side chapels and they were singing so sweetly. There were two nuns dressed in pure white singing alternatively with one man. It was so simple, clear, and reverent. We stayed for quite a while listening to song after song.

After a nice leisurely dinner we headed to our hotel for an early night. We had a 6:00 am train to catch to Barcelona.

Sent from my iPod