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The Daily Reckoning | Sunday, July 17, 2011 Forget QE3 – America's Going Bust, on the Road to Bankrupt Hell If America had a credit card, it would get mercilessly cut up and thrown back in her face. The country's basically broke and isn't paying its debts. Harsh, but true. All of that – and how it could affect your family and your retirement – is revealed in this urgent video report. Don't wait, watch now. ------------------------------------------------------- This Week's Most Popular Column: We, "The People" by Addison Wiggin ------------------------------------------------------- Ratings agencies are on the crime scene...but all eyes are on the perp, Readers weigh in on the debt ceiling debate, Germany's rise and the cost of leverage, Plus, all the rest of this week's reckonings, debt-free and ready for your leisurely afternoon reading... Ratings Agencies Late Again Joel Bowman Checking in from Buenos Aires, Argentina... Among the juicy media tidbits on offer this week, ratings agencies Moody's and S&P, rarely accused of being early on the scene, threatened to sever the United States prized AAA credit rating. The pair cited political gridlock regarding the debt ceiling debate and the nation's uncertain (to put it mildly) financial situation as cause for concern. Should the agencies – which are licensed, let us not forget, by the US Government – choose to make good on their threat, it would be the first time in history the US was awarded anything less than the highest possible rating. One might think that, since the AAA rating is supposed to indicate "zero-risk," a platform from which all other risk is priced globally, a downgrade for the United States would have dire consequences, not only for the nation itself, but for all assets priced relative to US Treasurys. "Ho hum," said investors, who were evidently far more concerned with the mutterings of one Ben S. Bernanke and his on-again, off-again hints at QE3...or QE2.5...or whatever his next round of money conjuring might be called. As we've observed many times before in these pages, by the time these ratings agencies have arrived at the crime scene, the perpetrator is usually long gone. How curious, then, that today we should find not only that the perp is still on the scene...with green ink staining his hands...but that he has captivated everyone's attention. To switch metaphors for a moment, the lunatics are truly running the asylum. Just how far along the road to financial ruin is the temporarily AAA-clad Empire, we wonder? Addison provided some details in this week's feature column, We, "The Public." "According to the Bipartisan Policy Center," wrote Addison, "tax revenue for the 29 days of August after the 2nd will total roughly $172.4 billion. That compares to $306.7 billion in spending. "Ordinarily, the Treasury would cover that $134.3 billion gap by issuing new Treasury debt. But after Aug. 2, it won't be able to do so. That means Uncle Sam would have to immediately balance his books. "What would that look like? "Well, he'd have to choose his priorities. The Bipartisan Policy Center report breaks down the government's Aug. 3-31 expenses in a way that shows what the $172.4 billion in revenue can cover... and what it can't. "The Social Security checks would still be cut," observed Addison, "but not income tax refunds. Medicare and Medicaid would be kept going...but not food stamps. Military contractors would still be paid...but not the troops. "They can move certain items above the $172.4 billion line and others below it...but something has to give. And as we pointed out yesterday, matters are even worse than that list of priorities reveals." For the rest of Addison's feature column, see here: We, "The Public" – By Addison Wiggin Tiny US Wildcatter Discovers $1.2 Billion Alaskan "Oil Jackpot" And this explosive exploration company acquired this "Oil Jackpot" for a mere $4.5 million – a monster 99.6% discount! It's one of the best market buys in the history of the oil industry. Early investors could make huge gains off this once-in-a-lifetime oil bargain. Click here to find out how. ALSO THIS WEEK in The Daily Reckoning... The Euro and You By Frederick Sheehan A week does not go by without the ECB reducing its standards of collateral. The cost is not only its credibility as a central bank, but in the composition of its deteriorating balance sheet. To make matters worse, Greece is the smallest economy among the impoverished PIIGS: Portugal, Ireland, Italy, Greece, and Spain. Since others will probably follow Greece, the current impasse is all the more discouraging. The Greek government cannot meet its July interest payment obligations to banks, central and commercial. It can no longer borrow from banks or in the bond markets. (This is also true for Ireland and Portugal, and possibly others.) Distress is the Mother of Opportunity By Ray Blanco Few technologies have had a greater impact than the invention of television. But, it took decades for the basic idea to become commonplace. In the early 20th century, inventors tinkered with a variety of low- resolution electromechanical displays. The FCC even granted experimental broadcast licenses for early TV broadcasts using these sets. Yet by the mid-1930s, the broadcasts had ceased. It would take a superior technology to make television practical for the masses. Graphene: The Next Wonder Material? By Addison Wiggin Baltimore, Maryland Cheap solar panels. The most powerful transistors ever. Even the ability to make a fighter jet invisible. One barrier to solar breakthrough – its cost – is going down Each of these breakthroughs has been announced in the last two weeks. Each relies on one of the most basic elements mined from the earth. And each could line your pockets with cash if you move quickly enough. Let's hopscotch through these new developments... The Greater Depression Is Upon Us By David Galland The phrase "Greater Depression" was coined by Doug Casey a decade or so back, as a way of describing the economic crisis he foresaw as inevitable, and which is now materializing. Doug Casey now believes that the unfolding crisis is going to be even worse than he first imagined, and the longer the rest of us at Casey Research study the tea leaves, it is hard to disagree that the Greater Depression is still ahead. Consider... Only a Few Researchers Worldwide Know About the Last Stock You'll Ever Need... This could rival the great market stories of our era. What you're about to see is so secretive – you could easily see huge profits BEFORE the story hits the mainstream. Click here now for all the info. The Weekly Endnote... And now, a few words from our Fellow Reckoners... First up, Reckoner J.S.H. has this: Here are my thoughts on the subject. It does not seem like the majority of folks in our country are taking this situation seriously enough. The news media has done a lousy job of explaining what it means to everyone. Not just the rich or poor, but all people in our country. Congress and the president all seem to be jockeying for position to end the crisis with a big bang. What they should be doing is get down to brass tacks, so to speak, and put everything on the table. Taxes, spending, entitlements including their own salary, including foreign aid and such. Lastly, military spending. If they cannot get together in say 5 more days – go home because you are not doing your job. They were all elected to do their job, what is best for the citizens of this country. Either get on with it or go back home. We will hold elections and run people who are worth less than say $100,000.00 and see if they can do a better job of running this country. And this, from Reckoner M.K., in Florida: I read with interest Bill Bonner's article, "Giving up on the economic recovery." When he states that the middle class has been decimated, he's absolutely correct. He also stated: Leverage is an amazing thing: When prices go up, the borrower gets all the gains. And when prices go down, the borrower takes all the losses. Some families lost everything when the bubble collapsed, others lost very little. But, on average, American homeowners lost 55% of the wealth in their home. This is correct as far as it goes. However, entire regions in many states have seen their home values plummet much further than that. By comparing all the regions with each other actually minimizes the problems in the areas that were hardest hit. MUCH more than a loss of 55% was realized in these areas. For instance Southwest Florida from Bradenton, to Fort Myers, even as far south as Naples have seen housing values plummet below year 2000's valuation. My own home, for which I paid $305,000 in 2007, finally sold in 2010 for $91,000. The buyer? Fannie & Freddie. Good luck with that. And finally, a thoughtful musing from Reckoner P.A.: Just had an idea... While everyone is distracted by China rising, Germany is rising and shining. A First World country, skilled in running the First World. After the 'Wall' fell, Germany took a breather to collect itself. Two decades later it is Europe's largest economy, the world's fourth largest economy, the world's second largest exporter, etc., etc. It is growing and prospering, while the PIIGs are becoming totally dependent on EU loans. Should that read: dependent on German aid? Rioting mobs in Greece can see the huge debt trap closing in on them, but supposedly the high-minded, high officials of the IMF and ECB can't do the math! Rot. The EU is about controlling trade. Germany dominates the EU. In developing countries we know this game. The EU won't allow free trade. Giving aid or loans that cannot be repaid is preferred. That way local industry and independent growth is discouraged. First establish economic control then at the first excuse move in the military. Isn't that how it is done? Not sure, I skipped political science. Here comes the Fourth Reich, bigger and better! It's just an idea. Europe is finished I hear. --- If you'd like to chime in, feel free to send your thoughts to us at the address below. Other than that... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning