California will default

See "California will default on its debt" and "This is the Horrifying Budget Report".
When? Probably 2012

The average trigger for default is 22%

In an article about the Irish bailout is the following paragraph:

There is bitterness over the EU-IMF loan rate of 5.8pc, which may be too high to allow Ireland to claw its way out of a debt trap. Interest payments will reach a quarter of total revenues by 2014. Moody's says the average trigger for default in recent history worldwide has been 22pc. "The interest bill is enormous. The whole process lacks feasibility," said Stephen Lewis, from Monument Securities.

Hmm. What is the current ratio of interest to revenue in the US? 8.5% (188/2213). When will the US ratio exceed 22%? Maybe 2022. According to the official projections, the ratio will be 20.7% in 2020 (912/4400), assuming a 4.1% interest rate on 91-day t-bills. If interest rates exceed this then the 22% will be reached much sooner.

The Euro game is up!

The day the dollar died

December 19, 2012. This very well could happen.

Japan will default in 2012

JJapan is in much worse shape than the US in terms of its national debt, but this is offset by the facts that most of its debts are internally held, they have huge reserves, and they are a net exporter country. Nonetheless, it is certain that they will default and this will happen before the US does.

According to Kyle Bass, (see also this) this will occur within 1-2 years, so I will call it 2012. Japan has already entered the Keynesian endpoint: their debt service costs exceed their income. They are already more than 1 quadrillion yen in debt and the revenue is only 40 trillion yen, with expenses at 97 trillion. Their national savings rate is now zero percent. Their system has been like a Ponzi scheme that works as long as there are new buyers. Well now there are no new buyers as their demographics have changed.

The only good news about this is that Japan has been relatively isolated from the rest of the world so the default won't cause a chain reaction. And maybe it will cause the US to wake up and realize how severe our problems are.

Another Debt Projection

In the 7 quarters since 12/31/2008, the national debt has increased by an average of 3.44%/quarter. This is an increase of 14.5%/year. If this were to continue, the numbers quickly become very frightening. If inflation comes back, which seems very likely with the huge quantitative easing going on, the numbers will increase much more quickly, because the entitlement costs will soar and the interest costs will skyrocket. The numbers are in billions.

9/30/2008 10025
9/30/2009 11910
9/30/2010 13561
9/30/2011 15528
9/30/2012 17780
9/30/2013 20358
9/30/2014 23310
9/30/2015 26689
9/30/2016 30559
9/30/2017 34990
9/30/2018 40064
9/30/2019 45873
9/30/2020 52525
9/30/2021 60141
9/30/2022 68861
9/30/2023 78847
9/30/2024 90279
9/30/2025 103370

So what does this mean? At some point relatively soon, the whole system will skyrocket out of control. What is my best guess for when this will happen? Well, if my theory about 10 times revenue being the breaking point is correct, I see this happening sometime in 2017. Revenue in FY 2017 is projected at $3.477 trillion, with national debt at $34.990 trillion.

I've been wrong before and I hope I am wrong here, but this is scary. When I first started this blog, I was projected the endpoint as being in 2022, thus the name of the blog. Then I bumped it to 2028, then I lowered it to 2025. Now I think the end will occur much sooner. Maybe I am being paranoid, but check out the slope on this graph from official federal reserve data:



Update 6/19/2012: This is model D-1 and is discredited, because the debt isn't increasing that fast.

Quantitative Easing explained

Bankruptcy of the US is a mathematical certainty

“If you run the numbers, on all those numbers that you just talked about, which I think are accurate, very accurate, in 20 or 25 years, the United States goes bankrupt,” said Allison. “It’s a mathematical certainty. ... “Now, countries don’t go bankrupt the way companies do,” said Allison. “They don’t file bankruptcy. They usually hyper-inflate.
--http://www.cnsnews.com/news/article/former-bbt-ceo-bankruptcy-us-mathematica

2010 Final Numbers

Here are the final numbers, per the CBO, along with my projection for 2011 and 2012

	2008	2009	2010	My 2011 Estimate	My 2012 Estimate
Receipts	2524	2104	2162	2460	2728
Outlays	2983	3520	3456	3801	3832
Deficit	-459	-1416	-1294	-1341	-1104