Is U.S. Bankruptcy Near?

In November of 2009 Porter Stansberry wrote a shocking headline at The Daily Crus: The bankruptcy of the United States is now certain. He writes that the U.S. has $3.5 Trillion of debt rolling over including the need for 1.5 Trillion for the new deficit. He asks a good question: Where’s that money going to come from? If you can’t raise it, you are in default. Currency speculators developed a way to predict a default. It’s called The Greenspan-Guidotti rule. “The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities.”

The principle behind the rule is simple. If you can’t pay off all of your foreign debts in the next 12 months, you’re a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

Stansberry states we owe $880 Billion to foreigners in the next 12 months, yet have only $500 Billion in gold, oil and foreign reserves. Domestic savings total about $600 Billion so we are about $3.0 Trillion short.

We could print the money to buy our debt, monetization, but that would accelerate foreigners dumping cheapening dollars due to increased supply.

Do we see any signs of gold or oil bottoming, the dollar topping or interest rates beginning to move up? Jim Sinclair has a chart with implications for Gold.

He writes:

The sixth setup in money flows has been generated. These setups are rare and always precede big moves. It is simply a matter of time now.

How about Treasuries. The 30-year Treasury bond chart looks suspiciously like it could be readying for a move through 4.75%: