US In A State of On-Going Default For Decades

The United State's ability to service its debts in constant dollars was lost a long time ago. The use of currency devaluation (commonly known as inflation) as a means of servicing this debt have created a form of on-going default in the US since the early 70's. Try to remember that as the debt ceiling debate and economic solutions emerging from it reach frenzied levels this week.

Smart money, Jim Rogers included, has been shorting bonds into strength for months. The trick to shorting bonds is patience and short-side concentration. Late July will mark another round of it.

US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)


Jim Rogers: The U.S. Already Has Lost AAA Rating

“Everyone already knows that the U.S. has lost its AAA status,” Rogers said. “Anyone who knows what is going on, already knows that the U.S. is now the biggest debtor nation in the history of the world. It’s only S&P and Moody’s that haven’t figured out what is going on. The investment world knows that the U.S. is not AAA.”

Rogers also called the current debt negotiations in Washington a political “charade.”

“I don’t expect them to have real spending cuts. They have been talking about this for 40 years, talking about how they are going to solve the problem of the deficit. Remember the Grace Commission? Remember the Gramm-Rudman act? The Gramm-Rudman act said we couldn’t have deficit spending 25 years ago. They forgot about that.”

Source: blogs.wsj.com