US to Default on Debt, Dollar Headed Much Lower

With the US dollar tumbling, today King World News resident expert Michael Pento had this to say when asked how the US will fund social security and some of those other critical items such as defense with its heavy debt load, “Well, for me it means a form of default. You know when you can’t pay your debt, so there has to be some kind of restructuring. It’s either going to be done by a direct reneging on our obligations to our foreign creditors, it could be in the form of inflation, but without a doubt the US is headed for some form of default on its outstanding national debt.”





Michael Pento continues:

“Who is going to fill the gap when Banana Ben stops his counterfeiting spree in June of this year? When he stops, there is going to be a vacuum created. The Federal Reserve will hopefully end their purchases of US debt (in June), and Japan will also dramatically attenuate their purchases of US debt. They (the Japanese) have no choice in that matter.
So if that’s the case, who supplants that buying? And if it is not supplanted, at what price is that debt filled? What interest rate satisfies that debt?”

When asked what kind of move he is looking for on the long bond Pento stated, “Well I was going on a 10 year...I think that the ten year yield will creep up to 7% by the year 2013.”

When asked how much that will cripple the United States Pento replied, “That probably means around that time frame of 2013 to 2015, we’re going to be paying close to 50% of all of our revenue just to pay the interest cost on our debt. 50% of our revenue going just to service the interest on our debt.

For me that means that our annual deficits will be well north of $2 trillion, probably closer to $3 trillion on an annual basis. And that means our annual deficits will be running 15 to 20% of GDP.”

Regarding the US dollar Pento stated, “We just broke through 76 on the DXY that is a 52 week low. I think it’s headed much, much lower...that to me spells a very perilous condition for the value of our currency and for the purchasing and for the purchasing power of the US citizen.”

To listen to Michael Pento’s KWN interview CLICK HERE.

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