Is US Heading Towards Another Financial Crisis in 2012?

Our bitterest encounters with debt followed by the complicated debt relief process of the debt settlement firms remind us of the worst financial nightmares we survived. But is that all for a lifetime? No perhaps, as most probably US is going to witness the next level of financial crisis backed with massive amounts of new debts, vast quantities of additional digital dollars and the spark of higher interest rates in 2012 according to most financial experts and economists. Very clearly can it be noticed that the rising interest rates are going to be the driving factor behind the second level of financial collapse in future US. With rapidly growing price inflation, interest rates will be forced northward. It is being found that China and Japan who have been the major purchasers of US treasury debt are both declining to do so recently. Japan now has other priorities following its recent highly destructive tsunami.  China has already substantially reduced its purchases citing lack of confidence in the declining value of the United States dollar. They have also found that spending their inventory of surplus US dollars by ensuring future supplies of minerals and energy to be much more beneficial to the Chinese economy. Moreover, bond purchasers find sixty year low interest rates on US Treasury bonds, less than the rate of inflation, a very risky and unattractive investment. In the absence of enough foreign or private sector purchasers, the US central bank, the Federal Reserve Board, has been ‘monetizing’ federal government debt through its purchases of Treasury bonds.  The most telling and perhaps scary portent occurred recently when PIMCO, the largest private bond fund, sold its entire US Treasury bond holdings, thereby demonstrating its concern about federal government debt.  Reasons cited for the sale by PIMCO head Bill Gross are risks associated with near negative interest rates and the declining value of the US dollar stemming from excessive money creation. Moreover the tussle over votes and budgets between the two ruling political parties in US makes it sure that no tough or essential, measures of consequence will be undertaken by political decision makers to stabilize the financial system. All these circumstances and their respective consequences if put together, will point at the most obvious and oncoming financial crisis which US should wait to confront unless the nation’s builders take some serious constructive steps at the earliest.

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