Mark Faber: Social obligations will lead Western states to default

The United States’ top credit rating is at risk, with its triple 'A' status warned it may be downgraded if the economy grows at a slower pace than expected, says ratings agency Moody's.

“Maximum within 10 years time more than 35% of tax revenues will have to be used to pay the interest on the government debt and then you are in trouble – because then there will be not enough money out of the budget to pay for other stuff,” Faber warns. “I’m convinced the US government will go bankrupt, but not tomorrow. And before they go bankrupt, they’ll print money, and then you get high inflation rates, you have a depression and eventually they’ll go to war.”

The investment guru also says the cracks in the system are starting to spread, naming other countries that could follow suit. “Portugal, Ireland, Italy, Greece, Spain… I think, eventually, they will all default – because if one defaults, then the next would say why should we pay and will also default. The obligations of Western governments are far too high; they won’t be able to pay.” Faber suggests that governments raise the retirement age to 70 years old and cut on social spending, but he believes even that won't be enough.

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The Defense Department just released its king-sized, $708 billion budget for the next fiscal year. Much of the proposed spending is fairly detailed — noting exactly how many helicopters the Pentagon plans to buy and how many troops it plans on playing. But about $56 billion goes simply to “classified programs,” or to projects known only by their code names, like “Chalk Eagle” and “Link Plumeria.” That’s the Pentagon’s black budget.

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Soaring Deficits Projected Under Obama's New Budget

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Cost of Iraq, Afghanistan tops $1 trillion

The cost to U.S. taxpayers of wars in Iraq and Afghanistan since 2001 has topped $1 trillion, and President Barack Obama is expected to request another $33 billion to fund more troops this year.

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