The US is bankrupt

I have found, if you want a clear picture of what is really happening in the world you need to follow the money. If you want to be lied to about non-issues, continue listening to the politicians. You need to look at the economic issues to understand the motives of these poo-slingers.

In July of this year Boston University Professor and economist Laurence Kotlikoff began warning "The US is bankrupt". Many of us non-sheep are aware of the official $13.5 Trillion US debt figure. Many don't seem too bothered by the fact that the debt is 60% of our Gross Domestic Product. Well according to Kotlikoff those numbers are a lie!

Writing in the September issue of Finance and Development (an IMF publication) Kotlikoff notes that the debt number is all about how you look at it. The US determines it's debt relative to GDP but when looking at the "fiscal gap" (the difference between the present value of government payments and receipts.) We are met with a much larger figure.

Kotlikoff cites a recent IMF report;

“Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

With varied options of raising and lowering discount rates this figure can be pushed down to 12% or even 8%. I see the IMF wouldn't let you print an actual figure in your article, what does that mean in brass tax?

"In 2009, federal personal income taxes totaled 7.4 percent of GDP in the United States. To achieve present value fiscal balance would require a change in the present value of the government’s net cash flow equivalent to at least an immediate and permanent doubling of income taxes."

Oh boy. So how did this happen Larry?

"How did the United States reach its current state of what could effectively be considered bankruptcy? It spent six decades transferring ever more resources from the young to the elderly, under a variety of different programs described with a variety of labels. Many policies across many administrations from Eisenhower’s to Obama’s—cutting taxes, growing Social Security, enacting Medicare and Medicaid, spending to combat recession, and financing wars—added to the nation’s financial problems."

You mean I can't just blame Obama? But he's so smug! So what's gonna happen, will the sun explode?

"Once the world catches on to the true extent of U.S. fiscal insolvency, the ability of the United States to continue to finance its government borrowing could come to a halt."

But how do we solve the problem Larry my dear? How is Washington going to fix this?

:"One possibility, of course, is that the U.S. government will have come to grips with its fiscal problems."

HAHAHAHAHAHAHAHAHAHAHAHAHA! Pull the other one!

"Another is that the government will print enormous quantities of money to cover its bills—with concomitant high inflation, declining confidence in banks and money market funds, and a serious test for deposit insurance. This scenario is extreme, but not improbable."

Hmm I don't know we did that in 2009 and we are planning on doing it again.

OK so what is the actual number here Lars baby? I have sheep reading this, words make their brains hurt.



$200 Trillion? Wow, if this were any other country we'd be back to living in huts. Indeed, unlike Greece or Argentina, the US is a unique example. The dollar is currently the reserve currency of the world, but signs are emerging from Asia that our time at the top of the hill is coming to an end. The only thing that can save us now is a big old neon distraction..

K