Wow,
It sure has taken a while for mainstream to recognize this. You've been
waiting for the proverbial other shoe to drop for some time now, but
face-saving tactics were dispatched with costly abandon, and remedial
only to the Wall Street institutions that should have been forced into
bankruptcy.
I remember posting something years ago by French economist/conspiracy
theorist Thiery Meissen (SP?), whose assessments of the US economic
state, post 9/11, were as grim as what's below. At the time he called
the larger trade union pension funds depletion/pilfering as one of the
first indications, as well as all of the 9/11 deception on the part of
the US government, and predicted a forthcoming internal economy for
America upon bankruptcy. I believe you argued against the likelihood of
the latter with some good points. But for now, the failure of the US
economy is what the elite need to milk for their greatest profits yet.
Aug.10/10, the Federal Reserve said it would begin funneling proceeds
from maturing mortgage bonds into longer-term gov't debt in an effort to
support a sputtering economy. Hmmn.
As of July 28/10, total US public debt outstanding was posted as 93% of
annual GDP at $13.258 T. Total debt increased over $500 B each year
since FY 2003, with increases of $1 T, FY 2008 and $1.9 T in FY 2009.
23% of total budget is on Defense, with US spending nearly half of the
global expenditures on same. The 23% does not include costs of nuclear
weapons research, maintenance, clean-up, and production, which Dept. of
Energy handles, nor does it include Dept. of Homeland Security, FBI, or
NASA budgets, nor the black budget military spending of the Pentagon,
which is not published. One can imagine how military/defense
requirements get re-defined, crossing over to other departments and get
included in health, energy or education. The US had supposedly only
spent $900 B on Iraq and Afghanistan by FY 2008, plus interest and
incremental costs for caring for 33,000 wounded. Defense was at 3% of
GDP for 1999-2001, only 9.4% at the peak of Viet Nam in 1968, and was at
37.8% in 1944. So, whether or not war is here to stay, at least for the
remainder of our dark age, it is clear that the US, rather than raise
taxes for the poor and middle classes, need only reassess their values
to once again become prosperous. /Note: they're still not even trying to
track down that missing $3.3 T of Pentagon funds from Sept. 10/01.
/Sympathy for the failing US economy is sadly tiresome. It's an economy
of war and deception, and I think they really need to properly
investigate 9/11 deception and more widely publish terrorist incident
stats in order to dispel the need for defensive measures. That would be
way cheaper than dishing out for psychological comforts that erode
privacy and convince citizens that they need such costly protection. I
think they need to release the information on war casualties incurred by
Iraq and Afghanistan, release all of the ugliness videos, and release
the current data on the state of radiation over-seas which is spreading
round the globe, and the true cost of that. I really doubt that the US
can afford to wait for the next generation to rescue them. A hard dose
of truth would serve them well, and that truth will have nothing to do
with a need to raise taxes and belt tightening. That it should include a
reassessment of values is obvious. They absolutely must stop warring and
pretending to protect. They must pass laws which prevent profiteering,
and which foster preservation of life.
Whether or not the 1963 Special Study Group at Iron Mountain, allegedly
set up to examine what would happen to the US if it entered into a state
of lasting peace, was the world's most successful hoax, the premise of
its ensuing best seller novel of a constant state of war for both
control and profit by the few has certainly been deeply entrenched into
US and, of course, almost all other nation economies.
The former was raised in a novel by Steve Berry called /The Paris
Vendetta/, which also made mention of a few other bits worth noting. The
Financial Service Modernization Act, and the Commodity Futures
Modernization Act, adopted in 1999 and 2000, which respectively paved
the way for the 2008 meltdown. Berry's conspiratorialist character cites
the Federal Reserve as mostly owned by private investors, owed trillions
upon trillions, whose interest alone is approximately 8X bigger than the
wealth of the richest man on the planet. That "If you or I printed
money, then loaned it out, we'd go to jail."
Natalia
Keith Hudson wrote:
Good stuff from Kotlikoff. And his book, "Jimmy Stewart Is Dead", is
good, too.
There's also a good video clip today from James Mackintosh, FT's
investment editor as to the possibility of a permanent America
deflation along Japanese lines.
Keith
At 11:55 12/08/2010 -0700, you wrote:
-----Original Message-----
*From:* [email protected] [mailto:[email protected]] *On
Behalf Of *Sid Shniad
*Sent:* Thursday, August 12, 2010 10:56 AM
*Subject:* U.S. Is Bankrupt and We Don't Even Know It
http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html
Bloomberg
Aug 10, 2010
*U.S. Is Bankrupt and We Don't Even Know It*
By Laurence Kotlikoff
Bloomberg Opinion
Lets get real. The U.S. is bankrupt. Neither spending more nor taxing
less will help the country pay its bills
<http://www.bloomberg.com/apps/quote?ticker=FDDSGDP:IND>.
What it can and must do is radically simplify its tax, health-care,
retirement and financial systems, each of which is a complete mess.
But this is the good news. It means they can each be redesigned to
achieve their legitimate purposes at much lower cost and, in the
process, revitalize the economy.
Last month, the International Monetary Fund released its annual
review <http://www.imf.org/external/np/sec/pn/2010/pn10101.htm> of
U.S. economic policy. Its summary contained these bland words about
U.S. fiscal policy: Directors welcomed the authoritiescommitment to
fiscal stabilization, but noted that a larger than budgeted
adjustment would be required to stabilize debt-to-GDP.
But delve deeper, and you will find that the IMF has effectively
pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected
Issues Paper
<http://www.imf.org/external/pubs/ft/scr/2010/cr10248.pdf> says: The
U.S. fiscal gap associated with todays federal fiscal policy is huge
for plausible discount rates.It adds that closing the fiscal gap
requires a permanent annual fiscal adjustment equal to about 14
percent of U.S. GDP.
The fiscal gap is the value today (the present value) of the
difference between projected spending (including servicing official
debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current
federal revenue totals 14.9 percent of GDP. So the IMF is saying that
closing the U.S. fiscal gap, from the revenue side, requires, roughly
speaking, an immediate and permanent doubling of our personal-income,
corporate and federal taxes as well as the payroll levy set down in
the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5
percent of GDP this year, rather than a 9 percent deficit. So the IMF
is really saying the U.S. needs to run a huge surplus now and for
many years to come to pay for the spending that is scheduled. Its
also saying the longer the country waits to make tough fiscal
adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office
whose Long-Term Budget Outlook
<http://www.cbo.gov/doc.cfm?index=11579>, released in June, shows an
even larger problem.
UnofficialLiabilities
Based on the CBOs data, I calculate a fiscal gap of $202 trillion,
which is more than 15 times the official debt
<http://www.treasurydirect.gov/NP/BPDLogin?application=np>. This
gargantuan discrepancy between our officialdebt and our actual net
indebtedness isnt surprising. It reflects what economists call the
labeling problem. Congress has been very careful over the years to
label most of its liabilities unofficialto keep them off the books
and far in the future.
For example, our Social Security FICA
<http://www.socialsecurity.gov/mystatement/fica.htm> contributions
are called taxes and our future Social Security benefits are called
transfer payments. The government could equally well have labeled our
contributions loansand called our future benefits repayment of these
loans less an old age tax,with the old age tax making up for any
difference between the benefits promised and principal plus interest
on the contributions.
The fiscal gap isnt affected by fiscal labeling. Its the only
theoretically correct measure of our long-run fiscal condition
because it considers all spending, no matter how labeled, and
incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous?
Simple. We have 78 million baby boomers who, when fully retired, will
collect benefits from Social Security, Medicare, and Medicaid that,
on average, exceed per-capita GDP. The annual costs of these
entitlements will total about $4 trillion in todays dollars. Yes, our
economy will be bigger in 20 years, but not big enough to handle this
size load year after year.
This is what happens when you run a massive Ponzi scheme for six
decades straight, taking ever larger resources from the young and
giving them to the old while promising the young their eventual turn
at passing the generational buck.
Herb Stein
<http://search.bloomberg.com/search?q=Herb%20Stein&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>,
chairman of the Council of Economic Advisers under U.S. President
Richard Nixon
<http://search.bloomberg.com/search?q=Richard%20Nixon&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>,
coined an oft-repeated phrase: Something that cant go on, will
stop.True enough. Uncle Sams Ponzi scheme will stop. But it will stop
too late.
And it will stop in a very nasty manner. The first possibility is
massive benefit cuts visited on the baby boomers in retirement. The
second is astronomical tax increases that leave the young with little
incentive to work and save. And the third is the government simply
printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with
dramatic increases in poverty, tax, interest rates and consumer
prices. This is an awful, downhill road to follow, but its the one we
are on. And bond traders will kick us miles down our road once they
wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the
next few years wont affect our ability to deal with deficits in the
long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the
governments credit-card bill and each years 14 percent of GDP is the
interest on that bill. If it doesnt pay this years interest, it will
be added to the balance.
Demand-siders say forgoing this years 14 percent fiscal tightening,
and spending even more, will pay for itself, in present value, by
expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded
supply-siders. Our country is broke and can no longer afford no-pain,
all-gain solutions.
(Laurence J. Kotlikoff
<http://search.bloomberg.com/search?q=Laurence%20J.%20Kotlikoff&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>
is a professor of economics at Boston University and author of Jimmy
Stewart Is Dead: Ending the Worlds Ongoing Financial Plague with
Limited Purpose Banking.The opinions expressed are his own.)
To contact the writer of this column: Laurence Kotlikoff at
[email protected] <mailto:[email protected]>
!DSPAM:2676,4c643785177553611930706!
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