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The US is Insolvent (and headed towards bankruptcy)

Friday, July 17, 2009, 9:59 AM

Last night, in Boulder Colorado, I had the honor to present a one-hour mini version of the Crash Course to an audience that I estimate to be in the vicinity of 300+. Sponsored by Transition Colorado, who did a remarkable and professional job of organizing and managing the event, this talk was attended by more young people than any other talk I have given.

This was extremely heartening.

Dr. Albert Bartlett was in attendance, which was a great honor for me, although I confess to being nervous at the thought of covering exponential growth with him in the audience. It seemed kind of like giving meditation advice to the Dali Lama. Nonetheless, I now have a picture of myself with a man who I am sure will be recognized through time as being both right and unwavering in his views on exponential growth and population.

At the talk, I necessarily had to gloss over some important details, and one of those concerned the statement that “The United States is Insolvent.” 

I originally wrote about this unpleasant fact back in 2006 in a Martenson Report entitled The United States Is Insolvent.  And today, unfortunately, the situation has only deteriorated. I want to revisit that topic because there is really nothing more onerous to the future prosperity of a country than going bankrupt. If you care about the future prosperity of the US, you need to understand this situation.

Yesterday, my jaw literally dropped when I read this statement made by Vice President Joe Biden:

“We’re going to go bankrupt as a nation,” Biden said.

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

What surprised me was not the admission by a sitting US Vice President that the nation is headed towards bankruptcy.  I suppose that's pretty clear to everybody by now, so why not just tell it like it is?  What got me was that the statement, as expressed, displays an unbelievable ignorance of finance and economics. The claim boils down to the idea that the way to avoid bankruptcy is by spending money.

If this is somehow possible, I sincerely hope that Mr. Biden sees fit to share the secret with the millions of people that entered bankruptcy this year. Otherwise, it will have to stand as a jaw-droppingly inane comment.

But it clues us in to the mindset of at least some of the DC leadership and gives us some sense of how much faith we should place in their efforts to centrally manage everything from car companies to secretive trillions handed out to untrustworthy bankers.

Instead of blind faith, we might prefer to trust in our own ability to look at the data and ask, “How is this going to work?”

This morning I finally read an exceptional document put out by Sprott Asset Management (Toronto, Can.) which exactly and precisely lays bare the magnificent funding problems that DC has created for itself. Titled “The Solution…Is The Problem”  it opens with a statement of fact, “In fiscal 2009, the United States must find buyers for almost three times the debt that was issued last year.”

Three times, or 300% more debt sales by the US government this year compared to last year. How will that happen? Rather than just sort of assume that this will somehow get done, this report breaks down the potential purchases of US debt by specific classes of purchasers and provides a mid-year report card on how each one is doing in their quest to buy 300% more than last year.

The results are not encouraging.

We begin with the largest buyers of debt outside of the United States – ‘Foreign and International Holders’ (#2). This group accounts for the largest source of external capital for US debt purchases and represents a very important group to float the deficit. They collectively purchased $564 billion last year, and the US will require them to increase their purchases to $1.6 trillion in 2009. Thus far, they have only purchased $465 billion to March 2009, which is halfway through US fiscal year - and well behind the pace needed to triple last year’s purchases. Current data does not bode well for further purchases either. In fact, April Treasury data revealed that ‘Foreign and International Holders’ were net sellers of US debt from March to April 2009. This is not surprising given the public comments from officials in China, Japan, Russia and Brazil concerning the level of debt issuance by the United States and its potential impact on the US dollar.

The report continues on covering all ten classes of purchasers and it turns out that only one, “Other Purchasers” is on track to triple their purchases over last year. The other nine?  Most are well off of the pace needed to cover up a massive gap.

How will the shortfall be covered? In reality there is only one option, and it is the reason I own gold. As the Sprott paper concludes:

As we hope the breakdown above has revealed, the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government - and it appears that current holders of debt are beginning to sell. Because it is impossible to balance the budget from outside sources of capital, the only source of funds left for the US, in all reality, is continued money printing.

Such money printing represents a breach of the public trust required to operate a fiat money system. We trust that they will operate the money machine responsibly and they trust that we will go about our daily lives and be productive. Instead the Fed is aiding and abetting the largest printing operation in history and is steadfastly refusing to be audited in any way shape or form. If confidence and transparency are required elements for the sustainable continuation of a fiat money system, the US dollar is in for a rough ride.

While the short term wiggles and jiggles of the markets, and their attendant mouthpieces in the media, do their best to confuse us, it is the larger trends that will illuminate the way.

There can be no doubt that the US government is financially insolvent. While we may not know the exact timing (this year, next?) or the exact mechanisms (Raise taxes hugely? Renege on entitlement benefits?), we can be sure that past profligacy will translate into future hardship and reduced prosperity.

And the shame of it all is that it did not have to be this way. History is thoroughly unambiguous on this matter; spending beyond ones means inevitably ends in tears. No exceptions.  How did we manage to forget this?

As I probe further into this country’s recent past, the time of my grandfather and great-grandfather, I am reading of people who understood that prosperity resulted from a combination of productivity and living well within ones means. I wonder what changed.  I wonder how we so completely forgot the lessons of the (very) recent past that today it is possible for a Vice President of the United States to assert that spending is the key to avoiding bankruptcy and then walk out of the room with his head held high.

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59 Comments

markf57's picture
markf57
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Re: The US is Insolvent (and headed towards bankruptcy)

Chris:

It was a pleasure to meet you and here your presentation last evening. I was wildly pleased with the turnout as well.

I liked how you started the talking thanking the audience for "giving up" such a beautiful evening to come and here you speak. Don't tell anyone, but that is pretty much how every summer evening looks in Boulder.

And you did look visibly nervous when you got the exponential growth part of the talk, but your comment about the Dali Lama was priceless. BTW, did you know Dr. Bartlett was going to attend the talk? If so, how much notice did you get?

I also liked how the seminar this weekend is available on a daily basis. As a member for almost a year, you didn't want to spend the $ for the first day as I already understand the Crash Course concepts, but I will be there Sunday.

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Re: The US is Insolvent (and headed towards bankruptcy)

Thanks Chris.

Everything you say in this report can be applied to the United Kingdom as well. I've long been trying to deduce what the impacts on the UK will be if the worst comes to the worst in the US. But in actual fact it hardly matters because we are in exactly the same situation. The UK is insolvent. The only difference is that we do not have the bold men of vision such as your self, Peter Schiff and Ron Paul (to name a few) that the US is blessed with. When I raise the very real concerns that you articulate, transcribed for a British audience, no one seems bothered. It really is amazing how much we live on the margins in the 'developed' anglo-saxon world. So long as the water still comes out of the tap, the lights remain on and there is just enough cash left after the bills are paid to have a beer and watch the football, no one cares. No one plans, no one is bothered. Bread and Circuses. We are now right up against the line. It won't take much to fall over it and then things will unravel at a frightening pace.

Thanks again, I use your website as a window on the state of America. Very informative.

Hugh

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Re: The US is Insolvent (and headed towards bankruptcy)

Chris

Of course you are right .......

However, as an independent small businessman,  I've found myself in a financial pickle on numerous occasions over the course of my life. In each case I have   deluded myself into the belief that if I only had more money my problems would be solved. If only I could get that extra million or more from the bank or an investor, I would show the world how to make real money. I don't know if it is human nature or just me, but when there are bills to be paid and no money to pay them, the immediate problem is to find money, and, then the original business plan could be continued and profits would come pouring in -- problem solved. Somehow there is a tendancy to be blinded by the reality that the original business plan was plain wrong in the first place. My brain seems to lock onto a vision that what I am doing is the right and only way to proceed -- A good thought process if you are on the right track, but horrible if you are not.

I think it is fair to say that we are on a similar track as an entire country that has worked for several generations heading increasingly farther off course and cannot see reality

Jim Pitre

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Re: The US is Insolvent (and headed towards bankruptcy)

Chris,

On a street level view where I live, I think we have reached a social tipping point, paradigm shift or whatever you call it. The people are transforming rapidly into informed and active citizens -- the most effective tools that our forefathers built our government machinery for. I can now discuss ideas presented here with people I meet day to day without running into the ignorance or just plain denial that was so common even 9 months ago.

True, many have negative emotions. But they are entirely appropriate.

Fear keeps people alert, informed and aware. Anger keeps them motivated and sparks direct action to vote and take part in our government.

Humans have enormous capacity for change.

Thanks for leading the way Chris.

 

Jeff Borsuk's picture
Jeff Borsuk
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Re: The US is Insolvent (and headed towards bankruptcy)

"Jubilee" anyone?

SteveS's picture
SteveS
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Re: The US is Insolvent (and headed towards bankruptcy)

Glad your first day went well, great insights.

cmartenson wrote:

What surprised me was not the admission by a sitting US Vice President that the nation is headed towards bankruptcy.  I suppose that's pretty clear to everybody by now so why not just tell it like it is? 

Actually, I am extremely surprised a politician would admit we are heading toward bankruptcy. And what politician would state something just because everyone else knows it already?  Our politicians continually avoid the obvious truths we all know when they are things that will require sacrifice and hard choices, and most of all the possibility of loss of political contributions or political support.

The truly sad thing is that most Americans are clued in and, though they might not like hard choices, are willing to accept changes that make sense.

mainecooncat's picture
mainecooncat
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Re: The US is Insolvent (and headed towards bankruptcy)
Jeff Borsuk wrote:

"Jubilee" anyone?

Or how about this one: "Got jubilee?"

Actually that's my new bumper sticker. Ha!

Cycle9's picture
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Re: The US is Insolvent (and headed towards bankruptcy)

 Chris,

Thanks for your astute observations, as usual.

The question we should be asking is, why and how we got here.  We need to figure that out to dig our way out. 

One of the prime issues we are dealing with is finger pointing.  There is a lot of it to go around.

Who is to blame?  Government? Profligate spenders? Homeowners who bought oversized houses?

It seems that a lot of the blame here and on other similar sites points to one of two things: our oversized government, and/or defective individual behavior.  I have come to the view that these two are nice scapegoats for the real underlying cause: we've been sold out as a country by wealthy, corporate interests.  They have bought our government, and they have bought our minds (through advertising). 

I will not argue against a viewpoint that says government is too big.  Nor will I argue against a viewpoint that says that many individuals spent well beyond their means.  But what I will do is ask why and how our government has been hijacked by corporate interests to become the bloated cow that it is, and our population convinced that they are "consumers" first and foremost, citizens second.

For example, few will debate that our entitlement payouts are unsustainable.  How did they get that way?  Some conservatives like to point at "welfare moms" and the like.  But it is not welfare moms that are bankrupting government.  It is the fact that there are no longer decent-paying jobs for middle class folks in America.

Why not?  Because all the jobs have moved to China and places like that.  In order for the system to continue functioning while all the jobs were outsourced, american "consumers" had to have a source of money to keep buying.  That source of money was debt.  Cheap credit and lots of it flowed... for many years.  And even those of us who never felt right about getting in debt, were certainly tempted.

Now the credit has stopped flowing.  There is no other source of money, because Americans have stopped producing.  But it is not like we don't want to.

I am trying to get production going of a US-made electric bike.  But it will likely cost 2 times as much as a Chinese made one (at least - look at the Optibike - a $9,000 bike made in the US).  I can't pay people $2-$4/day like they do in China.  Plus we have regulations to follow here that the Chinese don't, which add expense.  But, Reagan and Clinton both bought the mantra of "free trade".  So while countries like China and Japan won't buy our products, we happily buy theirs, because they are "cheap".  Penny wise and pound foolish, we are.

Henry Ford understood this well.  He actually paid his employees very well, because he knew that they would use that money to buy cars.  But a nation of McDonalds and WalMart employees can't afford much of anything.. unless it is on credit.  Once the credit runs out, then what?  Ooops, it is running out.  The result is stuff like this:

We've forgotten to take care of our own citizens first.  We've been trained that buying a cheap piece of Chinese-made plastic at WalMart is our number one goal in life - even if that puts millions of american workers out of jobs.

Our economy will not restart until we actually figure out how to start doing things for ourselves again.  This is not so simple as it seems, because there are entrenched, wealthy interests that like the status quo.  Eric Jantzen of iTulip and Michael Hudson both call it the "FIRE" economy: Finance, Insurance, and Real Estate.  These sectors have grown way out of proportion with historical norms, and have become "the" economy, rather than a little slice of the economy.  They are like a bloodsucking leech, growing ever fatter and needing ever more blood to sustain themselves.  But our economy has no blood left.  It has been drained out and sold off. 

Out of control government spending is only a symptom of the problem.  The real problem is that we have nothing else besides government spending to keep us afloat as a nation.  First we lost our industry (beginning in earnest during the Reagan years), and began living on credit.  Now the credit is drying up, so we are attempting to live on the government dole.  The attempt will probably fail.  When it fails, the question is, what next?

I believe the only non-doomsday scenario is to actually bring back industry to the US.  Industry in areas like clean energy, biofuels, rail transport, and so on.  And with that industry, creating jobs.  If we don't do something like that, I think we will just slide off into oblivion. 

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Re: The US is Insolvent (and headed towards bankruptcy)

Is this a fair distillation of where we are now?

1. US is insolvent as the day is long.

2. A contracting or flat global economy.

3. A burgeoning US annual budget deficit/total debt.

4. The need to sell an ever increasing amount of bunk paper (US treasuries) to countries who are ever increasingly wary of everything the US does and stands for. And, by the way, they really don't have the wherewithal to do this anymore -- one of the keys in Chris' above presentation.

5. The US economy has probably entered into permanent decline to never return again -- except perhaps in a radically redesigned way. This means that the insolvency/bankruptcy crisis is irreversible barring some kind of debt jubilee or economic miracle on par with -- to borrow from Gerald Celente -- the discovery of fire or the invention of the wheel.

I mentioned on another thread that I've been particularly doomerish as of late, so talk me down here if you can. How does all of the above not add up to a global financial crisis (one that would make the fall of '08 look like nothin') in the next 24 months?

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Re: The US is Insolvent (and headed towards bankruptcy)
Cycle9 wrote:

One of the prime issues we are dealing with is finger pointing.  There is a lot of it to go around.

Who is to blame?  Government? Profligate spenders? Homeowners who bought oversized houses?

It seems that a lot of the blame here and on other similar sites points to one of two things: our oversized government, and/or defective individual behavior.  I have come to the view that these two are nice scapegoats for the real underlying cause: we've been sold out as a country by wealthy, corporate interests.  They have bought our government, and they have bought our minds (through advertising).  

You've made my day, my friend. Thank you. Thank you. Thank you.

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Re: The US is Insolvent (and headed towards bankruptcy)

‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

Let's take 'Windsock Joe' -- our nation's highest-ranking invertebrate -- at his word.

Spending money when you're bankrupt is not difficult, when you're a counterfeiter. As MadDog Ben Bernanke has said, 'We've got a technology called the printing press.'

What I consider deplorable is Joe's vain fantasy that he dreamed up this road to ruin himself. No, Joe. Acknowledge your intellectual debt to the great Robert Mugabe. He's already spent more trillions than you've ever seen in your life -- all on behalf of the Zimbabwean people that he loves so much.

Rock on, Windsock Joe. You're our favourite gerbil.

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Re: The US is Insolvent (and headed towards bankruptcy)

The quote below is from and AsiaTimes article that appeared on July 1. It is discussing some ideas presented in a book by Robert Allen titled The British Industrial Revolution in Global Perspective . It is worth checking out and thinking about the implications for the current crisis and how the wealth and industrial/technological progress were generated that lead us toward the world we occupy today. The thesis presented suggests that perhaps one reason technological progress did not continue to build upon itself in the Roman world was the availability of cheap labor, mostly in the form of slaves. Technological marvels like the Antikythera mechanism [http://en.wikipedia.org/wiki/Antikythera_mechanism] remained toys for the wealthy class rather than being incorporated and utilized for the production of labor-saving devices.

In addition to the importance of a population limited to a level below the carrying capacity of the landscape, the availability of cheap energy in the form of coal (and later oil) was also critical.

Limits to population, cheap energy (through some technological innovation), and a adequately-fed, well educated populace, effective inter-regional trade, and competition that leads to innovation.... looks like some rough times ahead from this perspective.

http://www.atimes.com/atimes/Global_Economy/KG01Dj01.html

Quote:

To take the causes roughly in chronological order, happy sheep were the result of the 1348 Black Death, which wiped out a third of England's population and resulted in the restoration of much good agricultural land to grazing. As a result, English sheep, fed on richer diets than previously, grew longer coats, from which were created the "new draperies", finer in quality than competitive textiles and hence market-dominant.

The depopulation of the Black Death also caused wage rates to rise and, in England, reproductive patterns to change, producing a decline in fertility. England's lower fertility ensured that the impoverishing 16th and 17th centuries were less impoverishing than elsewhere in Europe and wages remained relatively high. One of Allen's more startling discoveries is that real wage rates in Vienna in 1825 were a quarter of their level 400 years earlier; in England, this immiseration did not happen.

Imperialism, next, added both to the wealth of the country and to its urbanization (which increased returns to agriculture, thus further increasing rural wage levels). Extensive trade in exotic goods and the construction of large merchant and naval marines both provided high-wage urban employment and generated large amounts of capital. The safety valve of North American emigration worked against any Malthusian fall in rural wages, ensuring that new generations were adequately fed and at least modestly educated.

There are nevertheless a number of modern policy lessons that can be learned from Allen's analysis. First and most obvious, trade is essential to rapid economic development. By allowing rapid arbitrage between high cost areas and low cost areas, it generates capital accumulation, which lubricates other economic activity. A world in which trade becomes bureaucratized and atomized lessens the possibilities of new wealth generation both directly through placing barriers to economic system optimization and indirectly through lessening the accumulation of capital.

While rapid arbitrage of goods through free trade is highly desirable, rapid arbitrage of labor through free migration is not. No society where unskilled labor is in excess supply has ever been able to use that labor to improve its wealth. Undifferentiated low-cost human labor has been in excess throughout the vast majority of humanity's experience; it is only labor scarcity and skill that have raised mankind's living standards above the Malthusian level. Low-skill, undifferentiated labor does not pull up its own living standards, though if its supply is limited, its living standards may be raised by the efforts of others.

There is thus a huge distinction between trade policy, in which the maximum possible freedom is desirable, and immigration policy, in which complete freedom of migration produces an excess of unskilled labor that drives down wages for the unskilled to Malthusian levels. This is not only the case in high-wage economies such as the United States. In low-wage economies such as pre-1980 China, India and Africa, the first requirement for economic growthis to reduce the birth rate sufficiently that the society can afford to educate the majority of its young people, and not leave them as a pool of intermittently employed surplus unskilled labor driving down living standards and causing disturbances.

 

 

 

 

 

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Re: The US is Insolvent (and headed towards bankruptcy)
machinehead wrote:

‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

Let's take 'Windsock Joe' -- our nation's highest-ranking invertebrate -- at his word.

Spending money when you're bankrupt is not difficult, when you're a counterfeiter. As MadDog Ben Bernanke has said, 'We've got a technology called the printing press.'

What I consider deplorable is Joe's vain fantasy that he dreamed up this road to ruin himself. No, Joe. Acknowledge your intellectual debt to the great Robert Mugabe. He's already spent more trillions than you've ever seen in your life -- all on behalf of the Zimbabwean people that he loves so much.

Rock on, Windsock Joe. You're our favourite gerbil.

Machinehead is back!

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Re: The US is Insolvent (and headed towards bankruptcy)

machinehead said:

Let's take 'Windsock Joe' -- our nation's highest-ranking invertebrate -- at his word.

I thought that was his boss.

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Re: The US is Insolvent (and headed towards bankruptcy)

What is simply remarkable is how casually Mr. Biden speaks.....

A catastrophe is waiting in the wings and he utters nonsense.

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Re: The US is Insolvent (and headed towards bankruptcy)

As Zappa says...

 "The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater."

Yet the markets are still going up and up and up...

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Re: The US is Insolvent (and headed towards bankruptcy)

 Try this from The Big Picture...

wh-monthly-715

How much of this is beyond the economy tanking (20% versus ~6%)...people increasingly losing faith in our government?

How much more will people question need to pay taxes?

Any doubts?

Those who don't think we are in the early stages in the process of a "Crisis in Confidence" as we accelerate toward financial oblivion of bankruptcy, I submit are delusional.  This has happened in history and is part of human nature.

There's more to occur than Bankruptcy and hyper-inflation; how about collapse(s) of governments at multiple levels, disorder...unfortunately also mayhem?

Maintain this will accelerate the remainder of this year.

Is everyone ready?

 

Nichoman

 

 

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Re: The US is Insolvent (and headed towards bankruptcy)

Elizabeth S.,

Quote:

A catastrophe is waiting in the wings and he utters nonsense.

At least he's consistently idiotic. ;)
Scary thing is, some times some of them sound really smart, and people really like what they hear.

'Ole Joe Biden... not very often.

Cheers,

Aaron

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Re: The US is Insolvent (and headed towards bankruptcy)
metalmongrel wrote:

As Zappa says...

 "The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater."

Yet the markets are still going up and up and up...

Thanks for the quote, MM. FZ's one of my favorite musicians and social critics.

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Re: The US is Insolvent (and headed towards bankruptcy)

RE: My above post #9

I guess no one's talkin' me down yet!

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Re: The US is Insolvent (and headed towards bankruptcy)

Cycle 9 said 'wealthy corporate interests' ...'have bought our government and they have bought our minds'. Now that is worth pondering awhile...and I agree totally. Well put!

And then to have a quote from Zappa in the same thread!

My day, too, has been made!

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Re: The US is Insolvent (and headed towards bankruptcy)
Aaron Moyer wrote:

Elizabeth S.,

Quote:

A catastrophe is waiting in the wings and he utters nonsense.

At least he's consistently idiotic. ;)
Scary thing is, some times some of them sound really smart, and people really like what they hear.

'Ole Joe Biden... not very often.

Cheers,

Aaron

Talking to him person to person is even scarier.  You can't overstate the above comments w/r/t to our VP.  As the situation gets more dire, he will do much more of this.

Better stop now.

 

Nichoman

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Re: The US is Insolvent (and headed towards bankruptcy)

 

Quote:

It seems that a lot of the blame here and on other similar sites points to one of two things: our oversized government, and/or defective individual behavior.  I have come to the view that these two are nice scapegoats for the real underlying cause: we've been sold out as a country by wealthy, corporate interests.  They have bought our government, and they have bought our minds (through advertising).  

Need to be precise here.  Need to look higher than corporations.  Corporations are dependent children of the big banks.  And the banks are dependent children of the Federal Reserve.  The Fed is the problem. Corporations are a symptom of the problem.  Bloated government is a symptom of the problem (it's not a scapegoat...it's a direct result of having the Fed system which depends on ever-growing govt debt to fuel the private economy...a mathematical truth).  

I was actually impressed that Biden revealed the truth.  He's correct.  Given our monetary system, yes, the more the Treasury spends, i.e. goes in debt to the Fed, the more the Fed can pump the economy.  That's how it has worked for a long time, especially since 71.  What the used car salesman Biden doesn't understand is that the upper bound of that joke system has been reached.

 

 

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Re: The US is Insolvent (and headed towards bankruptcy)

 The problem is the corrupt goverment, and the goverment is people

The problem is the corporation greed, and the corporations are people

The problem is the people egoism.

If we make another revolution and dont change the people inners, the problems will resurge again.

The scientifc method for change inner people problem (the egoism) is the science of cabala of michael laitman.

www.kab.tv

www.laitman.com

There is no another way to do this needed change.

We not are in crisis, we are in the last evolution, the evolution of the mind.

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Re: The US is Insolvent (and headed towards bankruptcy)
mainecooncat wrote:

RE: My above post #9

I guess no one's talkin' me down yet!

Nope, Can't. Best, Rog

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Re: The US is Insolvent (and headed towards bankruptcy)

"We have to go spend money to keep from going bankrupt" 

You know, some say Biden's comment is superficial, but that's just on the surface.

On one hand, he's indecisive; but on the other, he's not.

 

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Re: The US is Insolvent (and headed towards bankruptcy)

Strength through exhaustion.

Had a running debate with some of the guys who work in the shop across from me about the economy.
Lots of opinions, but nothing outside the mainstream.

I said something to the effect of "...Debt-based exponential money system, and the limits of growth..."

It might have been more appropriate to say "Take me to you leader" judging by the looks I got.
The conversation continued more or less without me.

...looking forward to the day where this is accepted as self evident...

Cheers,

Aaron

PS - Maine... Sorry - bad timing for the pep-talk. I see signs of further delapidation and ignorance.
But ultimately, the cycle will repeat, and that's worth considering.

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Re: The US is Insolvent (and headed towards bankruptcy)
mainecooncat wrote:

How does all of the above not add up to a global financial crisis (one that would make the fall of '08 look like nothin') in the next 24 months?

It won't happen, because Goldman Sachs wouldn't be able to make any money if the financial system collapsed.

Its a government of Goldman Sachs, for Goldman Sachs, and by Goldman Sachs, so help me Goldman Sachs.

 

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Re: The US is Insolvent (and headed towards bankruptcy)
JAG wrote:

 

It won't happen, because Goldman Sachs wouldn't be able to make any money if the financial system collapsed.

Its a government of Goldman Sachs, for Goldman Sachs, and by Goldman Sachs, so help me Goldman Sachs.

 

Not exactly a pep talk, but certainly good for a laugh!

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Re: One Chart: US is Insolvent (headed towards bankruptcy)

 Here's what CM said in one chart from latest data this past week for June...

 

The chart below shows the rolling twelve month change in receipt, as well as outlays, and the variance between the two (An inexact formula? Yes, but it puts this all in perspective). What this shows is a massive spike in spending AND a massive cliff dive in receipts.
 
 
 
Yep, all is well, nothing to see here, move along now.  

 

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Re: The US is Insolvent (and headed towards bankruptcy)

Unfortunately for all of us are the only green shoots that have been planted are those of insolvency. These are growing quite well as Biden & Obama & the rest of the loonies poor fertilizer on them.

One would think all Biden has to do is act like he knows what he is talking about & he can't even get that right?? Truth be known probably 1/2 or more of the AARP crowd thought it was a wonderful idea he had LOL.

Any guesses if mainstream media will pickup on this.

Cycle9 I like a lot of the points you made.

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Re: The US is Insolvent (and headed towards bankruptcy)

Chris,

I would love to see the photograph of you with Dr Bartlett. Any chance of you posting it? I re-viewed his video(s) this week on YouTube, wonderful stuff.

Hugh/hughacland (Post 2),

Welcome to Chris's site. There ARE other people in the UK who feel as you do, but (as in the USA?) they are fewer and further between OR are not aware as a result of the media (lack of) coverage. There are also a few politicians who appear to understand our problems (Vince Cable for Prime Minister!). I get to feel more passionate about this as time is moving on with what appears to be raping of the populace (and more so in the USA than the UK or Europe - Angela Merkel, to her credit, refused to be drawn further into QE despite exhortations from the USA). For real passion about GS, Max Keisler is great (also posted by investorzzo in "Wow! Max Kieser rips Goldman Sachs & the FED")!

Jeff/JAG (Post 29),

You said "It won't happen, because Goldman Sachs wouldn't be able to make any money if the financial system collapsed". I'm sure they would via shorting the market and taking appropriate derivative positions (options, futures, ETFs, etc etc) as well as taking out the necessary currency positions - the annoying thing is that they probably have such a hold on what's going on that when it does hit the fan they will be the ones orchestrating it.

For another musical metaphor, one of my favourite albums remains Jethro Tull's "Thick As A Brick" and one of my all time favourite lines from it is 'We are geared to the average rather than the exceptional' - with regard to the people who govern us (Joe Biden for example!) this is certainly true, they may be highly educated but certainly exhibit nothing exceptional in behaviour or integrity.

David C

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Re: The US is Insolvent (and headed towards bankruptcy)

Biden is being consistent. He thinks the solution to the "problem" is to reinflate the bubble.

Something jumped off the screen for me last night during Dr. Martenson's presentation. The thing is, the Government is acting as if we are experiencing a financial problem. The truth of the matter is, that we are in a financial predicament.

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Re: The US is Insolvent (and headed towards bankruptcy)

Hi Mark,

An interesting semantic difference!

It's almost unbelievable that the whole premise of currect actions by the politicians, financial community and in the markets is to return to 'normalcy' (I prefer the word normaility) when the last ten years or more have been anything but normal - Chris's continued reiterations that we are movng into different times (together with his adjuncts) are true.

DavidC

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Re: The US is Insolvent (and headed towards bankruptcy)

Hughacland,

So, it isn't just me being ignored and ridiculed by uninterested fellow Brits!

It is nice to know that at least a few of us have woken up to the shocking truth.

 

.

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Re: The US is Insolvent (and headed towards bankruptcy)

Hi brits, reminds me:  I saw a brit post a blog comment on an article that was talking about how the queen was slamming the MPs who were recently discovered building castles with the public's money that said "I won't trust ms windsor until she gives up her own family's claim to the public purse."  100s of brits slammed him for his comment!  I couldn't believe it.  Why would the masses submit, even PREFER to do so, to such a family that's been proven psychopathic over the years?  Or at least why don't the masses see the hypocrisy in her comments?  Why wouldn't there be at least one other brit to agree with him?

Yet...americans do the same thing.  We have the equivalent of a royal establishment and nobody cares.  We let them tax/inflate away our wealth, control our govt, and we pay them interest for the privilege of owning us.  So I used to think this was just a Brit disease...nope, perhaps it's inherent in mass psychology world-wide and we deserve what's coming.  

Tallyho my right honorable friends.

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Re: The US is Insolvent (and headed towards bankruptcy)

 

 Mark says:

The truth of the matter is, that we are in a financial predicament.

I completely agree that we are in a "predicament" however, in my opinion, it goes beyond what I consider a financial predicament The mainstream view in our country in relationship to the world is badly skewed and any "financial " cures to make that better is equivalent to a butterfly flapping its wings in a hurricane. The time has come for us to face reality and quit trying to live the insane dream that we have adopted that says such ideas as "Our lifestyle is non-negotiable", "Drill Baby Drill" "Trickle Down Theory", Cut taxes and the free market will solve everything", "Debt is not an issue" and " Making things is not important, we are in the information age and we can let others do the low margin work" - the list goes on goes on ad nauseam ............

 

The truth is that wealth is created (as opposed to stolen) by the making things that are of value. Wall Street has nearly perfected the art of stealing from producers and pretending they are contributing to our well being, but only a small percentage of what passes for productive effort in the financial sector of the economy benefits anyone other than the few oligarchs in control.

 

We know we have to quit living the bubble dream, but whenever it is suggested that we must cut back on our oil/energy consumption, lower our standard of living or get serious about fixing our agricultural and manufacturing system, the purveyor of such intelligence in labeled an unpatriotic commie, kook, & liberal not worthy of being called an American.

 

For example, even posts on this site label the idea of increasing the cost of carbon fuels by taxation or other means as insanity that will lead to sure destruction of the country in short order. Is it not clear that one of our highest priorities is to change our system so that we are not dependent on foreign oil? And is it not equally clear that if we are to bring about this change that we need a program that will increase the cost of fuel to the equivalent of European style $7 per gallon or more in an orderly fashion over the next couple of years? Europeans have done this and while they are not perfect either, their fuel use is around 1/2 of ours on a per capita basis.

 

Another example goes along the lines of rather than make $150 per ton of steel by manufacturing it with giant industrial plants, unions and headaches, we've elected to have somebody else do the real work in Korea or China and sit back raking in $150 per ton importing and shuffling paper  -- and then complain that jobs are going overseas. We are turning into a country of entitled  percentage men and women taking our cut for doing little and producing nothing.

 

Somewhere I've seen the percentage of our GDP that is generated by "Financial Services" being somewhere in the region of 40% of GDP. The exact percentage doesn't really matter -- suffice it to say that much of our economy has little to do with producing anything.

 

It is my opinion that our National mindset has to change -- we can make this change by plan or by being forced by the reality of the real marketplace of Mother Nature. The choice is ours, however if we stay on the track we are currently on, it will be extremely painful before the required change takes place

 

 

 
Jim
 
 

 

 

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Re: The US is Insolvent (and headed towards bankruptcy)

Great quote from Joe Biden.  Though he might come off as a drunk uncle who has had a frontal lobotomy, I listen to anything he says very carefully.  Especially when Obama or another government spokesperson has to "clarify" his remarks.  Biden is the closest thing to real facts we will ever get from the world politic that is typically full of half-truths and euphemisms.  Just an observation...

Gonzo

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Re: The US is Insolvent (and headed towards bankruptcy)

Hello Gonzo: He often lets the cat(s) out of the bag, like the time he disclosed his hand me down secret location.

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Re: The US is Insolvent (and headed towards bankruptcy)

 Hey  maincooncat,   The only thing I can think of that might be added to your list is that those greedy wall street bloodsuckers are, at this very moment, continuing many of the same practices (some under different names) that brought all this to a head in the first place.....AND.....are busy thinking up new ways to drain the American taxpayer of even more cash, i.e. get us deeper into debt.

Otherwise, I liked your list a lot.

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Re: The US is Insolvent (and headed towards bankruptcy)

I remember Biden from years ago, growing up in Pennsylvania, he was a local politician in a nearby state.  How strange that he is in charge. 

I can no longer find the  video (I think it has been scrubbed out pretty well from the net) but you remember this one:

"Gird your loins,” Biden told the crowd. “We’re gonna win with your help, God willing, we’re gonna win, but this is not gonna be an easy ride. This president, the next president, is gonna be left with the most significant task. It’s like cleaning the Augean stables, man. This is more than just, this is more than – think about it, literally, think about it – this is more than just a capital crisis, this is more than just markets. This is a systemic problem we have with this economy.”

Don't know what he meant then but it seems oddly relevant.  Except now they are loading the stables up with more horse doodoo (i.e. debt). Crazy stuff.

Regards and happy weekend to all

D

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Re: The US is Insolvent (and headed towards bankruptcy)
Quote:

we have to go spend money to keep from going bankrupt [..]

It's an epitath for the American Dream.

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Re: The US is Insolvent (and headed towards bankruptcy)

Chris it is great to see the young Americans turn out to listen to you. That gives me some real hope for our future. Amazing the good sensible minds we have in this country (like your's) & this administration lacks the common sense to gather some of these ideas.

Being facetious maybe Joe knows what he is really doing??? First you create inflation & then you fix it Jimmy style.  Jimmy Vs Inflation.   http://www.time.com/time/magazine/article/0,9171,921854-1,00.html

Big Government has always proved to be bad for the people IMHO. Expansion of Big Govt is even worse, expansion of Big Inept Govt is a disaster! Then add in problems with the 3-Es & it becomes pretty clear....Houston WE Have A Problem.

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Re: The US is Insolvent (and headed towards bankruptcy)

Cycle9 says:

"It seems that a lot of the blame here and on other similar sites points to one of two things: our oversized government, and/or defective individual behavior.  I have come to the view that these two are nice scapegoats for the real underlying cause: we've been sold out as a country by wealthy, corporate interests.  They have bought our government, and they have bought our minds (through advertising)."

Without a doubt C9, and it all started with the first mass-media enabled facist manipulation of our corporogovernment; a conspiracy which was designed by Edward Bernays, Freud's nephew (whom many of us here at CM are already uncomfortably familiar with, as may you be):

The Romans used fear (Catholicism); the U.S. Corporatocracy used fear (Consumerism); Nature, which will have the final word, will use?

 

Metalmongrel says:

'As Zappa says...

 "The illusion of freedom [in America] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.'"

Sounds to me like a Jackson Browne song:

"Now the seats are all empty
Let the roadies take the stage
Pack it up and tear it down
Theyre the first to come and last to leave
Working for that minimum wage..."

 (The Load Out)

Or, perhaps:

"Im going to be a happy idiot
And struggle for the legal tender
Where the ads take aim and lay their claim
To the heart and the soul of the spender
And I believe that whatever may lie in those things that money can buy..."

 (The Pretender)

 Mainecooncat said:

"RE: My above post #9

I guess no one's talkin' me down yet!"

Apparently you haven't been consulting "The Realist's Thesaurus" lately:

Main Entry:

"Particularly doomerish"

Part of Speech:

financially bifurcated political adjective

Definition:

Right bifurcation: bleeding perspective of those who did not receive government bailouts; Left bifurcation: bleeding perspective of those who did not receive government bailouts.

Synonyms:

positively armageddonish; Celente-like; Google IPO participant-ish; without connections on Wall Street; Honest; Most likely to participate in violent purge of banker infestation after collapse

Nichoman said:

"There's more to occur than Bankruptcy and hyper-inflation; how about collapse(s) of governments at multiple levels, disorder...unfortunately also mayhem?

Maintain this will accelerate the remainder of this year.

Is everyone ready?"

Need we look any further than the 2008 Presidential election to understand how quickly things can change in the information age? But if you really want to understand how quickly things can change, then consider that "denial" is something that truly exists, then spend the last five years abroad; i.e., Americans are the last to know.

Robinson said: "The problem is the corrupt goverment, and the goverment is people

The problem is the corporation greed, and the corporations are people

The problem is the people egoism."

Which is why I don't get the reluctance to act; in fact, we "act" as if there were something above people. Ain't true. Need to knock these underwear-wearing, shitting, farting, came-into-this-world-the-same-way-as-the-rest-of-us people off of their thrones; NOW! By whatever means! Problem solved.

 

JAG said:

"It won't happen, because Goldman Sachs wouldn't be able to make any money if the financial system collapsed.

Its a government of Goldman Sachs, for Goldman Sachs, and by Goldman Sachs, so help me Goldman Sachs."

It's tempting to consider that the "masters of the universe" have realized that they let their greed get out of hand (as Max Keiser has often suggested in the past), and now they are back-scratching, attempting (futilely) to keep the U.S. from collapsing by buying everything and everyone: they (GS) have to know that if Gerald Celente's predicitions for social breakdown obtain, it's the rich that will die first (Goldman Sach's employees will have a price on their heads); hence the attempt to levitate the Dow and appease "the beast." However, it's too late.

Unfortunatley, the "Sach"ing of the working-class wealth over the last couple of decades has been SO extreme (yet, to date, actually mostly unrealized, since the boomer withdrawals from the market are just beginning), that there is nothing they (the current Generals with temporary heads, AKA, Government Sachs) can do to save themselves from what We are about to become (and there are no places on this planet that an ex-Goldman employee can hide without being identified; I say that, having lived in most places a Suit with a case of $10,000 wine might be tempted to hide).

Jpitre said:

"The truth is that wealth is created (as opposed to stolen) by the making things that are of value. Wall Street has nearly perfected the art of stealing from producers and pretending they are contributing to our well being, but only a small percentage of what passes for productive effort in the financial sector of the economy benefits anyone other than the few oligarchs in control."

Watch the spinning wheel and count backward from 100.... Your eyelids are beginning to feel heavy...

Unfortunately for Wall Street, there are only so many rotations available in rotating mechanical systems before they wear out and seize up.

P.S. Thank you for saying what so few have said aloud!

 

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Re: The US is Insolvent (and headed towards bankruptcy)

God help us all if the US goes bankrupt.

http://www.independent.co.uk/news/business/news/paulson-reveals-us-concerns-of-breakdown-in-law-and-order-1750076.html

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Re: The US is Insolvent (and headed towards bankruptcy)

Jessinica wrote:

help us all if the US goes bankrupt.

http://www.independent.co.uk/news/business/news/paulson-reveals-us-concerns-of-breakdown-in-law-and-order-1750076.html

I posted this or it is coming up in one of the DG's but Detroit is no longer going to prosecute low priority crimes. Their idea of low priority: Breaking and entering.

I guess what I am getting at is that as individual states go BK we will get a preview of what things may be like. Coming to your state soon.....

Take care

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Re: The US is Insolvent (and headed towards bankruptcy)

More like, they were afraid Americans would come after THEM with pitchforks......

Now they should be worried about this w/Goldman Sachs as well as TPTB....Oh, I guess they're all the same people.  Actually, probably the best things that could happen is a bankrupt US so we could start over from scratch and roust the criminals out of power.

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Re: The US is Insolvent (and headed towards bankruptcy)

Jessinica there should be no worries right??? The first part of the article states:

The Bush administration and Congress discussed the possibility of a breakdown in law and order and the logistics of feeding US citizens if commerce and banking collapsed as a result of last autumn's financial panic, it was disclosed yesterday.

Since we are under new management Joe Biden knows how to fix these things. It is purely a consumption issue. We just need to eat more & that should fix everything LOL.

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Re: The US is Insolvent (and headed towards bankruptcy)

From the Independent article:

"Making his first appearance on Capitol Hill since leaving office, the former Treasury secretary Hank Paulson said it was important at the time not to reveal the extent of officials' concerns, for fear it would 'terrify the American people and lead to an even bigger problem.'"

So what's changed?

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Re: The US is Insolvent (and headed towards bankruptcy)

Hi. I enjoyed your talk last night in Boulder.  A quick comment:

You can get a fit of 1.0 for the money plot (versus the .98 described) if you accept its logistic (not exponential) S curve nature http://en.wikipedia.org/wiki/Logistic_function, topping out in the 1990's.  

The credit bubble of the 2000's is the equivalent of a new "habitat" for money to grow, an unhealthy and untenable one, as you know.  Hence, we are likely to see smaller s curves stacked on previous ones, at net forming a generalized exponential function.

So, I think your basic premise is sound, but can be informed by that very interesting flat line region of the 1990's, which evidently hadn't happened before in our data range, and was the equivalent of no new money for a short while that nonetheless aligned with a time of peace, growth, and increased security.

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