America Is Not Broke

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merouleau's picture
merouleau
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Joined: Feb 28 2009
Posts: 6
America Is Not Broke

An interesting perspective from Credit Suisse:

http://pragcap.com/credit-suisse-america-is-not-broke

Travlin's picture
Travlin
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Joined: Apr 15 2010
Posts: 1322
The article gets thoroughly

The article gets thoroughly shredded in the comments section of the link, and deservedly so.

Travlin 

darbikrash's picture
darbikrash
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Joined: Aug 25 2009
Posts: 573
One of the comments from the

One of the comments from the linked thread:

I am in agreement with other posts here, as I don’t believe there are many serious arguments about the country being broke. Because some notion of the term “broke” is understood across the class structures, elected officials generally use it as a scare tactic to quickly and effectively describe their levels of “concern”. I don’t believe they actually believe it to be true, but they do like the reaction elicited from the use of the phrase. It is unfortunate that more time is not spent on discussing the inflationary impact of servicing the escalating levels of debt, rather than continuing to polarize the electorate into the “they who spend” and “we who do not” camps.

There is more to this argument than would appear at first blush. The article mentions household net worth as overlaid against government debt. Fair enough, but we still do not have a complete picture, barely even a partial picture. On the debit side of the ledger, of course we have to consider unfunded liabilities, which are quite significant. Unfortunately, this category is subjected to such much politicizing that it is virtually useless as a metric to evaluate solvency. Depending on your political whim, you can find websites and statistics (including this one) that plot unfunded liabilities anywhere from zero to upwards of $150 trillion and anywhere in between. In short, the entire category is bogus and has become nothing more than a political fear mongering tool to advance political agendas. It would be most interesting to have a separate thread discussion on what exactly is the definition of “unfunded liabilities” and what are some realistic numbers. But I digress.

On the credit side of the ledger we have the aforementioned household net worth, pegged at some $57 trillion. The US Govt Flow of Funds report pegs total corporate net worth at some $141 trillion. To this we have to add government owned assets, some trillion acres of publicly held land, foreign land assets, military assets, natural resource reserves , etc, to even begin to get a full spectrum accounting of the country's net worth. Yet, we never seem to see these values consolidated in many, or even any, of the arguments. I have seen credible consolidated estimates of the entire US net worth well above $200 trillion when these assets are considered.

Even considering the most politically opportunistic estimates of unfunded liabilities, this still show a massive positive net worth when a legitimate accounting and careful study of a real balance sheet is undertaken.

That said, the US government is still spending more that it is taking in, and this has to stop. What is becoming ever more obvious as time goes on is that most of the debate is a carefully couched battle as to decide who pays, if entitlement programs get cut, or do revenues increase.

And when the debate is framed with statements that the "country is broke", well, ask yourself who:

1.)    Understands this choice of words that the lexicon dictates.

2.)    Who is being set up to pay for it.

And if the debate is set up to frame the argument as a country with ample wealth, but unfair distribution of said wealth to the top 1% of the population, who is being set up to pay for it now?

 

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