America's Fiscal Collapse

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investorzzo's picture
investorzzo
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America's Fiscal Collapse

 America is the most indebted
country on earth. The US (federal government) public debt is currently
of the order of $14 trillion.
This does not include mounting public debts at the state and municipal levels. 

 http://www.globalresearch.ca/index.php?context=va&aid=12517

SkylightMT's picture
SkylightMT
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Re: America's Fiscal Collapse

It doesn't make any sense to talk about debt without also talking about income.

If I make $10,000 a year, my debt of $100,000 is a serious problem.

But if I make $1,000,000 a year, my debt of $100,000 is not worrisome.

The US has the most debt, but it does NOT have the worst debt-to-income ratio. In fact, of all the countries, its right about in the middle, depending on how you measure things.

But things are changing...

Woodman's picture
Woodman
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Re: America's Fiscal Collapse

Doesn't matter how we compare to other countries.  Chris M has documented in previous articles and the Crash Course that our debt to income ratio is at historic levels and is rising.  If it's rising, to me it's unmanageable. 

The referenced article has a nice summary of the bailout packages to date.   I'm trying to figure out how they got $14T Federal public debt.  The national debt was a bit over $10T at end of FY 2008; maybe they added to that the sum of recent bailouts.  Note only part of the national debt is publically held debt; the rest is intergovernmental borrowing.

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caroline_culbert
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Re: America's Fiscal Collapse
Woodman wrote:

Doesn't matter how we compare to other countries.  Chris M has documented in previous articles and the Crash Course that our debt to income ratio is at historic levels and is rising.  If it's rising, to me it's unmanageable. 

The referenced article has a nice summary of the bailout packages to date.   I'm trying to figure out how they got $14T Federal public debt.  The national debt was a bit over $10T at end of FY 2008; maybe they added to that the sum of recent bailouts.  Note only part of the national debt is publically held debt; the rest is intergovernmental borrowing.

 

As of March 4, 2009, the total U.S. federal debt was $10,942,165,294,650.89[2], or about $37,851 per capita. Of this amount, debt held by the public was roughly $6.5 trillion.[3] In 2007, the public debt was 36.8 percent of GDP [4], with a total debt of 65.5 percent of GDP.[5] The CIA Factbook ranked the total percentage as 23rd in the world.[6]

caroline_culbert's picture
caroline_culbert
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Posts: 624
Re: America's Fiscal Collapse

On the front cover of my "Social Security Statement"

"About Social Security's Future....

Social Security is a compact between generations.  For decades, America has kept the promise of security for its workers and their families.  Now, however, the SS system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today's younger workers are ready for retirement.

In 2017 we will begin paying more benefits than we collect in taxesWithout changes, by 2041 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 78 cents fro each dollar of scheduled benefits.  We need to resolve these issues soon to make sure SS continues to provide a foundation for future generations.

*These estimates are based on the intermediate assumptions from the SS Trustees' Annual Report to the Congress.

cmartenson's picture
cmartenson
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Re: America's Fiscal Collapse

In 2017 we will begin paying more benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 78 cents fro each dollar of scheduled benefits. We need to resolve these issues soon to make sure SS continues to provide a foundation for future generations.

Two giant errors in that statement:

  1. The 2017 shift from a cash flow surplus to deficit was calculated over 18 months ago.  Economic conditions since then have almost certainly moved that date forward a year or two ( or more).
  2. There is no "trust fund".

On point #2, it it is critical to understand that the "trust fund" consists of self-referential IOU's issued by Uncle Sam to Himself.  If it were possible for such a scheme to work, we'd all be fantastically rich by virtue of writing ourselves promissory notes.

It is the most easily dismissed of all possible schemes because it doesn't even have a single layer of complexity to befuddle us.

Repeat after me: An asset cannot consist of you owing yourself money.

The "trust fund", therefore, is nothing more than a future obligation of future taxpayers and is therefore a LIABILITY, not an asset.

caroline_culbert's picture
caroline_culbert
Status: Platinum Member (Offline)
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Posts: 624
Re: America's Fiscal Collapse
cmartenson wrote:

In 2017 we will begin paying more benefits than we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 78 cents fro each dollar of scheduled benefits. We need to resolve these issues soon to make sure SS continues to provide a foundation for future generations.

Two giant errors in that statement:

  1. The 2017 shift from a cash flow surplus to deficit was calculated over 18 months ago.  Economic conditions since then have almost certainly moved that date forward a year or two ( or more).
  2. There is no "trust fund".

On point #2, it it is critical to understand that the "trust fund" consists of self-referential IOU's issued by Uncle Sam to Himself.  If it were possible for such a scheme to work, we'd all be fantastically rich by virtue of writing ourselves promissory notes.

It is the most easily dismissed of all possible schemes because it doesn't even have a single layer of complexity to befuddle us.

Repeat after me: An asset cannot consist of you owing yourself money.

The "trust fund", therefore, is nothing more than a future obligation of future taxpayers and is therefore a LIABILITY, not an asset.

Yikes... why do I even bother reading my SS statement!!!  Why am I deluding myself into thinking we'll have SS when I retire!!!???

cat233's picture
cat233
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Posts: 575
Obama: Don't fear the future

"I don't think that people should be fearful about our future," he told the
newspaper. "I don't think that people should suddenly mistrust all of our
financial institutions." 

President Obama... Aaccording to a story published Saturday in The New York
Times.

http://www.cnn.com/2009/POLITICS/03/07/obama.interview/index.htm

Cat

Ken C's picture
Ken C
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Posts: 753
Re: America's Fiscal Collapse

It will be politically impossible to NOT pay Social Security. So it will be covered out of the general budget. This just means that the gov. will print more money to meet the SS obligations.Another reason to believe that hyperinflation is inevitable.

 So, we will get paid the $$ owed to us but they won't be worth anything.

 

Ken

 

Woodman's picture
Woodman
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Posts: 1028
Re: America's Fiscal Collapse

I expect some Social Security will be paid in the future to satisfy everyone politically, but benifits will be reduced in nominal terms through changes in the rules and the value of what is paid out will be reduced by inflation.

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