Is the U.S. Government Bankrupt?

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csstudent's picture
csstudent
Status: Bronze Member (Offline)
Joined: Dec 22 2008
Posts: 48
Is the U.S. Government Bankrupt?

I thought this was an interesting article from a conservative blog.  Just one disclaimer - I don't agree with everything posted at this site and don't like how they aren't consistent in their principals.  For example, it was ok for Bush to carelessly spend money and have government bailouts, but not ok for Obama to carelessly spend money and have bailouts.  Also, I should warn anybody who might want to post there that mentioning the name of Ron Paul will pretty much get you banned from that site.

http://www.redstate.com/dan_perrin/2009/09/11/is-the-us-government-bankrupt/

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Is the U.S. Government Bankrupt?

You might want to read Chris Martenson's article "The US is Insolvent (and headed towards bankruptcy)."  I think both the democrats and republicans are equally guilty of ignoring their fiduciary responsibilities.  The left blames the right and the right blames which makes our insolvency look like a political issue - in actuality, it is a banking issue. 

For some reason American's are content to allow a private banking cartel to run our monetary system.

Larry

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: Is the U.S. Government Bankrupt?

It depends on what one means by "bankruptcy." In the case of private debtors, either the debtor can declare bankruptcy, or unpaid creditors can petition the court for involuntary bankruptcy. Presumably, as a sovereign, the U.S. government is immune from a creditors' petition for involuntary bankruptcy. After all, this debtor operates the bankruptcy courts. Good luck with getting bankruptcy judges to declare their own employer bankrupt and stop their own paychecks. Think we might have a little conflict of interest here?

In practical terms, Usgov is insolvent but liquid. It is liquid by virtue of access to financing via weekly, monthly and quarterly debt auctions. This debt, in my view, has a lot in common with commercial paper. The market was happy to roll over commercial paper, the same way it rolls over T-bills, until a crisis came along. Then suddenly, commercial paper wouldn't roll.

This hasn't happened to T-bills, because Usgov is still regarded as the solidest credit in the land. This is true because of its ability to tax and to print money. But taxation no longer raises enough funds to meet Usgov's spending needs, and probably never will again. This leaves borrowing and printing.

Presumably if Treasury auctions started failing, the Federal Reserve would step in and buy Treasury debt directly, thus creating the funds out of thin air. But this would very rapidly turn hyperinflationary.

Closely examined, Usgov is living hand to mouth. It has very little actual cash on hand, in relation to its spending. It is completely dependent on auctioning new debt every week to stay afloat. Even one or two weeks without fresh financing would cause it to default, unless the Federal Reserve stepped in to monetize the necessary amounts. Or unless it sold the gold reserve. That's assuming there IS a gold reserve (how would we know, with no audit?).

Needless to say, Usgov is living precariously. Its finances are a mess. As long as it is liquid, all appears normal. The day the liquidity dries up, for whatever reason, it's INSTANT APOCALYPSE.

 

 

negator's picture
negator
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Joined: Aug 31 2009
Posts: 14
Re: Is the U.S. Government Bankrupt?

the united states of america was discovered early this morning hanging in a bangkok hotel room, dead by asphyxiation. (i'll leave the more lurid details to the imagination.)

that's the good news.

the other good news: an entire carrier battle-group was sunk in a possible false-flag attack in the hopes of generating some revenue.

failing to get a payday loan, california sold its blood again. california was seen later buying a twelve-pack and a carton of kools.

 

"it's for the children."

 

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