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We Owe How Much??

by John Rubino on April 2, 2012 · 31 comments

One of the problems with the debate over the “national debt” is that there’s no generally agreed upon definition of that term. Is it what the federal government owes, or what it owes foreigners, or what the whole country, private and public sector together, owes? Does it include off-balance-sheet items and contingent liabilities?

There’s a hundred-trillion dollar gap between lowest and highest on this spectrum, which allows each commentator to confuse the rest of us by picking the measure that best suits their point of view. New York Times columnist Paul Krugman, for instance, uses “net debt” — the amount that the US owes foreigners — to argue that since this number is relatively small and slow-growing, we’re actually fine. Analysts using broader definitions of debt come to the opposite, more apocalyptic conclusion. Consider this from today’s Wall Street Journal, on the impact of off-balance-sheet obligations:

Smoke, Mirrors and Public Deficits
Are public debt and deficit numbers illusory? Perhaps, judging by the ruses employed by governments and identified by the International Monetary Fund’s Timothy Irwin in a recent staff note. Deficit crises in developed countries may only increase the allure of such devices, although they may do little to help in the long run.

European countries got creative as they strove to hit targets to join the single currency during the 1990s. In 2005, Organization for Economic Cooperation and Development researchers cataloged 192 cases of one-time measures and accounting maneuvers across Europe—50 in Greece alone—with effects ranging from negligible to 2% of GDP. In 1997, for instance, France took on the pension liabilities of France Télécom in exchange for a payment of €5.7 billion ($7.6 billion), or 0.5% of GDP.

But Europe wasn’t alone in playing games. In 2003, the U.S. proposed buying 100 refueling planes via operating leases, which would have kept the cost from being recognized upfront. The Congressional Budget Office said that was federal borrowing in disguise and would prove more expensive than a normal purchase.

The euro-zone debt crisis has put these techniques front and center. Portugal hit its 2011 target only via a transfer of bank pension assets that shaved 3.5 percentage points off its deficit.

Likewise, the U.K. is taking on the Royal Mail’s pension plan to pave the way for privatization. The plan brings with it £28 billion ($44.8 billion) of assets, thereby reducing the country’s 2012-13 deficit. But the U.K. is also taking on long-term liabilities on behalf of the company with a present value of £37.5 billion—which aren’t recognized immediately. So accounting transforms the Royal Mail’s pension deficit into a short-term gain for the U.K. budget but at a long-term cost.

Keeping long-term liabilities out of the picture is a common tactic: In the U.S., debt was 62% of GDP in 2010, but including civil-service pension and other liabilities raises the total to 113%, Mr. Irwin notes. Public-private plans for infrastructure have also shifted upfront investment costs off-budget but have raised long-term debt risks—often through government guarantees.

The crisis has narrowed governments’ options. One way to flatter the statistics is via optimistic growth assumptions, although skeptical markets and the rise of independent fiscal watchdogs such as the U.K. Office for Budget Responsibility make this difficult. Another way is to shift cash flows forward, as Germany, Greece, Portugal and Belgium did in the past via securitizations of future government revenue. This, too, may now prove a tricky sell.

Investors trying to keep track of governments should remember Goodhart’s law: As soon as an indicator becomes a target for conducting policy, it loses its informational value. It also becomes a target for manipulation. That is a sobering thought given the euro zone’s obsession with deficit targets. They might just conceal problems building up elsewhere.

Then there are the “unfunded liabilities” of entitlements like Social Security and Medicare, which dwarf the official national debt. From a recent Zero Hedge article:

Massive $17 Trillion Hole Found In Obamacare
Two years ago, when introducing then promptly enacting Obamacare, the president stated that healthcare law reform would not cost a penny over $1 trillion ($900 billion to be precise), and that it would not add ‘one dime’ to the debt. It appears that this estimate may have been slightly optimistic… by a factor of 1700%. Because coincident with the recent Supreme Court debacle, in which a constitutional law president may be about to find that his magnum opus law is, in fact, unconstitutional, someone actually read the whole thing cover to cover, instead of merely relying on the CBO’s, pardon Morgan Stanley and Goldman Sachs’, funding estimates. That someone is Republican Jeff Sessions who after actually running the numbers has uncovered that the true long-term funding gap is a mind-boggling $17 trillion, just a tad more than the original sub $1 trillion forecast.

This latest revelation means that total underfunded US welfare liabilities: Medicare, Medicaid and social security now amount to $99 trillion! Add to this total US debt which in 2 months will be $16 trillion, and one can see why Japan, which is about to breach 1 quadrillion in total debt (yen, but who’s counting), may want to start looking in the rearview mirror for up and comer competitors. And while Obama may have been taking creative license with a number that is greater than total US GDP, he was most certainly correct when saying that Obamacare would not add a penny to US debt. Because the second the US government comes to market to fund a true total debt/GDP ratio of 750%, it is game over, and the Fed will have its hands full selling Treasury puts every waking nanosecond to have any time left for the daily 3pm stock market ramp.

Here’s a chart (compiled by John Williams’ Shadowstats) illustrating the impact of adding unfunded liabilities to the national debt:

There are two reasons that debt and unfunded liabilities are treated as separate things:

1) The practice allows government to hide its true obligations in the same way that Enron did — right up to the day it evaporated. In other words, it’s a legally sanctioned lie.

2) Debt and unfunded liabilities are, at first glance, different in some ways. Debt is a legal obligation that gives the lender recourse, i.e. some way of getting back some of their money. In the private sector a lender who’s not getting paid can seize the borrower’s assets or force the latter into bankruptcy court where a judge decides who gets what. With sovereign debt, the creditor (who lent money by buying bonds) can sell those bonds and use the proceeds to buy up the borrower’s assets.

Unfunded liabilities, in contrast, are simply promises that don’t carry a legal obligation. In theory, Medicare could be cancelled tomorrow by Congress. Just like that, the program and its associated unfunded liabilities would disappear.

So the question becomes, how real — and therefore how dangerous — are US unfunded liabilities? The answer is that because they represent a promise to tens of millions of retired baby boomers who expect to get free money and health care for the last 30 or so years of life, they’re effectively more real an obligation than a Treasury bond.

A politician who messes with the Most Selfish Generation’s free health care will find himself back in the private sector before the polls close in the next election. Compare this with the probable repercussions of stiffing China or Saudi Arabia on bond interest — some contentious headlines and a bit of turmoil in the foreign exchange markets that most voters would hardly notice — and it’s clear that unfunded liabilities have, if anything, a more solid claim on future economic activity in the US than does interest on Treasury bonds.

So our true national debt is government debt plus private sector debt plus off-balance-sheet obligations plus unfunded liabilities, which comes to somewhere around half a million dollars per man, woman and child, or two million per family of four.

We can’t pay this of course, so the story of the next few years will be the search for the least painful way of breaking our promises. And history is pretty clear on this: a country with a printing press will always use it before exploring the harder options of actual default, whether through non-payment of interest or cancellation of benefits.

{ 27 comments… read them below or add one }

JWRebel April 2, 2012 at 8:34 pm

Social security is not just unfunded free money for seniors. It is an insurance premium (FICA withholding, often incorrectly called a tax) that hits relatively less wealthy people disproportionately higher. Allowing people’s savings to evaporate as suggested would mean that working people have in fact been directly paying for the tax cuts for rich people (capital gains, etc., all feeding the securities bubble), Robin Hood in reverse.
Yes yes, I know that on a cash basis the government has simply spent those savings and that the funding does not cover the accrued liabilities.


JWRebel April 2, 2012 at 8:47 pm

INCOME is what supports one’s debt position; GDP is revenue. You can’t pay off the household debt with revenues from the store, you need to pay it off with the income that the store produces. The much favoured Debt/GDP ratio assumes that the government can tax any proportion of GDP it would like.
A brief look at the Debt/Income numbers points out that the media has over-hyped the story of the debt overburdened “socialist” European sovereigns, e.g.:

[USA$ 2010]
02160 revenue
01296 deficit (60% of revenue)
01653 increase in debt position (77% of revenue)
13500 USA Fed Debt (626% of revenue)
14900 USA GDP
16500 public sector (local+state+fed) debt (110.7% of GDP)

[EU27€ 2010]
05404 revenue
00784 deficit (14,5% of revenue)
01061 increase in debt position (19,6% of revenue)
09828 Gov Debt (182% of revenue)
12281 GDP
09828 public sector debt (80% of GDP)

Note that even in terms of the (often cited but also misleading) GDP ratios, USA public sector debt (adding in state and local government debt to be comparable to the reported consolidated general government sector debt positions of EU members) is 16.5/14.9 $tr = 110.7% of GDP (2010), not including about 5.5 tr$ off-balance sheet GSE liabilities (Fannie, Freddy, etc.). For the EU[27] this ratio is 80%.


Tony D April 2, 2012 at 8:57 pm

Just curious how the US debt/GDP ratio was listed as around 60% (in the first graph)in 2010, even ignoring unfunded liabilities it was much higher.Something like 12tdebt/15t gdp. Was this calculated on 1/1/10 ?


Bill Sampson April 2, 2012 at 11:30 pm

So what are us baby boomers to do with our money that we have ?
House is worth less that the value, 401k is under water….
I expect to get ss and medicare and now wow… this opens our eyes!!
Thanks again for your real articles
BIll from CA


mike B April 3, 2012 at 12:53 am

My problem with Rubino is his continued “selfish Generation” crap…lets be clear here, the only generation that is going to get a life time of Social Security, Medicare, big company retirement pension and government funded pensions is the “Greatest Generation” funded from..the baby boomer generation… you can slice it, dice it and mix it with all the Bullshit you want, but the Baby Boomer Generation, for all the fuck-ups it has produced (and there are lots) funded the last 30 years of entitlements for everyone on top of the ponzi scheme, there won’t be shit left for Baby Boomers my age (50) who worked all their lives to watch Presidents from the “Greatest Generation” (Johnson/Nixon) destroy our futures with generational programs and criminal currency decisions.. get real Rubino… it wasn’t a “generation of one people who screwed this country, it was a bunch of Psychopaths and greedy fuckers..


John Rubino April 3, 2012 at 7:45 pm

Mike B and Paper is Poverty,

Well, sure, we boomers (I’m 55) are going to suffer if the dollar collapse scenario plays out as predicted. But whose fault is that? We’ve been in charge for over 20 years. The WWII generation created Medicare and the global military empire, but we’ve had plenty of time to scale them back to manageable size — or to make offsetting cuts in other spending or raise taxes or whatever. In the 1990s we had a perfect chance to fix the imbalances that were building up (look at a total debt to GDP chart from that time; it was obvious even then that we were bankrupting ourselves). That was our moment to sacrifice a bit in order to hand a better world off to our kids, and what did we do? We elected whoever promised the most free stuff. We engineered the tech bubble, the housing bubble, and now the government bond bubble, each of which was pure self-indulgence, and each of which left our kids in an even deeper hole. Today’s “national debt” isn’t an act of God. We borrowed that money ourselves through mortgages and credit cards, and we voted for governments that looted the Social Security and Medicare trust funds.

Now, when it’s obvious that we’ve accumulated a fatal amount of debt, where are the boomers offering to accept lower retirement benefits so our kids and grandkids don’t have to live in a bankrupt third world country? The only presidential candidate talking about actually shrinking the government and paying off debt is Ron Paul, who’s 76 years old. And he’s lucky to get 10% of the vote, mostly from college kids who realize that their parents are screwing them. Boomers on both the right and the left don’t want to hear about changes to their entitlements or their military empire even if the alternative is to bankrupt the country.

And about Social Security and Medicare being insurance programs that beneficiaries paid into, yes, boomers have paid in, but in many cases a lot less than what we’ll get out under the current plan, especially when it comes to health care. It’s not “insurance” if most participants get more than they pay. If our generation offered to take out only what we’ve paid in, then we could talk about our ownership of those assets. But we don’t. We demand open-ended benefits because that’s what we’ve promised ourselves.

It’s also not insurance if the insurance company spends the premiums rather than investing them. Pretty soon Social Security and Medicare will become pay as you go programs, in which current taxes pay for current retirees. And it’s not a pension plan if liabilities aren’t funded. Yet we’ve allowed Medicare to build up something like $50 trillion of unfunded liabilities because we were too immature to insist that our government give an accurate accounting and fully fund the program.

We boomers did all this. We set these benefit levels and we elected the people who looted the trust funds and lied about unfunded liabilities. They couldn’t be there without carrying the boomer vote. So when the leaders we’ve put in place (almost all baby boomers) decide that the only way to stop us from voting them out is to keep borrowing while inflating away their obligations, thus secretly impoverishing retirees, we have no one to blame but ourselves. This system is our creation.

Sorry for the harsh tone, but the world my sons will grow up in is likely to suck, and it didn’t have to be this way.


paper is poverty April 4, 2012 at 11:09 pm

I think I’m just too cynical to see things this way. You guys invented this system? I don’t think so; militarization, the expansion of propaganda & social control, and ever expanding federal government are trends that were well under way even in the 20s. Your generation came along rather late in the game. We were already a military empire providing bread and circuses and without a gold standard by the time boomers took the reins… we all know where that leads. You certainly couldn’t have changed anything through voting! Both candidates are groomed by powerful interests with very few exceptions. If the democrat is elected the oligarchs pursue agenda items A through M; if the republican, then it’s agenda items N through Z. Either way, we advance the empire a little further toward its inevitable collapse. In any society you could always look at the last generation that still had a chance (mathematically speaking) to alter the course and stave off ruin, but it doesn’t seem a reasonable thing to expect… what empire has ever staved off collapse? (That’s a real question– maybe there are some, I just don’t know of them.)

To me your generation looks more like the patsies than the instigators of ruin and despair.


Bruce C. April 6, 2012 at 12:55 am

I’d like to add a few comments about this too.

I basically agree with JR on this, because the opposing view seems absurd; that is, unless you think that the American political system is a sham. If the majority of voters over the past 30 years or so aren’t largely responsible for the nations state of affairs – or at least the direction that it is going in – then who or what is?

However, that said, it may be theoretically true that “we” (i.e., “the Boomers” during the last 30 years or so) could have made better choices politically, fiscally, and monetarily but I’m not so sure that that was practically possible because of the democratic process. There were plenty of people who knew better and wanted better but there were a whole lot more people who didn’t. They constituted the majority opinion. That’s why democracy is called “the tyranny of the majority.” And, that is also why “the Founders” emphasized the importance of an educated and civilly active citizenry if they were to maintain the Republic as outlined in the Constitution (which is primarily a restriction on government powers and responsibilities and, therefore, government overreach and their inevitable fuck ups.) Therefore, a distinction needs to be made between the relatively more educated and responsible minority in society (e.g., the visitors to websites like this one) and the majority.

Heck, just consider “the will of the people” as recently as 2008. Obama promised even more of the same shit from the last century and most people lapped it up. I’m not taking blame for that, but I’m also not going to deny that there are hell of a lot of craven ignoramuses out there with the same voting rights that I have so “my” voice gets drowned out.

It’s a real problem politically, because a democratic form of government seems to be one of the best and most popular (no pun intended) that have been tried, and yet it has the tendency to spiral downward (or transformed into an oligarchy) as the “masses” become complacent and are bought off. In theory, rational persuasion is supposed to hold sway but once corrupting influences have made inroads it becomes a hard sell to reverse things. That’s where we are today.

I also think that another problem in general is that the consequences of fiscal and monetary policies take so long to manifest that most people don’t realize what’s happening until it’s too late. I can’t tell you how long I’ve been hearing about how unsustainable our national debt and entitlement systems are. At least 40 years and counting, and everything is still growing, and people still don’t agree that we even have a problem or, if they do, the reasons for them. How can one expect the average voter of 20 or 30 years ago to have been more prescient than we are today? (Answer: Don’t give the government any more power or responsibilities than necessary. Otherwise they will screw it up.)

I still remember two quotes when I was a kid from people who have long passed that seem relevant now. One of them was, regarding government entitlements, “Believe it or not, most people think that the government simply prints money and gives it out to whoever they want.” (How ironic that those “ignoramuses” have proven to be correct!).

Another one was, “Most people realize by the time they get old that the government has screwed them, so they want to get back as much as they can.” Maybe that’s why retirees don’t want to sacrifice their “entitlements”.

It’s a sad state of affairs no matter how you slice it.


Jack N Meovslo April 4, 2012 at 7:57 am

You’re spot on Mike B.

I’m going to offer all of you some very sound economic advice that will be sure to help get you through the economic train wreck that is just around the bend…. INVEST IN PRECIOUS METALS …

I’m not talking about the big three here … you know … Gold, Silver and Platinum …

No … I’m talking about the three you’re sure to need … When the shit hits the fan nothing will be more valuable to you and your loved ones than


And there’s no need to worry about it if you’re not currently a skilled marksman. There should be plenty of food to go around seeing how about 75% the population will die of shock over the first few days after they realize that their cell phones no longer work. Hey, I’ll take 75% dead over 75% taxes any day of the week.

Praise the Lord and ‘stash’ the ammunition!

If you think that I’m delusional it’s only because you live in the city!


Sue April 3, 2012 at 2:00 am

Got guns? I don’t mean shotguns.


Bruce C. April 3, 2012 at 2:23 am

The only reason why all of these creative bookkeeping shenanigans are possible is because Treasury bond rates are, for whatever reason, so low, which creates a forgiving environment that allows for sanguine analysis. If or when they rise enough the “true” debt levels will be academic, if they aren’t already. Even the lowest, most absurdly low estimates (like Krugman’s “net debt” concept), is enough to cause a global depression if bond rates revert to the historical mean.

Nevertheless, Treasury rates ARE still low, and may be going lower, and so people (understandably) are interpreting that to mean that perhaps the bond market is expressing some kind of wisdom or insight that the US is better off than many think, thus the efforts to quantify and rationalize the situation. Only time will tell, but if Goodhart’s law is correct, that “As soon as an indicator becomes a target for conducting policy, it loses its informational value,” then US Treasury rates will be the red herrings of the century. The Fed, along with almost all of the central banks, have targeted interest rates in an effort to spur economic activity and growth and to maintain or reflate asset values. But are they singularly responsible? Goodhart’s law casts doubt. Maybe they are lower primarily because global bond investors are genuinely not concerned.

So beware of gleaning any guidance from sovereign bond rates. The Fed – echoed by US Treasury rates – is saying that the crisis is over and inflation is benign (e.g., gas prices should subside soon). The currency markets say that the dollar must be pretty stable and is relatively weak only on purpose (how else could Treasury rates be so low?). Wall Street is saying that equities are the only place to be, given negative real rates, corporate profits and stock dividends. Cynical investors say that rising equity prices are a no-brainer because even bad news will be met with more liquidity and even lower rates, boosting risk assets even more, and continued good news – even if propaganda – will be self-fulfilling. Bullish investors are saying that interest rates are starting to rise because the economy is improving, and continued economic growth will maintain our ability to honor our debt payments. Skeptical investors are saying that Treasury rates are rising because of impending stagflation.


Rachael April 3, 2012 at 3:18 am

We shouldn’t be surprised at systemic growing debt when our monetary system requires debt generation to put currency into circulation. Mathematical facts dictate that to keep the dance going, enough new debt must be created each year to account for the interest payments made in that same year, plus some for ‘growth’ (purposeful consolidation contractions aside, of course).

The Republican and Democrat leadership alike are very well aware of this too, which is why it hasn’t mattered who’s been in control for the last 99 years. If they don’t know when they arrive in Washington, they will eventually be told how the game is played and as a result the only real difference between them is how they spend to generate the debt.

Until enough people realize that bickering or complaining about the debt, where it comes from, who generates it, or how to reduce it is focusing on a result of the problem and not the real problem itself, nothing will change. You, your children, and your children’s children are all destined to be debt slaves unless we start focusing on the real problem and seeking a solution. Period.


paper is poverty April 3, 2012 at 3:44 am

I don’t think it’s fair to refer to Social Security payments as “free money” when people have paid their withholding their whole working lives. Also, Social Security has worked for nearly 80 years, over 3 generations, meaning that society no longer has a memory of when there was no Social Security, and it’s very difficult for people to question the program’s soundness.

I also agree with Mike B that the baby boomers are going to be the most screwed generation in history, so there is no need to call them names. My parents are boomers and it’s terrible that the world is crumbling just when they’re leaving their most productive & effective years, and will have less ability to cope or adapt.

Social Security benefits have already been reduced on the sly by government’s underestimation of the inflation rate, and thus a failure to keep pace with inflation in SS payments. Hardly anyone (in the general public) seems to be aware of this, so I’d have to say that the slow default by inflation seems to be working well for the elites so far.


Mickey April 3, 2012 at 4:42 am

the problem is most of American does not understand one iota of the problem nor cares about the problem as long as they get their entitlement.

BTW–the Social security “lock box” was broken into in 1995 under Bill Clinton–3.5 Trillion was taken in exchange for Treasury notes–whoppie!

This is a show 99 years in the making due to the Fed and monetary and social policies meant to break the bank.

We have little to look forward to: our leadership loves to point fingers at everybody avoiding fixing the problems, further dividing the country which already has social problems.



planck April 3, 2012 at 8:30 pm

Every dollar in circulation originated from a debt signed by some schmuck somewhere in the country. Every dollar in circulation is a debt somewhere. There is no other way for dollars to get into circulation that from principal on bank loans. Privately owned banks issue the dollars through bank loans. That is how a reserve bank debt-money monetary system works! Debt is what you get when you have a money supply that comes exclusively from bank loans and other loans they’ve sold off as securities. To top it all off, the interest due on those loans is NEVER created in the money supply along with the loan principal. So, where are borrowers supposed to get the money to pay interest? Well, as long as another schmuck is borrowing, there will be money supply out there to pay off the older loans. But, not once the banks stop lending. Then comes the hard asset collateral grab! Credit crunch is the numero uno way for owners of banks to get hands on valuable assets. There are a lot of things we have to wake up to here.


Rick April 3, 2012 at 8:39 pm

Let me get this straight this 17 trillion is now the albatross that hangs around our necks. B.S. It’s just a number. Our nirvana was attained a long time ago not by simply coming up with this number. I hope it costs 17 quadrillion, so what now it all the rich people are just as screwed as the rest of us.


Kevin April 4, 2012 at 2:08 pm

Sorry, John Rubino, Mike B had it right. You can not lay this on the baby boomers. This mess was started before us. The generation that fights the most to keep these entitlements going is the generation before us. Look at what the AARP does every time a politician makes an attempt to make any changes to SS and medicare to just future generations. It is not the baby boomers that are stopping any reforms.


John Rubino April 4, 2012 at 4:06 pm

Hey Kevin,

Okay, accepting that the WWII generation is responsible for all our problems and is destroying the lives of baby boomers and future generations, how do you explain the fact that we’re letting them get away with it?

We boomers own the government. The past three presidents were boomers, as is the majority of congress. And yet with all that power, we meekly allow the country to be bankrupted…why? Because we’re terrified of the AARP? Agreed, it’s a force for evil that ranks right up there with teachers unions. But we’ve never had a problem with dissing our parents in the past. Why become respectful all of a sudden, when the stakes are finally high?

I think the answer is fiat currency:

We’ve grown up with a printing press, which has allowed Washington to promise everything to everyone, paid for with newly created currency. Boomers have never known a time when it was necessary, in a macro sense, to prioritize, and this sense of entitlement is in our DNA now. We can intellectually accept the idea of limits, but can’t grasp it emotionally. To this day most boomers believe that a few tweaks to the other guy’s programs will bring back a “normal” economy of plentiful jobs and easy credit. For proof of this you just have to look at the presidential campaign. Romney vs Obama is a match between almost identical visions of business as usual, and between them these guys will carry a majority of boomer votes.

Put another way, we as a generation have been corrupted by easy money and are, in the aggregate, self-centered and clueless. Yes, there are lots of wonderful, kind boomers who take care of their kids and their communities and absolutely don’t deserve to suffer. But as a group our behavior has been destructive as measured by pretty much any macro number you’d care to cite. Historians will date the beginning of the debt binge that destroyed this country at about the same time the first boomer turned 30. We’ve run things since then and will be in charge when everything falls apart.


JustamereBear April 5, 2012 at 3:01 am

I find all this pointing fingers about who to blame for our current malaise is crap. That and obfustication is what politicians do. I am much more interested in the future.

First question, can this slow motion train wreck be fixed or avoided? Well, we all know that mother nature abhors extremes. It takes a long time but she will grind down mountains. And she always make sure that debts are paid back often very painfully. Now last July when the US debt ceiling question was going around, it was stated, and I believe it, that the US would default if the debt ceiling was not raised. You mean the debt, NOR the interest can be paid unless more money is borrowed? That is a Ponzi scheme and Ponzi schemes NEVER end well. No, the problem cannot be fixed. The US can NEVER pay back what it owes.

The US is bankrupt, pipe dreams in technicolor of the citizenry or government notwithstanding. Just looking at the officially recognized debt, the debt of the US PER CAPITA is about $45,000. Greeces per capita debt is/was $39,000. That is another what? 15%? And IMHO, Greece has a lot further to fall yet. How far does the US have to fall? The numbers for England are even worse.

Oh, it can’t happen here. Wanna bet? Remember you may be betting your life if it gets bad enough. Certainly at a minimum Greeks are going to have a reduced life span at least with all the free medical services etc. cut off. (Those that don’t get killed in riots or die an early death from starvation, either because they cannot afford food or have it taken from them.)

What does the future look like? No one can tell, but the novel “Operation Phoenix” may be one probable future. It is still available as a free read at http://www.AllenCurrie.ca and is an awesome read. I recommend it highly as has everyone else I know who has read it.



Jason Emery April 5, 2012 at 4:17 pm

“First question, can this slow motion train wreck be fixed or avoided?”

Doubt it. Two recent trends are very disturbing. The most recent one is the amount of deficit spending. Using GAAP accounting, we’re running deficits of many trillion per year. Even using the cash accounting method, they are over $1.3 trillion four years in a row, counting the current fiscal year. Think about how bad inflation would be without the one off events of the export of manufacturing sector, the housing bust, and the massive natural gas glut.

The other even more disturbing trend is the willingness of the USA to fight wars with borrowed (or freshly created from nothing) fiat. That does not bode well for the future.


JustamereBear April 7, 2012 at 1:53 am

Jason Emery
No one has noted that for some years the auditors are refusing to sign off on the balance sheets because they are totally misleading, and that DOES NOT include contingent liabilities such as medicare and pensions, etc. etc. etc.


JustamereBear April 5, 2012 at 3:38 am

A PS to the above. Unfortunately probably the first of many

Elderly Greek Kills Himself in Main Athens Square
A Greek retiree shot himself dead in the busiest public square in Athens during morning rush hour Wednesday, leaving a note police said linked his suicide with the country’s acute financial woes.


Daily Proto Thema exclusively published the shattering hand-note of D. Ch.:

“The occupation government of Tsolakoglou* literally annihilated any possibility for my survival that was depended on a decent pension which only I personally paid for 35 years (without any state support).

Because my age does not give me the possibility for a dynamic reaction (without meaning that if a Greek would grab the kalashnikov, I wouldn’t be the second one [to grab one], I see no other solution than the decent end before I start searching in the garbage for food.

I believe that one day the youth without future will take the arms and hang upside down at Syntagma Square the national traitors as the Italians did with Mussolini in 1945 Piazza Poreto in Milan)”


DR01D April 5, 2012 at 4:04 am

This article changed the way I look at our predicament. One way or the other… sooner or later we’ll default on our debt. But it is 100 times more politically difficult if not impossible for the USA and Europe to “default” on entitlements or government pensions. Brilliant insight John.

As an aside if you talk to older Americans they almost universally believe that young people are lazy and expect too many free handouts.


father of 2 April 5, 2012 at 6:11 pm

This is like my grandparents picking my children and I up, driving us to the SS and MC government buildings, handing us over to them and receiving a voucher for lifetime care. They than go back to their golf course, and my children and I get shackled in chains and are handed a shovel to start working off our debt for the gov.


JustamereBear April 7, 2012 at 1:48 am

This seals it for me in a big way

Fed buying 61 percent of US debt
The Federal Reserve is propping up the entire U.S. economy by buying 61 percent of the government debt issued by the Treasury Department, a trend that cannot last, Lawrence Goodman, a former Treasury official and current president of the Center for Financial Stability, writes in a Wall Street Journal opinion article published Wednesday


The treasury auctions have obviouisly been failing big time for some time. I urge you to read “Opertation Phoenix” at http://www.AllenCurrie.ca for a view of what happens when a treasury auction visably fails. It is still a free read totally, but sometime this month it will become a teaser with only a few chapters available. There is also a forum for comments and exchange of ideas


PeteCA April 13, 2012 at 11:12 pm

“Fed buying 61 percent of US debt
The Federal Reserve is propping up the entire U.S. economy by buying 61 percent of the government debt issued by the Treasury Department, a trend that cannot last … ”

If you stop and think about it for a second – you’ll realize that the members of the Fed must know that the game is up. No-one who sees that data and understands banking could conclude otherwise. Bernanke and Co. simply cannot comment publicly on what is a “lost situation”. I wouldn’t be surprised to find out that current Fed members are considering retiring, or even that some are buying properties in other countries.


Jim August 10, 2012 at 3:10 pm

This is so true planck!
“planck April 3, 2012 at 8:30 pm
Every dollar in circulation originated from a debt signed by some schmuck somewhere in the country. Every dollar in circulation is a debt somewhere. There is no other way for dollars to get into circulation that from principal on bank loans.”

I find it funny about all the points everyone argues on here about various causes of the situation… which truthfully are a valid points, but nobody discusses the REAL underlying issue which planck hits bang on and no one even seems to acknowledge him???

The real and simple issue is all money is borrowed by the government and its citizens into existence therefore all money in circulation and in your wallets and bank accounts is in theory owed back to the bank by someone plus interest!

The solution is so simple its retarded, no need for policy change, or plans or programs. THE GOVERNMENT NEEDS TO PRINT ITS OWN DEBT FREE MONEY AND NOT BORROW FROM PRIVATE BANKERS.

All we do is bankrupt ourselves while private banking institutions that are loyal to no country are the only ones getting rich.

Wake up


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