I was having a nice glass of wine last night at a little cafe in Sweden (where yes, a glass of wine cost about 15 dollars US, an order of toast 7 dollars), when I came across this little piece in my paper (thanks borka for the online link).
Yes, the MSM is catching on, first with the housing bubble, and the entitlements disaster, and also the complete incompetence of the current Administration and congress.
Now it looks like they're (finally) going to start reporting the real and scary truth, that the next financial crisis won't be a third world country, or an emerging democracy... It's us folks, the great ol' USA
I don't think we'll default though. We'll just print more and more money. So my glass of wine in Sweden in 5 years? I'd guess that'd run me 30 dollars or more.
Gold.
Peace out.
The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank
A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.
Prof Kotlikoff said that, by some measures, the US is already bankrupt. "To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked.
According to his central analysis, "the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds''.
If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country's policy will be unsustainable and can constitute or lead to national bankruptcy.
"Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke."
July 16, 2006
"There are strong reasons to believe the United States may be going broke"
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36 comments:
Hey hype boy. The deficit has actually been running alot lower then previously thought due to strong tax revenues, which are due to lower tax rates. As a % of GDP it is ot out line at all (MSM won't point that out as that does sell papers). Supply-side econ IS working and it pisses off you chicken-little, sky is falling, bitter, liberal loser freaks.
You're eating $7 toast, living in the UK spouting off about gold and owning AAPL stock, and WE should listen to your calls about money nd where markets are going. AS you say "peace out"
The funny thing about this article is that it's just stating what most Americans already know. The scary thing is that we all know The United States is broke and most Americans won't do anything about it. Nine out of ten Americans vote feelings and never use hard facts or common sense.
Will people vote to fix the tax system? Nope.
Will retirees agree to take less social security to save the country? Nope.
Will people vote to raise the minimum wage and increased entitlement spending? Every Time.
We deserve what we get because we let feelings get in the way of solving our problems.
naughty keith: didn't your gold position got sold? are you back in, miraculously..(thinking..what a fraud)
Turn out the lights
The party's over
They say that
All good things must end
or for those with more traditional tastes
The Party's Over, it's time to call it a day.
They've burst your pretty balloon and taken the moon away.
Anonymous said . . .
"Hey hype boy. The deficit has actually been running alot lower then previously thought due to strong tax revenues, which are due to lower tax rates. As a % of GDP it is ot out line at all (MSM won't point that out as that does sell papers). Supply-side econ IS working and it pisses off you chicken-little, sky is falling, bitter, liberal loser freaks. "
You are wrong. The tax revenues are up because of the housing bubble (yes, flippers have to declare their outrageous profits as income), refinancing schemes (spend, spend, spend), a population explosion (millions of more workers), higher incomes, and inflation the government pretends doesn't exist (most cost, more profit). It has nothing to do with the tax cuts--Bush-Rove propaganda mouthed a few nights ago by Bill O'Reily (which, I suspect, is where you picked it up).
Since the refinancing/housing ponzi scheme went into full gear after 9/11 in order to prop up the languishing economy, people have been spending borrowed money like water, and businesses have been making out like bandits.
Remember all the money Bill Clinton brought in after raising taxes? That too, was the result of an idiotic bubble, the Internet stock bubble, and had nothing to do with his tax increase.
You are confusing the appearing of wealth with the actual thing. People living in massive houses and driving massive cars are not necessarily prospering; many are in massive debt, and don't own any of the bling they're flaunting. In fact, most have negative wealth, the opposite of wealth, and are far poorer than people who own little, but owe nothing.
The United States owes far more than it owns (tax revenues). It is not prospering; it is digging itself into an ever deeper hole in order to maintain appearances.
As the incredibly wealthy become even more incredibly wealthy, tax revenues are bound to soar. This doesn't do much for those they step on. Why is it that virtually every major corporation in America supports granting amnesty to illegal immigrants and those who illegally hire them? Because cheap slave labor means ever bigger profits, and bigger profits create more tax revenues. But, ill-gotten gains are still ill-gotten gains.
I am not a liberal, so that supposed argument want work here.
True wealth is control over the means of production. There are many in the U.S. who confuse debt with wealth. The federal government spends far more than it recoups in taxes and fees. Like its citizens, it too considers itself powerful because of all the wonderful things it accomplishes while spending money borrowed from China, Japan, and Korea.
LOL!
Pixel This
Aging movie star
She still thinks shes beautiful
She still thinks shes rich
She still thinks she has billions of fans.
She still thinks she has friends.
Americas time has passed she dosent know it yet.
Thats the mega bubble of knowlege that has yet to burst.
This is why faith basied politics is so important.
When we lose faith in any of her institutions in mass..its done.
(America the biggest debtor nation and the richest nation to..makes sense right... Gotta hand it to the men who can pull that off.)
A lot this is based on static projections, similar to projecting the last 5 years housing prices to infinity.
What will really happen is adjustments will be made. Those of us thoughtfull enough to save in our 401k's will find ourselves "means tested" out of Social Security, or have it 100% taxed. We will also raise the SS taxes to the sky, similar to medicare (anyone notice that one a few years back? Must earn over $132,000 to notice it).
We will also print money a bit, sell more bonds, and pretty much do what we have been doing, and take some painful adjustments. Basically, like the UAW GM pensions, they are never going to see the full value, but some compromise in between. At least the GM pensions have to be invested, where SS is not.
Also, all this SS bankruptcy stuff is crap. It was never solvent to beging with, but just a pay-as-you-go transfer payment system. The date of "bankruptcy" is just the time when the balance of payments from intake to outflow switch based on current static analysis. With benefit cuts (play games with inflation, means testing, etc.) and increasing taxes (bracket creep alone)on a slowly inflating currency, you balance the books.
That is likely how it will play out since each step is a small politically acceptable one.
There will be painful adjustments that are a coming reality for tens of millions of Americans. Expect living standards for most Americans to decline during the next five years as the debt hangover takes effect.
Pension systems already broke. . .
Probably national MSM didn't report much on the San Diego pension BK, but the old mayor and half the city counsil got swept out on that mess, and the city could still face bankruptcy. . .basically too large a pension, not enough money. . .this is playing out all over USA - from Duluth MN, to California. Only a small taste of Medicare and Social Security mess to come. . .I always warn people - if you have ANY other income, you probably will not see Social Security. . .
"strong tax revenues, which are due to lower tax rates"
WRONG...revenues are higher because of higher CORPORATE tax revenues, largely from oil and energy companies
funny thing..you give the big corporations EVERY single perk they desire, including letting them write legistation (!), and gee, guess what, they make an obscene amount of money!
so...we are paying higher taxes in a manner, through paying $3/gallon for gas, $20k/year prescription drugs, and on and on, that gives companies huge profits and they pay taxes on the profits
you cons are so f'ing clueless...and you are hurting average America
we're sick of it
oh, and one other thing anon 1:59..before you get feeling so great about the 'lower deficits', remember Bush doesn't count ANY of the Iraq costs
for instance the $110 BILLION he just requested for Iraq (what's that getting near now, a TRILLION $$?), is NOT counted in the deficit figures
yeah, things are just great; but keep spouting the party line and call anyone who actually thinks about what is happening and disagrees unpatriotic..that always seems to work
"The deficit has actually been running alot lower then previously thought due to strong tax revenues, which are due to lower tax rates."
That last part is a lie.
http://blogs.wsj.com/washwire/2006/07/11/do-tax-cuts-pay-for-themselves/
If you read the paper it's just an attempt to start pumping money into wall street before the baby boomers start selling their stocks and bonds en masse. If the younger generations don't start buying soon the well-off will lose trillions when everyone wants to sell. The stock will start dropping the maximums on a daily basis.
This paper is just the next round in the battle to privatze the SS progran so the poor suckers can bail those with a better living stanard out.
I think it's funny that the conservatives say Bush's tax cuts are working due to conservative economics and liberals hate Bush for being a conservative.
Bush is a clasic LIBERAL. He's done far more for environmental causes than any other president. His social spending policies are out of control. Before the war his big push was for more education spending. He pushed through the patriot act which is one of the largest power grabs from the American people in history (proposed by several other liberal presidents in the past by the way).
His liberal policies and the social programs of the liberals before him are what got us into this mess. Real tax reform (not just tax cuts) and cutting social programs are the only things that can get us out of this mess. Which won't happen.
Print Print Print...
Open new printing press in every city to print $$$$$...
Read, watch mainstream media...
with 1% in world population we are using (wasting) 40% world resources...
why 40%, use 80% by printing more money...
buy more hummers...
drink & watch base ball...
Print Print Print...
as long as there are fools to buy our $$$$...
Print Print Print...
Stupid Bush and his kind have run this country into the ground. The sooner the counrty goes broke the better off we'll all be. The beast has gotten out of control and seeks to control all aspects of life on earth. I'm guessing after the corporate fascist regime fails that my toilet will still flush and I can still have meat with my potatoes. Now the holders of US debt and dollars, they're screwed, totally.
Proof that the U.S. is going bankrupt from a legitimate source!
at http://tinyurl.com/j4yyc
From multiple backup offers and no end in sight to the real estate boom just 12 months ago, to now record listing inventories across the country, much higher and still increasing interest rates, the start of WW III and now the Federal Reserve says the U.S. is going bankrupt.
Folks, it couldn't be any more over than it is now.
"The American standard of living is jeopardized by the global oversupply of labor"
Even my 7 year old has come to understand what this phrase means. The govt bankruptcy scenario has been painted before (notably in the book "Bankruptcy 1995"). The reality is that many Americans have followed their govt's lead with debt financing of their current standard of living.
The days of reckless consumption, built in cheap overseas manufacturing and low rate financing started by the Fed, are slowly coming to an end.
We will see a protracted recession based on a drastic slowdown in consumer spending. It will take some time to work off all the excesses of the past couple of decades.
- prof
Anonymous said...
We will see a protracted recession based on a drastic slowdown in consumer spending. It will take some time to work off all the excesses of the past couple of decades.
No matter what your personal opinions of Bush and the White House, I think we can all agree that with rising gas prices, a coming crash in housing and less money around generally, people are going to be feeling the pinch soon.
So - what are you guys going to do to cut your input/output per month?
Yes I'm going to use the "F" word.....Frugal ;-)
In a society where "Bling is King", what measures are you going to take to make sure that your Bling doesn't overtake your life?
Me?
I'm holding off another year on buying a new car.
Plus I'm going to renovate my poor old bike - long since abandoned in the gagrage - and try and cycle to stores less that 1/2 miles away. As long as I'm not doing a weekly shop, there's no reason not to cycle there instead for a quart of milk.
Plus, I'm planting more vegetables in containers, like tomatoes, peppers and herbs.
May not sound much, but it'll save us a few dollars a week - a few hundred a year...
anyone else got some money-saving plans and care to share?
read the following article,
this is how they started war with Iraq and made all mess.
they once again started this,
b'cos they know they can convince stupid people.
Long live america.
http://www.msnbc.msn.com/id/13881857/site/newsweek/
The Hand That Feeds the Fire
Behind The Crisis: How Iran is wielding its influence to wage a stealthy war against Israel and America.
By Christopher Dickey, Kevin Peraino and Babak Dehghanpisheh
Newsweek
July 24, 2006 issue - The cool rage of Hassan Nasrallah crackled over the telephone line to a Beirut television station. Israeli jets had just tried to kill him from the air, destroying his home and office. "You wanted an open war, and we are ready for an open war," the Hizbullah leader warned. His missile-armed militia would reach deep into Israel. "Our homes will not be the only ones to be destroyed, our children will not be the only ones to die," he vowed. "You wanted to change the rules of the game? You don't know who you're fighting."
I want to stop paying into the ponzi scheme of Social Insecurity. The goverment can keep all the money I have paid in so far, just quit stealing it from me. I never voted for this socialist crap, last time I checked this is a capitalist society.
What is the 'source' of your income? Are you sure its taxable?
Last time I checked (By reading the relavant law in Title 26 and in the Code of Federal Regulations) the law is capitalistic. FICA is a voluntary FEDERAL INSURANCE CONTRIBUTION. (Hint: Read the bloody Form W-4 and the related Federal laws).
Did you know that by signing a W-4 you 'volunteered' to participate in FICA?
Did you know that many organizations, such as: police departments and school teacher unions; have opted out of SS and instead use thier own private retirement systems?
Buzz Kill, you crack us up. You're just one of those ignorant SLOGANEERS not unlike those who always show up at WTO protests to riot, and who use words that you are your socialist friends have tried to redefine into "loaded" phrases (Halliburtin, et al) with some nefarious or conspiratorial meaning. LMAOL
You forgot the rest of your talking points though, "Up with Hope, Down with Dope", etc., etc.
It's funny how this real estate blog has attracted political left wing whackos. I guess because its subject matter has that "woe is me" element to it. After all, the easiest way to identify a left wing pussy, is by their whining about how they are a victim of something because of what they think someone did to them, as opposed to just recognizing that just because everything in life doesn't go your way doesn't mean someone is to blame.
It's people like you that are bringing down this country. The good news is that hard working immigrants who recognize the opportunities you don't will just clean your clock.
As you as you can LEGALLY print money it is IMPOSSIBLE to go broke. Don't you agree?
Borkafatty is the best short in the world, ride this bitch to zero, get paid, but some grillz yo.
Let's see....... Clinton builds wealth over 8 years (the first time in a very long time).
Bush and Co. steal it over 3-6 years.
Congratulations, America.
Bush is neither a conservative nor a liberal.
He is an authoritarian statist doing the bidding of the corporate ruling class. Since he came into office they have been doing a smash 'n grab operation on this country and those of us who work for a living will be left to pick up the pieces.
But the boomers paid into SS all their lives. So they expect it and demand it. Therefore we must pay it. Nevermind the obvious logic that it won't be there by the time we're 65.
We're enslaved to that generation. They outnumber us, they outpower us, they have more money than us.
If you disagree... can I please opt out of SS, mr. boomer, please?
Hey Buzz Kill, you HAVE to think other people live with their moms because that's the only way you can feel good about yourself.
By the way, you were close though. I actually live with your mom ; )
"We will have:
deflation, not inflation"
Not a chance, the whole world is printing money like the presses are possessed!!
They have to, as once the boomers start to liquidate their assets to provide for their retirement, TPTB need to use this money to shore up the markets to stop a run and total collapse.
You'll be wiping your arse on $100 notes as it'll be cheaper than buying bogroll.
hey keith, did you know this fed report was originally commissioned by O'NEIL!! the guy who bush tossed out! yeah O'NEIL and his book "th price of loyalty".
The value of the dollar goes down and inflation goes up. The money we borrowed in US DOLLARS will go down in value and those who LENT us tha money, loose. All those trillions of dollars floating around the world will have no where to go but up in smoke.
Of course they could start buying US assets, houses, land, businesses, skyscrappers, but most of those assest can't be take out of the country. We were afraid when Japan bought Pebble Beach and top notch real estate but they couldn't take it home and when they had to sell they sold at a loss. Why should it be any different if China bought?
If the dollar today was worth 4c 100 years ago then shouldn't we all be happy if we have $300,000 mortages on borrowed money at 5 1/2% fixed for 30 years? Inflation will decrease my costs but give me an illusionary increase in wealth. As I've posted many times, inflation adjusted costs need to be used when comparing cost over the past 40 years.
If you cash out of your home and rent, your cost will go up where as in your home your mortgage remains fixed (if you were smart enough to get a fixed rate loan). And your savings? Invest in stocks and watch your money vanish like in a casino! Savings? The small amount of interest won't keep up with inflation so you watch your wealth melt away. Gold? Well, we bought gold back in the early 80s and adjusted for inflation hasn't kept pace with what we paid. Euros? Do you really think the European market is any stronger or healthier and that home costs in Spain, France, England, Sweden, Denmark, Greenland, Italy, Ireland are better than here? NOT! Most are even more expensive and most don't come with fixed mortgages!
We'll probaly see a repeat of the early 70s with stagflation, petrol shock, and economic pain but the country didn't collapse then either. Real Estate? Maybe it will repeat itself too! People went out and bought more than they could afford because in a year they couldn't afford to buy because their wages weren't keeping up with inflation but their homes were because commodity prices will rise with inflation so all those fixed mortages made money for all those folk. That set in motion the perpetual love of Californians to buy homes at any cost.
Oh and I guess in the end we'll do what? Default like Argentina? And they were penalized how? Their economy has recovered and their debts washed away and all those threats that nobody would do business with them again? They did and they were not one of the most populous and largest economies in the world.
"Default like Argentina? And they were penalized how? Their economy has recovered and their debts washed away and all those threats that nobody would do business with them again? They did and they were not one of the most populous and largest economies in the world."
And that's the secret to their success, they're a smaller economy and they gave up on the whole IMF thing just like Thailand after the Asian currency debacle.
You see, a vast majority of USD holders are international institutes. The dollar is the biggest game on earth and the bigger they are, the harder they fall and since a majority of the world's banks and exchanges don't want to go under, they'll support the USD in graduated sell offs until a new equilibrium is found which will of course tank the US (and other associated) housing markets but will at least keep the world economy going.
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