Tuesday, May 4, 2010

Dollar Inevitable Demise: US Government Needs 117 Trillion

Consider these figures. The current size of the American economy is roughly $14 trillion. As of this writing, the federal government's total public debt stands at nearly $13 trillion.

In its first midsession review, the White House Office of Management and Budget estimated that at the end of 2010, the national debt will breach the $14-trillion mark. This means that America's sovereign debt will be soon equal to the annual output of our economy. In other words, our national debt will shortly reach 100 percent of GDP. History and experience show that most governments that assume such levels of debt are ultimately not able to contain them. In most cases, this kind of situation eventually leads to the disintegration of the country's monetary regime and the collapse of its currency.

This outcome is not inevitable, given that -- in theory, at least -- a debt of 100 percent of GDP is still manageable. But to bring things under control would require strict fiscal discipline. Unfortunately, there no indication that our federal government can muster any. Quite the contrary. Last year the federal budget deficit reached a record $1.4 trillion. At nearly 10 percent of GDP, this was the highest peacetime deficit in history. Despite the numerous assurances that the 2009 shortfall was a one-off event brought on by the financial crisis, this year's deficit will go even higher. According to theanalysis submitted by the Congressional Budget Office last month, it will climb to $1.5 trillion. This will amount to 10.3 percent of GDP.

There is every reason to believe that the deficit will grow even faster in the years to come, as the federal government further increases its involvement in health care. The estimates by the Office of the Management and Budget which we quoted above do not factor in the costs associated with the recently passed health care reform. Even the more conservative estimates project that the legislation will cost well over one trillion during the program's first ten years. It is almost certain, however, that this figure is grossly understated, as government programs have a tendency to exceed their initial cost projections by grotesque multiples.

This, however, is not the worst of it, because the national debt represents only a relatively small portion of our government's total financial obligations. The far greater bulk is made up of long-term liabilities inherent in entitlement programs. According to the latest estimates by the Dallas Federal Reserve, the combined liabilities of Medicare, Social Security, and Medicaid amount to an astounding $104 trillion.

When we add the national debt and entitlements together, we get a figure of some $117 trillion. This figure represents the amount of money the federal government will have to come up with in the years ahead in order to discharge its obligations.

Rumor: Spain Will Ask for 280 Billion Euros of Aid Money – Euro Plunges
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39 comments:

  1. US Government can easily get 117 trillion dollars. Just print them out of thin air. This is exactly what Bernanke is doing. Prosperity for everyone just print. Like that going to work. Just ask Zimbabwe.
    Many European nations are in debts. They will print the euro out of thin air too.

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  2. If only Bush had another four years...

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  3. Not to worry...The economy is already in full recovery. Soon there will be good-paying jobs for all the unemployed and tax revenues will once again be rolling in. These deficits are and only a temporary blip, soon to be erased in a booming economy.

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  4. 8:02 where do you come from, the back woods of Tenn.? If your credit card owed was 1 million dollars and you made 100,000 grand a year, could you pay it? Are people here BRAIN DEAD? RECOVERY? WHAT?

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  5. Inbreeding is the reproduction from the mating of two genetically related parents, which can increase the chances of offspring being affected by recessive or deleterious traits.

    Example: 8:02

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  6. FURTHERMORE, THE FIRST THING I WOULD DO AS PRESIDENT IS REPEAL THE UNFAIR INCEST LAWS.

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  7. dip shit of an author... and yes if u make 100k/year u can pay off 1million in debt over time.
    The author fails to give a time frame.. Thanks for the disservice and the dis information. The sun is going to engulf the earth in "the years ahead'' just in the same way the US is going to owe 100 trillion in 'the years ahead" Very unethical reporting.

    I am not saying there isnt a valid point made, but u need to substantiate your claims better.

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  8. 8:41 come on you have to be the dumbest poster here:
    Your Monthly Payment of $3000
    Interest Rate 5 %
    Debt Balance 1,000,000

    Payoff Period Months NEVER
    (in years) Years NEVER

    At 3,000 per month you can never pay the debt of a million dollars

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  9. 8:41 - you must be dreaming. $1 million of debt at 5% means $50,000/year of interest (i.e. not even paying down the debt itself). That's after you pay taxes on your $100K income, leaving maybe $70K-75K. After paying the interest only, that leaves you with a measely $25K-$30K per year to live on - from that you must pay for food, clothing, insurance (homeowners, auto, health, maybe life), gas and auto maintenance, a new car every once in a while (even if it is used, it still costs money), electricity, water, property taxes, etc., etc. That's assuming that part of your debt is your mortgage. NO, you CANNOT repay the loan, because you can't live on what little is left after merely paying the interest.

    As to the issue of timeframe, you and everyone else need to understand that the unfunded future obligations (the $104 trillion discussed in the article) are increasing faster than the economy grows - i.e. faster than inflation and real growth combined. THAT is why we're effectively broke, because this has been going on for decades. We were once a very rich country, the richest in all of history - but everything is finite, and we spent more than we brought in for all of those years (yes, even during the "surplus" years of Clinton, because the government counted Social Security surpluses as current revenue), leading to the present situation.

    Mathematics is apolitical, it doesn't lie. Barring tremendous cutbacks in spending both currently and in the future (i.e. cutting Social Security, Medicare, pensions and all other future obligations...boy will that be politically popular), we are done for. Such is what happens to EVERY fiat currency - no society has ever had the discipline to live within its means for hundreds of years, and we're no exception. Dead man walking...enjoy what little time we have left before we are unable to import any oil or other critical materials, due to the extreme cost in the few depreciated dollars we'll have left after paying interest and other obligations.

    8:50 - $3K/month is too little to even pay the interest - 5%/year on $1MM = $50K/year = $4,250/month. This, of course, only reinforces your point.

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  10. Not to worry... as the Euro falls in relative value to the USD, Americans can begin to import many more European goods, thereby increasing employment there too. The current American Great Recovery will soon spread to the EU, and their debt problems will be solved in short order too.

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  11. 8:24!! LOL! Can't stop laughing. U R the greatest.

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  12. i know the economey is bad theres alot smarter people than me argueing over
    the speed of the titanic as she sinks

    weeee the market diveing
    glad i have my gold mr powers

    america is in a deppression
    when the market hits 4000 dow
    uuy as much oil as you can for 20 bucks a barrel
    only comes once in a lifetime

    and i paint houses for a LIVING
    THIS INVESTING STUFF IS EASY

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  13. I reiterate for the nine hundred and second time.

    ENTITLEMENTS

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  14. 9:33 am - Your writing skills reflect the fact that you paint houses for a living!

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  15. Does the $107 trillion dollars subtract the taxes paid into it? Or is that the amount after taxes?

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  16. I come from an oil and gas family and I used to work for a rig manufacturer, so believe me when I tell you that oil and gas are our salvation. Screw gold. Instead, buy liquid gold contracts. All of it you can get your hands on. Every last dollar should go to purchasing a stake in what's remaining of the Texas Tea. Mad Max is coming your way. Stake your claim now, and don't get run over by the Road Warriors.

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  17. 9:35, there are a lot of intelligent house painters. There are a lot of intelligent bums.

    Some of the world's most intelligent people can still be deceived and deluded.

    The sheeple are more D & D then they are stupid. Controlled, manipulated, herded.

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  18. The Al-CIA--duh stooge they set up for the Times Square bullshit looks like a Klingon. I have to hand it to them. They know how to script their BS. Now us idiotic Americans can hate the Muslims even more. Gee, I wonder who benefits from that?

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  19. the article states, record peace time defecit. Last time i looked we were in 2 wars what gives.

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  20. 2.. try like 5 or 6.. nkorea.. palestine/isreal (pardon my spelling) iran, iraq, afgan. and that african one, yemen. u better believe there are troops within shooting distance of those locals,

    were visibly in iraq and afgan.

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  21. Not wars; invasions, occupations, etc, there is a big difference.

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  22. When an Empire is expanding and conquering prior to its collapse. History shows it happening many, many times.

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  23. we already hit our peak. 2 options on the table.... but cant have both... Either a true representative democracy. Or a facist global empire. not both. humans not just americans need to be fighting for our freedom.. do we want nice cars, houses, boats, vacations, or the right to be free.. well a small percentage of us. we cannot have true freedom if we want houses, cars ect.. but if were all willing to tend to a farm, no one can bother you. and u claim yuor freedom and tear down the old system, and attempt to create a new better one.

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  24. 12:56 Put down the mouse and the crack pipe. Now, step back from the computer

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  25. so we never declared war on iraq

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  26. CHUCKLES THE CLOWNMay 4, 2010 at 5:53 PM

    CHUCKLES says the USA will be the last man standing,HURRAY!

    Euro is toast, just give it time.

    Then the USA is screwed, I didn't say the last man standing will stand forever, just a matter of time until it get REALLY BAD here, much worse than now.

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  27. 3:10 I hate say it, but you are right. Scary isnt it.

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  28. 3:10,
    Right on. Couldn't have said it better myself!

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  29. 3 10
    you think the chinese will hire us to clean up the mess
    because i need a job

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  30. Look at the latest propaganda with the Times Square CIA stooge and the sheeple are lapping it right up.

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  31. 455 The Chinese will put you to work. You will get a gun to your head and a bowl of rice as pay.

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  32. To make this easier to understand, let's say you earn $2,000 a month and your budget is $1,900.00. All it will take is one small disaster; illness, auto accident, your kid's broken arm, and you are toast.

    That's exactly what this country is.

    No one will ever elect me POTUS, because I would act responsibly and put America first, then my head would get blown off, just like JFK.

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  33. Hey 655, If you're so smart why don't you tap into it? You and Jed can run off together. You know, tap each others wells.

    Come 'n listen to my story 'bout a man named Jed
    A poor mountaineer, barely kept his family fed
    And then one day, he was shootin' at some food
    And up through the ground come a bubblin' crude
    Oil, that is, black gold, Texas tea

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  34. To: 7:21

    It's amazing sometimes what one feels compelled to do to get people off their duff and get about doing what needs done.

    I have

    I am a self made individual that never again has to worry about anything financial - it free's up alot of time and effort.

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  35. 8:13 - Speaking the truth. Keeping it real

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  36. 7:21 me too. I bought Park Place and Board walk.
    I have hotels on each of them and made a killing every time someone landed on them.

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  37. "we already hit our peak. 2 options on the table.... but cant have both... Either a true representative democracy."

    Here is the core of ALL our problems. We are supposed to be a Republic!! Article 4 Section 4!
    Our right to own and protect property from individuals and government have been taken away from us!! The government is NOT ALLOWED to take our money and give it to whom ever. This is the reason the word Democracy is not found within our founding documents!!!

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  38. 6:52 it is nice to know that there are some people like you that know that, thank you.

    Demo = mob, Democracy is just a mob rule, rule by the majority, with little concern for individual rights. We were never to be a Democracy, but try to explain that to 98% of the sheeple.

    A Constitutional Republic empowers the individual person with rights (corporations EXCLUDED). We can't have that and be running a clandestine Empire, controlled by Oligarchs back in the boardroom.

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  39. Of course since we are an Oligarchy with fake puppet presidents, nothing changes president to president. Same wars, same draconian wars and laws.

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Everyone is encouraged to participate with civilized comments.