I find it somewhat amusing in 2011 that there are still Keynesians (and their Samuelson clones) economist who are taken seriously. Combined with the boorish economic idiots are press columnist and politicians who still have no clue the game is over for them. I will skip beating a dead horse and move on to the clueless press and politicians.
Keynesian worshiping economist and Nobel Prize winner Paul Samuelson wasted his intellect on useless economic models that are garbage and lead to the current monetary expansion of credit and money
Why will the United States go bankrupt?
The federal debt per citizen is $46,914.
The state debt per citizen is $3,870.
The local debt per citizen is $5,480.
The personal debt per citizen is $51,418.
And other debts not listed here.
Add it all up and the average citizen owes $175,900 or $667,598 per family. 371% of personal purchasing power parity for those counting.
Add in the Social Security unfunded liability of $49,000 per citizen.
Add in the prescription drug unfunded liability of $64,830 per citizen.
Add in the unfunded Medicare liability of $257,826 per citizen.
Add it all up and the liability is $1,028,885 per citizen.
Add up the current debt and unfunded liability and the average 23 year old citizen just entering the work force will have to pay $1,204,785.00 to meet the obligations of both family and government.
Does this seem realistic?
Citigroup said that no country with a debt-to-GDP ratio of over 150 percent has “ever avoided a default.”
According to the CIA World Factbook we are at 62.3% in 2010 but that does not include our “soft” internal federal debt which brings the total to 98.6%. That would be the Social Security IOU’s.
Barney Frank exemplifies the dishonest politicians that infest Washington
Our public and private debt is 371% of GDP. Can the average United States citizen pay off this debt?
If only current federal debt is counted the average citizen would have to pay $432 per month for 10 years at the current 2% yield on a 10-year bond, for the government debt. This does not include the 15.3% taken out for Social Security and Medicare. This does not include federal taxes, state taxes, or local taxes.
The average citizen owes $4,453 per month, at 2%, for 30 years if you include the unfunded liabilities.
Does this seem reasonable that for the next 30 years our citizens will be able to afford $4,500 per month?
George W. Bush proposed Social Security reform in 2004 and was repudiated by both political parties
Does it seem reasonable that the federal government will be able to obtain financing at 2% for 30 years?
At 5% the payment increases to $6,467 per month. Shorten the terms down to a more realistic 10 year term, at 2%, and the monthly obligation increases to $11,085. Increase the financing to 5% and the monthly obligation increases to $12,778. Is any of this a reasonable sum to expect new workers to pay?
Does any rational person think Social Security and Medicaid will be around ten years from now?
If the government takes over medicine two things will happen, cost will increase and supply will decrease.
When you make something free, anything, people demand more of it. When you are a monopoly you supply less of it. The baby boomers will pay a huge price for the selfishness of politicians and today’s elderly population.
Currently the federal government pays extremely low interest rates for their deficit borrowing mostly with short term T-Bills. The debt portion of the federal budget is about 9% of the budget. What happens in the short run if inflation forces the Federal Reserve to raise interest rates?
Besides the obvious that the money bubble will deflate, the federal government will have to devote more of its budget to pay higher interest rates. 9% will become 15% overnight. This means less services provided.
There is a reason the founding fathers abhorred debt, it limits your options and enslaves the citizens and benefits the elites.
What happens if the Federal Reserve keeps interest rates low and pursues Quantitative Easing III?
Weimar Republic, Germany 1920s.
To any sane banker it is obvious the United States, and much of Europe, has leveraged themselves into a box. The Federal Reserve is leveraged 56 to 1. The Federal Reserve is in a box and cannot be counted on in the future to act in a rational manner. The only rational decision for the people is bankruptcy.
The discussion that needs to start happening among “Tea Party” people is to first recognize that entitlement programs are not sustainable, and second the debt is unsustainable. When we get over the grieving process and understand our politicians are playing for another two, four, or six years on the gravy train we can move on to the substantive subjects.
First, do we want to remain together as the United States or dissolve the union?
Be honest, there are two visions of government in America, one fascist, socialist and communist, the other libertarian, capitalist, and free.
Second, how will we care for the elderly who will not be receiving the benefits they were promised by dishonest politicians?
The coming bankruptcy of America does not have to be a horrible event. We can overcome our own folly if we have leaders that understand the problem and act in a rational manner to peacefully resolve the differences between citizens of different political desires. It can be done.
If we refuse to face the reality of our situation we can look forward to more totalitarian government, rationing for medicine, financial enslavement of a generation that had no say in the politics of the last 50 years, possible secession movements and war, movements towards a fascist national government.
Sooner or latter the people and governments of the world will realize the United States is broke, when that day comes we need to be prepared.
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