Posts Tagged ‘$200 trillion’

Actual U.S. Debt Exceeds GDP Of Entire Planet

April 11, 2011

Here’s one for you to put in your pipe to smoke on.  Even if the U.S. were to seize the wealth of the entire planet, and even if we taxed all the wealth of not only the rich but the miserably poor as well, we STILL couldn’t pay off the debts that Democrats demand that we keep adding to until after we’ve reached that “straw that broke the camel’s back” point:

True U.S. debt exceeds world GDP by $14 trillion
Obama 2010 budget deficit now 5 times larger than nation’s output
Posted: March 21, 2011
By Jerome R. Corsi

As the Obama administration prepares to finance a Fiscal Year 2011 budget  deficit expected to top $1.6 trillion, the American public is largely unaware that the true negative net worth of the federal government reached $76.3 trillion last year.

That figure was five times the 2010 gross domestic product of the United States and exceeded the estimated gross domestic product for the world by approximately $14.4 trillion.

According to the U.S. Department of Commerce Bureau of Economic Analysis, U.S. GDP for 2010 was $14.861 trillion. World GDP in 2010, according to the International Monetary Fund, was $61.936 trillion.

“As government obligations continue to spiral out of control and the U.S. government shows no willingness to make the magnitude of spending cuts required to return to fiscal responsible, the U.S. economy is headed to a great collapse coming in the form of a hyper-inflationary great depression,” says economist John Williams, author of the website Government Shadow Statistics.

Statistics generated in Williams’ most recent newsletter demonstrate the real 2010 federal budget deficit was $5.3 trillion, not the $1.3 trillion previously reported by the Congressional Budget Office, according to the 2010 Financial Report of the United States Government as released by the U.S. Department of Treasury Feb. 26, 2010.

The difference between the $1.3 trillion “official” 2010 federal budget  deficit numbers and the $5.3 trillion budget deficit based on data reported in  the 2010 Financial Report of the United States Government is that the official  budget deficit is calculated on a cash basis, where all tax receipts, including  Social Security tax receipts, are used to pay government liabilities as they  occur.

The calculations in the 2010 Financial Report are calculated on a GAAP basis  (Generally Accepted Accounting Principles) that includes year-for-year changes  in the net present value of unfunded liabilities in social insurance programs  such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social  Security and Medicare benefits in the year in which those benefits accrue.

“The broad GAAP-based federal deficits, including the Social Security and  Medicare unfunded liabilities, have been in the $4 trillion to $5 trillion range  in 2008 and 2009, and 2010’s deficit again likely was near $5 trillion,  remaining both uncontrollable and unsustainable,” Williams wrote.

“The federal government cannot cover such an annual shortfall by raising  taxes, as there are not enough untaxed wages and salaries or corporate profits  to do so,” he warned.

In his analysis of the 2010 Financial Report of the United States, Williams  listed both an official accounting and an alternative.

“The estimate of a broad 2010 GAAP-based deficit at $5 trillion is mine,” he  noted. “At issue with the published report, consistent year-to-year accounting  was not shown, with a large, one time reduction in reported 2010 Medicare  liabilities, based on overly optimistic assumptions of the impact from recently  enacted health care legislation.”


U.S. Government GAAP Accounting  Federal Budget Deficits U.S. Treasury, Financial Report of the United States,  2002-2010 (John Williams, Shadow Government Statistics, ShadowStats.com)

Williams argues the total U.S. obligations, including Social Security and  Medicare benefits to be paid in the future, have effectively placed the U.S.  government in bankruptcy, even before we take  into consideration any future and continuing social welfare obligations that may  be embedded within the Obama administration’s planned massive overhaul of health  care.

“The government cannot raise taxes high enough to bring the budget into  balance,” Williams said. “You could tax 100 percent of everyone’s income and 100  percent of corporate profits and the U.S. government would still be showing a  federal budget deficit on a GAAP accounting basis.”

Williams argues the U.S. government has condemned the U.S. dollar to “a  hyperinflationary grave” by taking on debt  obligations that will never be covered by raising taxes and/or by severely  slashing government spending that has become politically untouchable.

“Bankrupt sovereign states most commonly use the currency printing press as a  solution to not having enough money to cover  obligations,” he cautioned. “The U.S. government and the Federal Reserve have  committed the system to its ultimate insolvency, through the easy politics of a  bottomless pocketbook, the servicing of big-moneyed special interests, gross  mismanagement, and a deliberate and ongoing effort to debase the U.S. currency.”

He is concerned that the Federal Reserve will supplement its current policy  of Quantitative Easing 2, or QE2, under which the Fed intends to purchase by  mid-year 2010 another $600 billion of Treasury debt with “QE3.”

“These actions (QE2 and QE3) should pummel heavily the U.S. dollar’s exchange  rate against other major currencies,” he concludes. “Looming with uncertain  timing is a panicked dollar dumping and dumping of dollar-denominated paper  assets, which remains the most likely event as a proximal trigger for the onset  of hyperinflation in the near-term.”

Williams predicts that the early stages of hyperinflation will be marked by  an accelerating upturn in consumer prices, a pattern that has already begun to  unfold in response to QE2.

“For those living in the United States, long-range strategies should look to  assure safety and survival, which from a financial standpoint means preserving  wealth and assets,” he advises.

Williams suggests that physical gold in the form of sovereign coins priced  near bullion prices remains the primary hedge in terms of preserving the  purchasing power of the dollar, as well as stronger major currencies such as the  Swiss franc, the Canadian dollar and the Australian dollar.

And as totally insane as that is, it might well even be worse than that.

$61.936 trillion sounds like a lot.  And that’s the official figure for the International Monetary Fund’s estimate for U.S. indebtedness.  But the IMF is giving credibility to a figure that makes that $62 trillion seem almost manageable:

I Can Give You 200 Trillion Reasons Why We Need To Cut Government Spending NOW
By Michael Eden     March 7, 2011

Republicans are trying to get our spending under control, and Democrats are demonizing them every single step of the way.  Because Democrats are demons, and demonizing is the only thing they know how to do.

For the record, Republicans are trying to cut an amount which is basically 1/30th of Obama’s budget deficit.

News from globeandmail.com
The scary real U.S. government debt
Wednesday, October 27, 2010

NEIL REYNOLDS

Ottawa — reynolds.globe@gmail.com

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

Enron-style accounting?  From our government?  Say it aint so!!!

It’s isn’t a matter of IF America will financially collapse; it is only a matter of WHEN.  And “WHEN” is SOON.

And it will necessarily happen because Democrats are genuinely depraved.

Recklessly spending money on fools’ projects that your grandchildren will become debt slaves just trying to pay the interest on is immoral.

I can only keep begging Republicans to turn the Democrats’ demonization game back at them.  Democrats are running around on their talking points denouncing Republicans as “extremists” who want to kill poor people.

Bullcrap.

It is DEMOCRATS (I call them “Demoncrats,” for “Demonic Bureaucrats”) who want to implode America and kill tens of millions of American people by plunging this country into a great depression that will make the last one in the 1930s seem like a fun-filled day at the beach.

It’s not going to be the richest people who starve to death and die miserably in the cold.  It’s going to be all the people liberals love to say they care about – when in reality all they do is cynically manipulate them toward their own increasingly certain doom.

Don’t you dare forget that it has been LIBERALS who have been dreaming of undermining and imploding America financially since Cloward and Piven back in the 1960s.  And now we’ve got a JUST-ex SEIU official on tape plotting to send America into a financial crisis that will dwarf anything ever seen.

If you have a true death wish, and you vote Democrat, then by all means keep doing so, because they will give you the destruction and nihilism that you seek.  That’s the real meaning of Obama’s “hope and change.”

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Obama Causes Official End Of The Nation Of Makers

April 4, 2011

This is something that conservatives saw coming from the very fist days of the Obama administration.  From Cato, February 26, 2009:

Cato begins that article with a quote from Obama from a couple of days previous: “As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day… Not because I believe in bigger government — I don’t. Not because I’m not mindful of the massive debt we’ve inherited — I am.”

But like virtually everything else, it was a lie.  Obama’s own proposed massive increase in federal spending proved that.  And since Obama took office, he has spent as no government has ever spent in the history of the human race.

And thus is it utterly no surprise at all to anyone but ignorant fools that we are now here:

APRIL 1, 2011
We’ve Become a Nation of Takers, Not Makers
More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined.

By STEPHEN MOORE
If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees—twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida’s ratio is more than 3 to 1. So is New York’s.

Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things. The leaders in government hiring are Wyoming and New Mexico, which have hired more than six government workers for every manufacturing worker.

Now it is certainly true that many states have not typically been home to traditional manufacturing operations. Iowa and Nebraska are farm states, for example. But in those states, there are at least five times more government workers than farmers. West Virginia is the mining capital of the world, yet it has at least three times more government workers than miners. New York is the financial capital of the world—at least for now. That sector employs roughly 670,000 New Yorkers. That’s less than half of the state’s 1.48 million government employees.

Don’t expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren’t willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.

The employment trends described here are explained in part by hugely beneficial productivity improvements in such traditional industries as farming, manufacturing, financial services and telecommunications. These produce far more output per worker than in the past. The typical farmer, for example, is today at least three times more productive than in 1950.

Where are the productivity gains in government? Consider a core function of state and local governments: schools. Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.

But education is an industry where we measure performance backwards: We gauge school performance not by outputs, but by inputs. If quality falls, we say we didn’t pay teachers enough or we need smaller class sizes or newer schools. If education had undergone the same productivity revolution that manufacturing has, we would have half as many educators, smaller school budgets, and higher graduation rates and test scores.

The same is true of almost all other government services. Mass transit spends more and more every year and yet a much smaller share of Americans use trains and buses today than in past decades. One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we’ve gotten.

Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services—fire fighting, public transportation, garbage collection, administrative functions, even prison operations—through competitive contracting to private providers. But unions have blocked many of those efforts. Public employees maintain that they are underpaid relative to equally qualified private-sector workers, yet they are deathly afraid of competitive bidding for government services.

President Obama says we have to retool our economy to “win the future.” The only way to do that is to grow the economy that makes things, not the sector that takes things.

Mr. Moore is senior economics writer for The Wall Street Journal editorial page.

California?  Unions?  Consider this from the Los Angeles Times:

California’s $500-billion pension time bomb
The staggering amount of unfunded debt stands to crowd out funding for many popular programs. Reform will take something sadly lacking in the Legislature: political courage.
April 06, 2010|By David Crane

The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

The People’s Republic of Kalifornia was cursed with a R.I.N.O. governor who championed abortion, a $6 porker giveway for stem cell research, gay marriage, and a whole bunch of other liberal crap.  And the legislature is one of the most overwhelmingly Democrat in the country.  And the only things that have changed is that the People’s Republic is now officially under a Democrat Governor (Jerry Brown) and they actually added a Democrat seat in the legislature.

Illinois was described by NBC as having the worst unfunded pension crisis in the country.  Maybe they didn’t know how bad California’s really was when they reported that.  But more likely, they probably had no idea how bad Illinois’ problem truly was and is, either.

The United States is so screwed it is absolutely unreal.  And that is largely due to unions and the Democrats who support those unions in exchange for votes.  It’s an unAmerican scheme that works like this: labor unions give Democrats big campaign donations and provide the muscle and infrastructure for the Democrats’ get-out-the-vote campaign.  And in exchange, Democrats give unions other peoples’ money to the tune of hundreds of billions of dollars.  They don’t give a damn about the 88% of Americans who AREN’T in unions.

Unions are parasites that have sucked the blood out of every industry they have ever seized their vile little talons onto.  Autos, airlines, manufacturing, education government at every possible level – you name it; they’ve ruined it.  And the rest of America is the host that the parasites feed off of.  And Democrats care about the parasites, and not one damn about the rapidly dying host.

And Barack Obama is far and away the most pro-union president ever.  And that was true BEFORE he signed three new hard-core union-agenda executive orders into law.

Obama has just gotten caught red-handed using his ObamaCare to give huge payouts to unions and corporations that advanced his agenda (fascism alert).  Remember that G.E. – one of the corporate beneficiaries of ObamaCare, not only paid zero taxes but actually got money from the taxpayers.

Do you remember Obama’s preacher for over twenty years said, “No, no, no, not God bless America.  God DAMN America.”  And then said that “America’s chickens are coming home to roost”???

You need to understand our actual situation and look at our real debt to understand that AMERICA is the chicken – and Obama has cut its head off and thrown it into a pot of boiling water:

News from globeandmail.com
The scary real U.S. government debt
Wednesday, October 27, 2010

NEIL REYNOLDS

Ottawa — reynolds.globe@gmail.com

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling. […]

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie.

Every single one of these massive entitlements that is poisoning America they way Japan’s tsunami has poisoned her nuclear reactors with toxic meltdowns came from the vile minds of DEMOCRATS.  And it is DEMOCRATS who will cause the once mighty America to shortly go the way of the Dodo bird.

Social Security was a ponzi scheme from the outset.  And the only thing that has kept it going was that it is a really, really BIG ponzi scheme.  We find out that FDR – who wanted a massive takeover of the private sector by the federal government – worked hard to kill an amendment offered by a Democrat (Senator Bennett Champ Clark): ” It would have allowed workers to go with the new government system or, if they wished, to have their money put into a private-insurance plan. Either way, the contributions would be mandatory.”  Had that amendment been allowed to pass, it would have forced the government’s filfthy paws off the “trust fund” that they subsequently ripped off for the next seventy years and beyond:

We wouldn’t be saddled with today’s fiscal disaster. Hundreds of billions of dollars that politicians have “borrowed” from the Social Security trust fund for all sorts of pork spending would not have disappeared. Instead, all that capital would have been invested in the economy, leaving us a lot more prosperous. Moreover, the Clark Amendment would have been a model for state pension plans, which are now bankrupting local governments, as well as for other nations.

There was a much better idea from the private sector – but in the end Democrats wouldn’t have it.  They wanted their government fascist control instead.  They didn’t care about the American people; they wanted to be able to raid those retirement funds for their own partisan ideological ends.

Then there was the much more colossal failure known as Medicare.  Ronald Reagan famously warned America about that fraud in 1961:

One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project. Most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.

Medicare now represents the largest share of our unfunded liabilities today.  The private market could have done a much better job at a much lower cost, but again, Democrats wanted socialism, and they were hell bent upon getting their socialism.

Now we face collectivist bankruptcy.  We were previously told that if current trends held, Medicare would go broke by 2017.  But current trends didn’t hold, because Obama robbed Medicare of $500 billion to fund the ObamaCare boondobble that bears his name.

As the Iron Lady Margaret Thatcher famously said, “The problem with socialism is that eventually you run out of other people’s money.”  And voilà, here we are.

When it comes to how John F. Kennedy viewed the socialist redistribution of wealth via “progressive taxation policies,” you will find that Kennedy was solidly on the side of fiscal conservatives today.  As it stands, today’s vile Democrats are fundamentally at odds with the man widely recognized to be the greatest Democrat president.

As we speak, Republicans are trying to cut a tiny fraction of the bloated, totally-out-of-control federal budget.  And Democrats are demonizing them at every turn for it.  Because Democrats have been using government spending to massively pad the coffers of the government-sector unions who make their elections possible.  And to be a Democrat means you don’t give a damn about America’s future; you only selfishly want – to put it in John F. Kennedy’s famous words – “what your country can do for you.”

God HAS damned America in the person of Jeremiah Wright’s parishoner for 23 years.  And the most ignorant generation in America’s history voted for it.

From Bad To Worse: Japan Was On Path To Debt Default BEFORE Earthquake, Tsunami And Meltdown. America Next.

March 15, 2011

Meltdown.  That’s a good word for Japan these days.

And I’m not talking about the nuclear reactors, either.  I’m talking about what had been one of the most powerful economic engines on the planet.

Look at the facts in late 2010 BEFORE the earthquake, tsunami and nuclear reactor.  They didn’t look pretty then; they’ve become nightmarish since:

Japan Will Default as Economy Unravels, Bass Says
October 13, 2010, 4:19 PM EDT
By Nikolaj Gammeltoft and Susanne Walker
 
Oct. 13 (Bloomberg) — Japan will be forced to default on its debt, Greece’s economy is “done” and Iceland is worse off than Greece, said J. Kyle Bass, the head of Dallas-based Hayman Advisors LP who made $500 million in 2007 on the U.S. subprime collapse.

Nations around the world will be unable to repay their debt and financial austerity in a country such as Ireland is “too late,” Bass said today at the Value Investing Congress in New York.

Japan’s economy may unravel in the next two to three years, and its interest payments will exceed revenue, he said. “Japan can’t fund itself internally,” Bass said.

The country’s year-over-year gross domestic product was 2.4 percent as of June 30. It has the world’s largest public debt, approaching 200 percent of its GDP amid a 5.1 percent jobless rate. Consumer price fell by one percent in September and has been negative each month since May 2009, as deflation has taken hold.

Pricing on Japanese interest-rate swaps is the best he’s ever seen, Bass said. Investors could make 50 to 100 times their capital betting on them, he said, calling them a lottery ticket on Japan’s economy.

Japanese bonds have returned 3.3 percent this year, according to Merrill Lynch Indexes, compared with a return of 0.872 percent in 2009.

Crisis

Bank Of Japan’s Governor Masaaki Shirakawa refused to expand monthly purchases of government bonds this year even as deflation persisted. The bank on Oct. 5 instead created a 5 trillion yen ($60 billion) fund to buy bonds and other assets, and pledged to keep its benchmark interest rate at “virtually zero” until the end of deflation is in sight. Deflation has been entrenched in the economy since 1998. The GDP deflator, a gauge of prices across the economy, has fallen 14 percent since 1997, according to data compiled by Bloomberg.

A financial crisis in 1997-98 precipitated by bad loans on Japanese lenders’ balance sheets stemming from burst land and stock-price bubbles of the early 1990s set off Japan’s deflation. Property prices have slumped for 17 of the past 19 years, and stocks remain 76 percent off of their 1989 peak, according to the Nikkei 225 Stock Average.

Japan’s currency traded at 81.79 per dollar, compared with 81.72. It touched 81.39 on Oct. 11, the strongest level since April 1995.

Bass began buying securities with shorter durations last year as he predicted central bank and government actions globally to rescue the financial system will result in “outright currency debasement.”

He began buying shorter-term debt and precious metals then, anticipating hyperinflation will lead to higher interest rates. Bass also said in May that Europe’s debt crisis will not be solved by the $1 trillion loan package the International Monetary Fund and the European Union agreed on earlier that month.

–Editors: Nick Baker, Dave Liedtka

And that was all BEFORE Japan went from the frying pan into the nuclear fire.

What’s being said now?

Quake shattered Japan poses global debt worry
GARETH COSTA, The West Australian
March 15, 2011, 6:11 am

Concerns have emerged in global credit markets over how heavily-indebted Japan will be able to pay for its biggest economic reconstruction effort since World War II.

The Bank of Japan’s promise yesterday of a ¥15 trillion ($182 billion) cash injection into its banking system managed to soothe global equities, but not debt markets as Japanese government credit default swap rates used to insure against debt default soared 13 points to 92.

Although not yet at critical levels, analysts said yesterday’s sharp spike in the CDS rates highlighted debt market concerns about Japan’s funding pressures within a cash-strapped global economy.

“When you have a market the size of Japan down this much, it’s going to affect everybody,” Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management, said.

“A tragedy of this proportion is going to take up a lot of economic resources.

“It’s going to have quite a negative impact on growth.”

Credit markets were already concerned that Japanese government debt had ballooned to $US12.2 trillion, or 200 per cent of GDP.

Insurance experts estimate the repair bill carried by foreign reinsurers will be capped at $US34 billion, with the rest borne by Japanese insurers, the Government and uninsured homeowners.

Japan has so far managed to function under its debt because it has predominantly been funded by domestic investors and because it runs a steady trade surplus.

However, analysts caution that short-term liquidity constraints could prompt strong yen repatriation flows out of foreign markets as occurred after the Kobe earthquake.

Early estimates suggest the cost of the Sendai earthquake will easily exceed the $US100 billion Kobe earthquake in 1995.

Japan’s increased funding pressures are also occurring in a global economy far more cash-constrained than in 1995, and unless export earnings begin flowing soon, escalating funding costs could push the country’s financing costs over the tipping point.

Japan has been one of the biggest buyers of US Treasury debt and in January pledged to also buy up to one-fifth of bonds from the European Financial Stability Fund that was created to bail out Greece and Ireland, all of which will become secondary to Japanese funding needs for the next few months.

The country is also one of the world’s biggest holders of gold bullion.

Any decision to cash in on bullion’s record price and offload much of its sovereign holding would likely depress the gold price.

Japan’s Nikkei equities index slumped 6.2 per cent, its worse daily performance in two years.

[…]

What impact will it have on the global markets if the 3rd largest economy in the world defaults?  What effect will it have on the ability of the world’s largest debtor – that’s YOU, America – to continue to get credit as WE begin to look more and more like a default-likely credit risk???

Japan was the second largest purchaser of American debt, and was so far ahead of #3 (Japan buys 3 1/4 times more of our debt than Britain), that it’s not even funny.  The U.S. needs a sucker, I mean an investor, to continue to artificially prop-up our insane lifestyle.  Who’s going to do that now?

What you’re going to see is either the Fed dramatically hasten the rate at which it devalues the dollar, which in turn will hasten the inevitable result of America becoming a banana republic, or a giant spike in interest rates as other U.S. debt buyers demand more reward for their risks.

A third alternative is that Japan could begin to sell off its US debt to raise money to rebuild.  While that seems like the obvious course, it turns out in this crazy world it isn’t; were Japan to sell it’s U.S. debt, the result would surely kill the U.S. dollar, but it would also dramatically strengthen the yen and hurt Japan’s export market just when they need it most.

My point is it’s a lose-lose.  And the U.S. loses right along with Japan.

Yet “no drama” Obama didn’t care.  He didn’t even bother to mention Japan or it’s earthquake or its tsunami or its nuclear meltdown in his address the day after the disaster.  And just to demonstrate that he truly truly, truly didn’t give a damn, he played 18 holes of golf.

See the photos of Obama’s golf outing from Sadhill.

Then there’s the unfortunate fact that this disaster has coincided with the far more important NCAA basketball tournament.  A president has to choose his priorities, and clearly the basketball won out.

Note #1: this is hardly new behavior from the man who promised “hope and change.”

Note #2: the mainstream media excoriated Bush for golfing a tiny fraction as often as Obama.  One example is the liberal Washington Post headline from August 5, 2002, “Before Golf, Bush Decries Latest Deaths in Mideast.”  I wonder what the Post’s headline would be about Obama if they had even a shred of fairness in their coverage?

We’re in trouble.  And our leader is a fool.  And we have a media that is hell-bent (literally) on ignoring or explaining away this fool’s actions and responses.

One of the things I came to believe as I realized that Obama would actually quite possibly get elected president was that our economy was dead meat.  I entirely got out of the U.S. stock market entirely and won’t return until Obama and the Democrats are out of power.  The reason is that I believed – and STILL believe – that when our economy collapses, it will happen very suddenly, like a house of cards falling down.  And it might not start in America; rather, an event in another country will set off a spiral that will envelope us and expose us for what we truly are.

And just where truly are we?

News from globeandmail.com
The scary real U.S. government debt
Wednesday, October 27, 2010

NEIL REYNOLDS

Ottawa — reynolds.globe@gmail.com

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Our actual debt is not the fourteen trillion dollars that would be scary enough; it is $200 TRILLION.

That isn’t some rightwing thinktank saying that; it’s the IMF.

Japan had a literal meltdown.  It is about to have a financial meltdown.

And America will not be far behind.

As you look at the current fiscal situation, with Democrats not just fighting to keep the status quo of reckless and morally and mentally insane spending that will necessarily bankrupt America – and with Democrats literally sitting back waiting to demonize Republicans as “mean-spirited” the moment they try to do what is absolutely necessary to get our skyrocketing spending under control – realize that the United States is necessarily going to explode and collapse just like those reactors in Japan.

Democrats murdered America.  It was Democrats who were responsible for nearly ALL of those $200 trillion in debt that will destroy us (it is a simple fact that the Social Security, Medicare and Medicaid that constitute virtually all of our actual debt were all Democrat programs).  And it is Democrats who will literally fight to America’s death to prevent the nation from doing what is necessary to fix our situation before it is too late.

Social Security is now paying out more than it takes in.  Workers under forty are rightly quite confident that the system will collapse before they get a chance to collect.  Republicans want to fix the system before it collapses in order to save it.  But Democrats lie about the Republicans efforts (which would kick in slowly and not affect current retirees at all).  And Democrats race us faster, ever faster toward the collapse and nightmare that surely awaits America.

We’re a dead nation walking.  We just don’t realize it yet.

That’s the hope and change you voted for, America.  I hope you enjoy your starving in the soon-coming banana republic your false-messiah president created for you.

I Can Give You 200 Trillion Reasons Why We Need To Cut Government Spending NOW

March 7, 2011

Republicans are trying to get our spending under control, and Democrats are demonizing them every single step of the way.  Because Democrats are demons, and demonizing is the only thing they know how to do.

For the record, Republicans are trying to cut an amount which is basically 1/30th of Obama’s budget deficit.

News from globeandmail.com
The scary real U.S. government debt
Wednesday, October 27, 2010

NEIL REYNOLDS

Ottawa — reynolds.globe@gmail.com

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

Enron-style accounting?  From our government?  Say it aint so!!!

It’s isn’t a matter of IF America will financially collapse; it is only a matter of WHEN.  And “WHEN” is SOON.

And it will necessarily happen because Democrats are genuinely depraved.

Recklessly spending money on fools’ projects that your grandchildren will become debt slaves just trying to pay the interest on is immoral.