Is the US bankrupt?

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Along with war in Afghanistan, Iraq, and Israel we have oil shortages and a bumper crop of idiot politicians.

Lemme throw another log on the fire. Just found this gem
http://www.augustreview.com/index.php?module=pagesetter&func=viewpub&tid=6&pid=21
Is the U.S. Bankrupt?
By: Patrick Wood on Jul 17, 2006

Do Federal Reserve managers secretly believe that the U.S is bankrupt and is about to go under?

Well, where there's smoke, there's fire!

A stunning 23 page report by Professor Laurence J. Kotlikoff titled "Is the U.S. Bankrupt?" was issued by the Federal Reserve Bank of St. Louis in November, 2005, and quietly posted on their public website. Although publicly accessible, it was totally ignored by the U.S. press.

Kotlikoff is professor of Economics at Boston University and has penned at least 355 papers published by the Federal Reserve over several years.

Kotlikoff concludes that "Countries can and do go bankrupt. The U.S., with its $65.9 trillion fiscal gap, seems clearly headed down that path."

The fiscal gap of $65.9 trillion is more than 5 times U.S. Gross Domestic Product and twice as large as national wealth. The fiscal gap is all the money that the U.S. owes now and in the future, for which it doesn't have revenue to pay for. According to the Kotlikoff,

One way to wrap one’s head around $65.9 trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143 percent. (p. 8)

Imagine Ben Bernanke, chairman of the U.S. Fed., getting up in front of Congress and stating "The U.S. is clearly headed toward bankruptcy!"

The stock market would crash, the dollar would melt down, the bond market would implode and real estate would be frozen in time.

The greater question is, "What does the Fed intend to do about its bankrupt client? After all, the Fed has the exclusive franchise to loan money to the government and for the issuance/destruction of money and credit in the U.S. The Fed has only one client- the U.S. Government - and it is about to bite the monetary dust.

This writer believes that the Fed's proactive response is already well underway, but we have not recognized is as such -- until now.

As of June 29, 2006, the Fed has raised discount rates for the 17th straight time. This has the effect of withdrawing credit from the banking system. In other words, the Fed has been pulling in its loans and creating resistance for bankers to not lend as freely as before. Ask around the banking community (as I have done) and see how willing they are to loan money these days! They are collectively pulling in their horns.

When John Snow abruptly resigned as Secretary of Treasury on May 30, 2006, President Bush immediately nominated his replacement: Henry Paulson, CEO of Goldman Sachs. Goldman Sachs is part of the white-hot core of global banking, ranking with Brown Brothers, Harriman, Lehman Brothers, Kuhn Loeb, Inc. J.P. Morgan, Chase and others. Is Paulson such a patriot that he would leave a $38 million per year job for the paltry salary of the head of Treasury? After all, he was the highest paid CEO on Wall Street and was still rising. Also consider that Paulson's personal stock in Goldman Sachs is currently worth almost $500 million. He is no pauper!

Against any other possible logic, it's more likely that Paulson went on the inside (of government) to protect his crony's investments: And what better place to do that than as head of the U.S. Treasury?

This writer hates to be a pessimist, but this does not make for an optimistic near-term or long-term forecast. Monetarily speaking, it's time to "run for the hills."

The demise of the dollar may be at hand.

(Ed. note: For you history buffs, compare today's monetary scenario with 1928-1929 and the subsequent sharp removal of credit from the manic stock market of the 1920's.)
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"... Laurence Kotlikoff, an economist and research associate with the National Bureau of Economic Research, asked this question: If the United States collected all of the future revenue it anticipates receiving and matched that to its future obligations, would it be able to meet them? The answer was "no," to the tune of $45 trillion.... "
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- U.S. government debt jumping by trillions, Dallas Morning News - April 11, 2004

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http://ussliberty.org
http://ssunitedstates.org
 
The shape of things to come....

http://articles.moneycentral.msn.com/Investing/Extra/CheneysBettingonBadNews.aspx?page=all

Cheneys betting on bad news?
A look at the president and vice president's financial disclosure forms.

By Kiplinger's Personal Finance Magazine
Vice President Dick Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies. That's the conclusion we draw after scouring the financial disclosure form released by Cheney recently.

As of the end of last year, Cheney and his wife, Lynne, held between $10 million and $25 million in Vanguard Short-Term Tax-Exempt fund (VWSTX, news, msgs) (it's impossible to be more precise because the disclosure form lists holdings within ranges). The fund's holdings of tax-free municipal bonds mature, on average, in a little more than a year -- meaning that the fund should hold up well if rates rise.

The Cheneys held another $1 million to $5 million in Vanguard Tax-Exempt Money Market fund (VMSXX, news, msgs), which is practically risk-free and could benefit from continued increases in short-term interest rates. And the couple had between $2 million and $10 million in Vanguard Inflation-Protected Securities fund (VIPSX, news, msgs). The principal and interest payments of inflation-protected bonds rise along with consumer prices, making them good inflation hedges.


Expecting dollar drop?
The Cheneys also had between $10 million and $25 million in American Century International Bond (BEGBX, news, msgs). The fund buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25% of assets and the fund currently has only 6% of assets in dollars, according to an American Century spokesman.

The Cheneys' total assets could be as high as $94.6 million, according to the disclosure form. The vice president's advisers say the vice president pays no attention to his investments. His lawyer, Terrence O'Donnell, says outside money managers supervise the investments. "He has nothing to do with it," O'Donnell says.As for stocks, the couple held between $1 million and $5 million in Lazard International Equity (LZIOX, news, msgs) and a like amount in Lazard Emerging Markets (LZOEX, news, msgs). The Cheneys' relatively few U.S. stock fund holdings include $1 million to $5 million in GMO Tax-Managed U.S. Equities III (GTMUX, news, msgs).


Bushes' investments meek
President Bush may be bold in his public policies, but his private investments appear decidedly on the meek side. Bush and his wife, Laura, reported on their disclosure form that they held combined assets of $7.2 million to $20.9 million.

As of the end of last year, the Bushes' two largest assets were their Texas ranch, valued at between $1 million and $5 million, and a blind trust, also valued at between $1 million and $5 million. Of course, it's impossible to tell how the trust is invested, so it could be heavily in stocks. The White House would not make the trust's managers available for comment.

Beyond the trust, the First Family's investable assets are largely in super-safe Treasury notes, money market funds and bank certificates of deposit. The Bushes' holdings in these instruments totaled between $1.7 million and $4.4 million. The president also listed a health savings account worth between $1,000 and $15,000.

The Bushes confine most of their stock investing to their relatively small IRAs and to the president's retirement account from when he was governor of Texas. As of last December, that account was worth $108,016 and was invested entirely in Vanguard Wellington (VWELX, news, msgs), which owns stocks and bonds. The president's IRA, worth $87,074, includes $30,142 in Capital Income Builder, a balanced fund that's part of the American funds family; $30,866 in Growth Fund of America, another American fund; and $24,219 in zero-coupon U.S. Treasury bonds. Nearly all of the first lady's IRA, worth $8,556, was also in Capital Income Builder.

Vice President Dick Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies. That's the conclusion we draw after scouring the financial disclosure form released by Cheney recently.

As of the end of last year, Cheney and his wife, Lynne, held between $10 million and $25 million in Vanguard Short-Term Tax-Exempt fund (VWSTX, news, msgs) (it's impossible to be more precise because the disclosure form lists holdings within ranges). The fund's holdings of tax-free municipal bonds mature, on average, in a little more than a year -- meaning that the fund should hold up well if rates rise.

The Cheneys held another $1 million to $5 million in Vanguard Tax-Exempt Money Market fund (VMSXX, news, msgs), which is practically risk-free and could benefit from continued increases in short-term interest rates. And the couple had between $2 million and $10 million in Vanguard Inflation-Protected Securities fund (VIPSX, news, msgs). The principal and interest payments of inflation-protected bonds rise along with consumer prices, making them good inflation hedges.


Expecting dollar drop?
The Cheneys also had between $10 million and $25 million in American Century International Bond (BEGBX, news, msgs). The fund buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25% of assets and the fund currently has only 6% of assets in dollars, according to an American Century spokesman.

The Cheneys' total assets could be as high as $94.6 million, according to the disclosure form. The vice president's advisers say the vice president pays no attention to his investments. His lawyer, Terrence O'Donnell, says outside money managers supervise the investments. "He has nothing to do with it," O'Donnell says.As for stocks, the couple held between $1 million and $5 million in Lazard International Equity (LZIOX, news, msgs) and a like amount in Lazard Emerging Markets (LZOEX, news, msgs). The Cheneys' relatively few U.S. stock fund holdings include $1 million to $5 million in GMO Tax-Managed U.S. Equities III (GTMUX, news, msgs).


Bushes' investments meek
President Bush may be bold in his public policies, but his private investments appear decidedly on the meek side. Bush and his wife, Laura, reported on their disclosure form that they held combined assets of $7.2 million to $20.9 million.

As of the end of last year, the Bushes' two largest assets were their Texas ranch, valued at between $1 million and $5 million, and a blind trust, also valued at between $1 million and $5 million. Of course, it's impossible to tell how the trust is invested, so it could be heavily in stocks. The White House would not make the trust's managers available for comment.

Beyond the trust, the First Family's investable assets are largely in super-safe Treasury notes, money market funds and bank certificates of deposit. The Bushes' holdings in these instruments totaled between $1.7 million and $4.4 million. The president also listed a health savings account worth between $1,000 and $15,000.

The Bushes confine most of their stock investing to their relatively small IRAs and to the president's retirement account from when he was governor of Texas. As of last December, that account was worth $108,016 and was invested entirely in Vanguard Wellington (VWELX, news, msgs), which owns stocks and bonds. The president's IRA, worth $87,074, includes $30,142 in Capital Income Builder, a balanced fund that's part of the American funds family; $30,866 in Growth Fund of America, another American fund; and $24,219 in zero-coupon U.S. Treasury bonds. Nearly all of the first lady's IRA, worth $8,556, was also in Capital Income Builder.
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v 2.0

http://www.kiplinger.com/personalfinance/printstory.php?pid=5557

PORTFOLIOS

Are Dick Cheney's Money Managers Betting on Bad News?
by Steven Goldberg


A look at the President and Vice President's financial disclosure forms.

Vice President Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies. That's the conclusion we draw after scouring the financial disclosure form released by Cheney this week.

As of the end of last year, Cheney and his wife, Lynne, held between $10 million and $25 million in Vanguard Short-Term Tax-Exempt fund (it's impossible to be more precise because the disclosure form lists holdings within ranges). The fund's holdings of tax-free municipal bonds mature, on average, in a little more than a year -- meaning that the fund should hold up well if rates rise. The Cheneys held another $1 million to $5 million in Vanguard Tax-Exempt Money Market fund, which is practically risk-free and could benefit from continued increases in short-term interest rates. And the couple had between $2 million and $10 million in Vanguard Inflation-Protected Securities fund. The principal and interest payments of inflation-protected bonds rise along with consumer prices, making them good inflation hedges.

The Cheneys also had between $10 million and $25 million in American Century International Bond. The fund buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25% of assets and the fund currently has only 6% of assets in dollars, according to an American Century spokesman.

The Cheneys' total assets could be as high as $94.6 million, according to the disclosure form. The vice-president's advisers say the vice president pays no attention to his investments. His lawyer, Terrence O'Donnell, says outside money managers supervise the investments. "He has nothing to do with it," O'Donnell says.

As for stocks, the couple held between $1 million and $5 million in Lazard International Equity and a like amount in Lazard Emerging Markets funds. The Cheneys' relatively few U.S. stock fund holdings include $1 million to $5 million in GMO Tax-Managed U.S. Equities III.

President Bush may be bold in his public policies, but his private investments appear decidedly on the meek side. Bush and his wife, Laura, reported on their disclosure form that they held combined assets of $7.2 million to $20.9 million.

As of the end of last year, the Bushes' two largest assets were their Texas ranch, valued at between $1 million and $5 million, and a blind trust, also valued at between $1 million and $5 million. Of course, it's impossible to tell how the trust is invested, so it could be heavily in stocks. The White House would not make the trust's managers available for comment.

Beyond the trust, the First Family's investable assets are largely in super-safe Treasury notes, money-market funds and bank certificates of deposit. The Bushes' holdings in these instruments totaled between $1.7 million and $4.4 million. The President also listed a Health Savings Account worth between $1,000 and $15,000.

The Bushes confine most of their stock investing to their relatively small IRAs and to the President's retirement account from when he was governor of Texas. As of last December, that account was worth $108,016 and was invested entirely in Vanguard Wellington, which owns stocks and bonds. The President's IRA, worth $87,074, includes $30,142 in Capital Income Builder, a balanced fund that's part of the American funds family; $30,866 in Growth Fund of America, another American fund; and $24,219 in zero-coupon U.S. Treasury bonds. Nearly all of the First Lady's IRA, worth $8,556, was also in Capital Income Builder.
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Actually I read where ALL Countries are in debt. I guess my question is if EVERYONE is in debt who is the money owed to?????
 
People who own savings bonds, T-bills, bonds, etc.
People who have invested in mutual funds/bond funds.
Trust funds.
Corporations.
Retirement funds.

John
 
"Vice President Dick Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies."

That's right, just like the article goes on to say, he has nothing to do with it.

John
 
We're broke.

The U.S. has been broke since the introduction of the Federal Reserve system. The gold (actual money) that backed U.S. currency was given to the Federal Reserve Bank, privately owned, by the way, as "collateral" for worthless paper they churn out at prodigious rates. Your "money" in your wallet has no real value. The real currency, U.S. notes, was payable on demand in real value, that being gold or silver. The current paper is worth absolutely nothing and the U.S. has no reserves to back it's supposed value. This is the reason many of us rail about the Federal Reserve.
 
As long as the Treasury can sell bonds and the Fed prints money no. In other words as long as people are willing to swap worthless pieces of paper for other worthless pieces of paper or for goods no. Stocks, bonds, mutual funds, ect are all promises for tomorrow. Until the balance shifts to a preference to hard assetts (like real estate) this will go on. Here's a nice chart showing %of GDP to national debt
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Now if a major economic catashrophe were to happen in the world (like instead of 40 years of oil left we all of the sudden realized we only had 4) then the countries who owe lots would see their economies fall.
 
$8 something trillion is the FUNDED liability of our federal govt. $60 trillion includes both the FUNDED liability and UNFUNDED liability.

Unfunded liability consists of promises like social security, medicare, railroad retirement, ad nauseum for which no money was borrowed but promises were made.

People who own savings bonds, T-bills, bonds, etc.
People who have invested in mutual funds/bond funds.
Trust funds.
Corporations.
Retirement funds.
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True 'nuf. It also includes for foreign individuals, foreign governments, foreign banks, and foreign corporations.

Lemme ask a simpleminded question. Buy a govt bond in the US and you'll hear it is backed by the faith and credit of the US govt. When a foreign <insert institution of choice> buys a US bond, is the collateral the same faith and credit of the US govt or is something else a little more tangible pledged?
 
The U.S. has been broke since the introduction of the Federal Reserve system. The gold (actual money) that backed U.S. currency was given to the Federal Reserve Bank, privately owned, by the way, as "collateral" for worthless paper they churn out at prodigious rates. Your "money" in your wallet has no real value.
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Gold actually has no real value either, its only worth what folks are willing to pay for it. Lets say that the SHTF today big time. Now everyone wants food and ammo and medicine to survive. You cant eat Gold. Folks who have limited food and no way to get more will not take gold for the food or the ammo if there is no expectation that they will be able to obtain more food and ammo.


The value our money has is that it is backed by the production of goods and services. If there were no goods or services being produced that were equal to the value of the US dollar, we would have hyper inflation, a loaf of bread would cost $1 million in no time.:)

The Soviet Union experienced this, money in your hand and nothing in the store to buy (lack of production combined with price controls). Germany after WWI experienced Hyper inflation, a lof of bread costing $1 million Deustche Marks.

Econ 101 is your friend.

Thats all I will expend my breath saying here.
 
And what caused the inflation?

Same thing that's causing inflation now. To boil it down to it's basics, printing money with no backing causes the currency to lose value. Since the value is less, it takes more currency to buy an item of a given value. Gold has been used for thousands of years for currency and to back currency because it is the universal "shiny stuff" that everybody wants. This creates a stable value because the demand is not localized. Yes, the study of economics is good, but so is a little common sense and history. Modern economics is very like accounting. Much legal speak and theory that flies in the face of common sense and is counter productive.

The lack of goods and services is not inflation, but capitalism gone awry. The reason a loaf of bread might cost a million bucks if nobody was baking bread is because...nobody is baking bread! When you limit supply, demand goes up and demand drives price. When it's said that the value of our currency is backed by the production of our economy, that's similar to saying that the effectiveness of our fire extinguishers is proven by our ability to set fire to many houses. It's a self defeating loop with no real value. Real value is determined by a common currency (precious metals) or surrogate currency backed by the currency.
 
"Econ 101 is your friend."
===================

Obviously you took Econ 101 from Keynsians and not Austrians...

lpl/nc (In the long run we ARE all dead, but most of us will be penniless first.)
 
Diddo on the every country (and every person for that matter) is in debt. Not to get all political but in the 90's the Clinton adminstration balance the budget by funneling money away from the Military and from Social Security (which should have never been touched, but every president since Ford has done it). For most politicians, decreasing the size and expense of the military seemed like a good idea at the time. The USSR just collapsed so it seemed there was no need for a large land force to protect Europe. Everyone wanted small, swift, and cheap attack forces in the 90's. No one back then would have envisioned that we would be in a multi-front war and trying to nation build today. We are fighting a two front war and trying to build up the military back to cold war levels, due to multiple enemies (China, N. Korea, Iran, Islamic terrorist).

National Debt is not my big worry. The Reagan 80's the US was deep in debt yet the economy was great. It the high fuel prices triggering inflation that has me concerned. For those who remember the 70's you know what I mean.
 
Do Federal Reserve managers secretly believe that the U.S is bankrupt and is about to

......"Do Federal Reserve managers secretly believe that the U.S is bankrupt and is about to go under?"......

So how would this affect real estate/property values?
What would that scenario look like?
What happened to real estate values in 1929? Or other countries.
 
"And the meek shall inherit the earth."

Or what's left of it after the estate taxes are paid. :rolleyes:

Meanwhile, you're not bankrupt until you start missing payments and somebody gets upset.

John
 
Thank you house and senate.

But what we need is more social security payments to illegal aliens and their out of country relatives. That'll fix the problem!
 
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