But wait… Aren’t we too big to fail?
Several countries around the world are facing [national bankruptcy], the US among them, and one or several such defaults would make the corporate bankruptcies of 2008 look like fallen grass blades before falling redwoods.
In the case of the US, national debt held by corporations, foreign governments, individual investors, and institutions such as pension funds grew just last year from 41% of GDP to 53%. That led the Committee on the Fiscal Future of the United States to issue a warning last week that the US must rein in its deficit.
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I think everybody agrees that the US needs to cut its deficit, but it takes only a glance at the federal budget to see that doing so is politically out of the question. Consider that the five biggest gobblers of the US budget are Social Security, Medicare, Medicaid, the Department of Defense, and interest on the debt.
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Quietly, my circle of investors and geopolitical thinkers are wondering if a national bankruptcy is just what America needs to finally get corporate bloodsuckers off the taxpayer aorta. Given the political impossibility of reducing costs, will Democrats actually try raising taxes to retain US solvency? Imagine how that would go over as the bankers who caused the latest mess announce their record bonuses courtesy of taxpayer funds. The explosions to come may be the only way through the lobbyist choke-hold on Washington. Pick your poison: bankruptcy or bellicosity.
I suggest we start by cutting the defense spending by about 90%. And before the brain-dead here start going “Whuggaoogwhuggaduhduhduhduh” please remember that nuclear weapons are cheap, ( Already bought and paid for!) and are remarkably effective! And, if we did have occasion to use any, we only need one or maybe two to get the idea across. Plenty left for later. And any potential “laters” might think more than twice before doing anything we might find actionable. And would also give neighbors that are downwind plenty of incentive to take care of situations themselves, without getting us involved at all.
You guys might be on to something with the dollor becoming worthless. Ya know what a companies will start providing soon.
Company Cars, Company Housing, Company Groceries….
And not long after that. Credit issues will be resolved by indentured servitude. We’ve already seen the Bill of Rights ignored with the DUI Exception. The Credit Exception sounds more and more inevitable.
#20 he_who_must_not_be_flamed
It says here that 09 interest was $383 Billion. Which with 12 trillion of debt would put the interest rate at 3.2%.
With 12 trillion debt (the rest isn’t debt – its obligations, ie no interest), then per household, then the debt per household is 108k USD. Which means each household has 3,440 USD per year to pay _just in interest_.
Yikes.
That’s worse than I thought – but possible with average US household income of 50k USD.
Our financial system is one gigantic ponzi/pyramid scheme and we have no way to get
out from under it. Maybe I should spend all my money before it becomes worthless and go on welfare.
You are running deficits of over one trillion dollars. Going bankrupt won’t solve that problem, unless you’re interest payments are higher than your deficits, current and projected.
If you go bankrupt, you will have problems getting people to lend you money. This is a good strategy for smaller African countries, if they can manage themselves after the bankruptcy.
#17, I’m all for a %50 income tax for people making $25,000-$100,000, and a %75 income tax for people making $100,000-$800,000, and a %90 income tax for people making greater than $800,000.
Let me get this straight.
Someone making 25k, pays 50%, is now brining home less than someone making 24k?
BWAHAHAHAHA!!!
Moran.
Remember to slogan from the 80s, “EQUAL PAY FOR EQUAL WORK!”
Not everybody is equal. They are only created equal.
#24, Buy silver and gold. It’s the only way to be sure.
#26 LibertyLover
‘Someone making 25k, pays 50%, is now brining home less than someone making 24k?’
Presumably he means they pay 50% on the amount they earn over 25k. Thus problem solved.
Don’t know if that plan is right. But it seems likely there are more taxes in our future, with nothing to see for them, as they pay off interest and debt.
Including “unfunded liabilities” is intellectually dishonest. That is how insurance works. You wouldn’t tell a life insurance company that they are insolvent because they don’t have enough cash on hand to pay out every policy. By ignoring future premiums you make the problem seem worse than it is.
Many countries have a worse debt load than we do now, note that I’m talking about debt/gdp and not deficit. It would be nice if we spent our deficit on something more than useless wars and banker bonuses, but that is a different discussion.
Looking at the history of England and France is instructive in matters of debt. England was a smaller economy, but was always able to take on more debt than France. This ability helped them hold their own militarily against a much large land foe and build up a naval force to provide a safety buffer.
Being seen as a lower default risk allows capital to be had at much lower rates. It is possible that American politicians would cease payment on government debt, but we should hope not.
It is worrying to me that the US is forced toward shorter term debt. It isn’t short term debt like that which caused Russia to default, but it isn’t a good sign.
Higher taxes are a necessity, and we ought to soak the rich. The top few percent have benefited disproportionally from the Bush II years(when the debt started to grow more rapidly). They should feel the pinch too.
Defense spending should be slashed. Why do we need a big base in Japan, South Korea or Germany when those countries are wealthy and can fund their own protection?
Iraq is rather stable. Leave.
Afghanistan is a craphole. We’d be peacekeeping there forever. Let countries in that region do it.
Israel and Egypt … we give them billions a year. Time to stop doing that.
The idea of a pyramid scheme of Social Security is a farce. Change the benefit from cash money to living quarters plus meals.
“Politically impossibility of reducing costs?” — LAFF! It’s called reality. Politicians need to step up to the plate, foreign countries are funding our quality of life through debt and sometime you have to be responsible and get your hands dirty.
@29
“Many countries have a worse debt load than we do now”
Name some names of countries that aren’t third world landfills that have debt in excess of 1 year of GDP.
#29 chris
‘Including “unfunded liabilities” is intellectually dishonest. That is how insurance works. You wouldn’t tell a life insurance company that they are insolvent because they don’t have enough cash on hand to pay out every policy. By ignoring future premiums you make the problem seem worse than it is.’
So you’re not talking the national debt, you’re talking the additional stuff that pushes us to over 54 trillion.
It would be dishonest if it was calculated without taking into account likely ‘premiums’ – in our case the tax regime + likely economy performance.
But I don’t think it is calculated that way. In the movie IOUSA (which you can see a cut down version for free online) they show what happens to social security in an animated graph, and it shows that we are spending the surplus we have now (ie spending the future) – and how in a few years that goes from surplus to deficit as the baby boomers claim social security. Ie it appears to take into account the inputs (ie the current surplus) and the outputs.
So perhaps your argument is the same as this guy.
I don’t get it – the argument seems to be since we don’t know the performance of the vehicle (the stock market), do nothing. So why is this different from my saving money for a future obligation? I know I (unlike the government) can’t just print money – but that of course has an impact.
#31 Here you go.
#32 I never said to ignore demographic changes that will cause the immediate cost of socSec/medicare/medicaid to change. I’m just pointing out that that needs to be accounted for in a different way than government debt. Government debt consists of bonds, bills, and the like.
“Unfunded liabilities” is means that say we are never going to collect another penny of social security tax. Now the “debt” is much bigger. It sounds like a much more dramatic problem. It isn’t a proper, meaningful, financial formulation. It is only a political formulation trying to sell people on the idea that taxes are pointless because the ship of state is going down. It’s just bogus.
#26 LibertyLover,
so you love liberty, but you want everyone else to pay for your liberty.
Got it.
where are people drawing up these numbers of the “average” americans’ income being this ridiculously high 25-50k ?? , i’ve neeeevverrrr cleared more than 18.6k and that was with masssive overtime!!
im talking i had no personal life , i barely slept – i only worked.
its near impossible to find sustainable work thats not foodservice but thats not a sustainable job it puts you in debt, the same of any part time or less than i’d say 10$ an hour job roughlyyy.
the kicker is im a college student, and i work – i get shit, im lucky i havent been evicted and my teeth are gonna inevitably cause me some sickness from abscess since i dont have money for insurance and that even if i had insurance the cost of my extractions,fillings,surgical removal , drilling and braces want money upfront and lottts of it – unless you get government insurance.
heres the catch florida is effectively payin dumbsh%t$ money for breeding – heres the problem , they’re paying for dumbpeople to have kids … equals =more and even dumber peoples..
soo people like myself that contribute to the system as opposed to milk it – get jack and squat
If the US made an official declaration of Bankruptcy, it would signal to the world that the US Gov is illegitimate and have no authority what-so-ever. Therefore the US and all her territories would be unclaimed land and open for the taking by any country.
I don’t see that happening, but boy would that be fun!
#36 TooManyPuppies said:Therefore the US and all her territories would be unclaimed land and open for the taking by any country.
The multinational corporations that already own the country won’t allow that.
wtfdave, I have made the most by taking jobs nobody else wanted. However, after a time, the money was no longer worth the sacrifices.
The answer is simple, yet impossible for a pollitician. You cut spending, if its not absolutely needed, and the constitution does not mandate it, its on the chopping block.
That should at least get us back to a balance budget. After that, time to start the real cutting. Across the board, every department should be required to cut 10%. If the department says they can’t, you fire the person in charge, and bring in a hatchet man.
If the the department of eduction says they can’t cut, then you send in Ron Paul to do it. If the department of defense says they can’t cut you bring in Barny Frank.
This will have to be done several times, perhaps every 4 years or so. But most of all, an amendment needs to be added to the Constitution, that states that government shall not spend more than it takes in. A balance budget amendment basically.
Yes, my liberal friends, the military will have to be scaled back. But it can’t just be the military. Everything needs to be scaled back or, eliminated entirely. Even the democrats pet programs like welfare. If the program is important, the states can take it over. Look at the constitution, it spells out what the feds are suppose to do.
Even if all this is done, the problem will not be fixed in our lifetimes. The amount of money we are talking about is just too huge. But we cannot continue to spend money at the rate we are, its just that simple.
And I hate to tell my liberal friends this, but simply screaming, “cut the military by 90%” won’t solve the problem, especially if we replaced the spending with more spending every year. Like most people who go bankrupt, the country does not have an income problem, we have a spending problem.
50/50 we end up like Argentina did. You try to spend your pay check before your get it because your money is inflating so fast and no country will take dollars.
This of course means no imported fuels. No deals at Walmart or anywhere else. No imported anything. Does that mean empty stores?
If you are smart you can figure out at least some of what happens next.
Pain beyond words.