National Debt

U.S. National Debt 2010

So just how big is the U.S. national debt in 2010?  Well, according to the U.S. Treasury Department, on June 1st the U.S. National Debt was $13,050,826,460,886.97.  For those not used to seeing such big numbers, that is over 13 trillion dollars.  To give you an idea of just how much a trillion dollars is, if you had started spending one million dollars every single day when Christ was born, you still would not have spent one trillion dollars by now.  And yet somehow the U.S. government has accumulated a debt of over 13 trillion dollars.  This is a debt that we have callously placed on the backs of future generations of Americans.  Somehow we have the gall to expect our progeny to pay off the biggest mountain of debt in the history of the world.  What we have done to future generations is beyond sickening.

But hey, if you are feeling especially generous today, the federal government is actually taking online donations that will go towards paying off the national debt.

Yes, it is true.

Please try to resist the urge to laugh.

This request comes from the same government that spent $2.6 million tax dollars to study the drinking habits of Chinese prostitutes and $400,000 tax dollars to pay researchers to cruise six bars in Buenos Aires, Argentina to find out why gay men engage in risky sexual behavior when drunk.

Perhaps they should not hold their breath while waiting for our donations to show up.

Or perhaps they should get their own house in order before expecting donations.

But the truth is that they continue to recklessly spend our money as if they have not learned anything.

This year, it is projected that the U.S. government will issue nearly as much new debt as the rest of the governments of the world combined.

Yes, getting into debt is another thing that we Americans dominate the rest of the world in.

It is estimated that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

Now remember, when Ronald Reagan took office, the U.S. national debt was only about 1 trillion dollars.

So, from the founding of the United States until Reagan took office we accumulated a total of about 1 trillion dollars in debt.

In just the last 30 years we have accumulated 12 trillion dollars more.

You know, the truth is that it is really, really hard to even spend one trillion dollars.

If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

Hopefully that gives you an idea just how fast the U.S. government is getting us into debt.

And now we are officially in the danger zone.

According to Dr. Jerome Corsi,  the U.S. national debt is now equal to 90 percent of gross domestic product.

Most economists consider a level of 100 percent debt to GDP to be an absolute nightmare scenario.

But things look even worse when you total up all forms of debt in the United States.

The total of all government, corporate and consumer debt in the United States is now equal to 360 percent of GDP.

That is far greater than at any point during the Great Depression.

Yes, we are in a LOT of trouble.

So can we just raise taxes on everybody just a little bit and get rid of this budget deficit?

Well, unfortunately no.

According to the Tax Foundation’s Microsimulation Model, to erase the U.S. budget deficit for 2010, the U.S. Congress would have to multiply the tax rate for every American by 2.4.

That would mean that the 10 percent tax rate would become 24 percent, the 15 percent tax rate would become 36 percent, and the 35 percent tax rate would have to be 85 percent.

Would you like to pay 85 percent of your income in taxes?

And that would not reduce the national debt one penny – all that would do is eliminate the U.S. budget deficit for this year.

The truth is that it is simply not possible to pay off the national debt.  Most economists realize this and speak of more realistic goals such as getting our debt growth down to a level that is “sustainable”.

But the reality is that we are way beyond being able to get this debt under control.  If the U.S. government cut spending enough to make a real difference it would crush the economy and tax revenue would take a sharp nosedive.  If the U.S. government borrows even more money and increases government spending even more it will help the economy in the short-term, but it will make our long-term problems even worse.

No, the truth is that we have created an economic nightmare from which there simply is no escape under the current system.  The national debt will never be repaid and the never ending spiral of debt and paper money that we have created is doomed to failure.

So what will happen someday when the current economic system does collapse?

That will be for the American people to decide.  Hopefully they will learn from our mistakes and will return to our constitutional roots and devise a financial system based on solid economic principles.

How to Survive the End of the World as We Know It

Fed Up

Do you ever get to the point where you are just fed up with the way that things are headed?  There are times when it seems as if we are all stuck in some kind of horrific nightmare that we can’t wake up from.  Day after day we get the privilege of watching our esteemed leaders down in Washington D.C. wreck the U.S. economy, push us towards socialism and globalism, and slowly erode our constitutional freedoms.  Day after day we get the privilege of watching corruption and greed run wild down on Wall Street.  Day after day those of us who are awake to what is going on find ourselves increasingly frustrated with the vast majority of Americans who are either too dazed, too drugged or too asleep to even care that the great nation that their forefathers built is in the process of crumbling all around them.  Not that there aren’t some promising signs out there.  Certainly Rand Paul’s recent victory in Kentucky shows that the American people are not automatically going to vote for the candidates backed by the establishment anymore.  But it seems like every piece of good news these days is accompanied by a dozen news stories that are so bad that they make you want to scream.  It is incredibly frustrating that tens of millions of Americans who bust their backs working incredibly long hours, who try to do what is right, and who truly do love their country are going to pay the price for the errors of a bunch of idiots down in Washington D.C. and New York.  The America that so many of us grew up in love with (the once great Republic with the greatest free enterprise system in the world) is being strangled out of existence by a horde of globalists, socialists and elitists.  Well, there are millions of us who are fed up.  I am fed up.  So today you are going to get an “editorial”.  Actually what you are going to get is an old-fashioned rant.  But the truth is that we live during times when ranting is appropriate.  Feel free to express your agreement or disagreement with the various things I am going to rant about below.  Hopefully if enough people start talking about these things, the American people will wake up and start taking their country back.

So exactly what am I fed up about?   

I’m fed up with politicians in Washington D.C. who prance around and talk about what a good job they are doing while they pile up the biggest debt in the history of the world.  We are stealing trillions of dollars from future generations, and if they get the chance they will curse us for the horrific debt that we have left them. 

I’m fed up with an unelected, privately-owned central bank issuing and controlling the currency of the United States.  Nobody but the U.S. government should be issuing U.S. dollars.  The reality is that the Federal Reserve is about as “federal” as Federal Express is, and the international bankers have used it for decades to transfer the wealth of the nation into their own pockets.

I’m fed up with being told that the money I have worked so hard to earn needs to be “redistributed” to people who wouldn’t know a hard day of work if it came up and bit them on the rear.

I’m fed up with Tea Party activists who believe in the Constitution and who desperately want to see a return to the ideals that the American republic was founded upon being labeled as “extremists” by the media while those who are pushing a socialism and globalism on America are referred to as “centrist” and “mainstream”.

I’m fed up with anyone who suggests that it is a good idea for the government to get to look at an image of our naked bodies before we are allowed to get on an airplane.

I’m fed up with hearing that there are banks that are “too big to fail” and that it is necessary for tax money taken from me to be used to bail them out.

I’m fed up with a financial system that is so rigged that four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) can have a “perfect quarter” with zero days of trading losses during the first quarter of 2010.

I’m fed up with a financial system where the Dow can plunge nearly 1000 points in a single hour and nobody can seem to be able to figure out what happened.

I’m fed up with being told that I need to reduce my “carbon footprint” when carbon dioxide does not cause global warming and over 95% of total carbon dioxide emissions would occur even if humans were not present on Earth.

I’m fed up with people telling me that we should be glad to pay all the new taxes in the “health care reform” law because socialized medicine is such a good idea.   

I’m fed up with the open manipulation of the gold and silver markets right under the noses of the federal government.

I’m fed up with politicians that spend money in order to get votes without any concern for the financial future of this nation whatsoever.

I’m fed up with a government that can protect the South Korean border so well that not a single person gets through illegally for decades, and yet has done such a bad job of protecting our own border that Phoenix, Arizona has become the car theft capital of the world.

I’m fed up with a government that is so embarrassed by the recent anti-illegal immigration law passed in Arizona that they apologize to the communist Chinese for it.

I’m fed up with yuppies who went out and bought McMansions that they could not possibly afford whining and crying now that they are losing their houses.

I’m fed up with politicians shipping our manufacturing base to the third world and then pretending that it is our fault when we can’t get jobs.

I’m fed up with people telling me how wonderful “free trade” and “the global economy” are while our once great manufacturing cities such as Detroit turn into rusted-out war zones.

I’m fed up with international organizations such as the IMF and the WHO telling us that they want the American people to start paying global taxes.

I’m fed up with politicians being treated like celebrities and rock stars when they are actually leading American right into the toilet.

I’m fed up with a president and a Congress that are rapidly dismantling the strategic nuclear arsenal that has helped keep America safe for decades.

I’m fed up with politicians who run over to China and beg them to keep buying even more of our debt.

I’m fed up with the United Nations and members of the U.S. government claiming that there are far too many people in the world and that we need to promote population control measures all over the globe.

I’m fed up with a Supreme Court that has absolutely no respect at all for the personal property rights of ordinary Americans.

I’m fed up with a government that insists that freakishly-altered genetically modified crops are good for us, and that allows companies like Monsanto to ruthlessly push these “Frankenfoods” on to dinner tables all across the United States.

I’m fed up with a public that is far more interested in the death of Michael Jackson and in what is going on with Jon & Kate than in the absolutely crucial economic and political issues that directly affect them and their families. 

I’m fed up with a government that is so incompetent when it comes to foreign policy that Russia and China are literally running circles around them.

I’m fed up with a government that allows nearly a million innocent babies to be killed year in and year out.

I’m fed up with watching Wall Street bankers rake in record-setting bonuses while nearly 40 million Americans are on food stamps.

I’m fed up with a national debt that is impossible to pay off, a dollar that has lost over 95 percent of its value since the Federal Reserve was created and a financial system that is designed to fail.

If you don’t understand why the U.S. economic system is doomed, you should check out the video posted below.  The inevitable collapse of the U.S. financial system is beautifully illustrated in this brand new documentary entitled “Meltup”.  It is one of the best videos on the economic crisis that America is facing that has ever been posted on YouTube.  This video is likely to make you very mad, but after watching it you will have a much greater understanding of the economic nightmare that the United States is now facing….

So are you fed up too? Please feel free to leave a comment telling us what you are upset about….

How Is The U.S. Economy Supposed To Succeed When Our Politicians And The Big Banks Are Making Billions Of Dollars Betting Against It?

Most people around the globe think of America as a great “capitalist” economic machine, but the truth is that the U.S. financial system is essentially one massive betting parlor at this point.  In fact, there has been a whole lot of easy money made in this betting parlor over the past several years by our politicians and by the big financial players down on Wall Street.  So how did they make all of this money?  They did it by betting against America.  By betting that the U.S. economy would do badly, a lot of very powerful people have gotten insanely wealthy.  Literally billions of dollars have been made over the past five years simply by betting that the U.S. housing market would go into the toilet.  But is all of this “short selling” and are all of these “side bets” actually good for the American economy?  How is the U.S. economy supposed to succeed when the big banks and so many of our politicians are actively making bets against it?

Just take a moment and check out some of the folks that have been betting against America….

*A Wall Street Journal analysis of congressional disclosures shows that 13 members of the U.S. Congress or their wives were engaged in substantial short selling during the financial crisis of 2008.

*An individual by the name of Jeff Greene made hundreds of millions of dollars during the real estate collapse by making huge bets against the residential housing market.  Now he wants to use some of that money to run for the U.S. Senate in Florida.

*Goldman Sachs openly and brazenly bet against its own clients as the housing market began to implode back in 2007 and 2008, and they made a TON of money by doing so.

*John Paulson (with the assistance of Goldman Sachs) has quickly become one of the richest men in the United States by betting against America.  Shorting the subprime mortgage market enabled his firm, Paulson & Co., to make 15 billion dollars in 2007.  John Paulson alone made approximately 4 billion dollars that year.

*Legendary investor Warren Buffett said on Saturday that he’s bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the global financial crisis.

*The Federal Reserve holds credit-default swaps on the debt of Florida schools, and on debt owed by the states of Nevada and California.  So the Federal Reserve would profit if one of those states defaulted on its debt.

*JPMorgan Chase, Bank of America, and Citigroup are offering “municipal credit default swaps” that enable investors to make big money if U.S. states and cities end up defaulting on their debts.

It is one thing to make a legitimate profit on an investment.  It is another thing entirely for the biggest financial institutions in the United States and our politicians to be making massive amounts of money off of the economic collapse of America.

You see, those making huge bets against the U.S. economy also have an incentive to do what they can to make those bets profitable.  So for those who have the power to do so, does there come a point where they give the U.S. economy a little “push” in the wrong direction so that their bets will pay off?

The reality is that we have created a financial environment where fear rules.  For example, very few people want to back U.S. home loans anymore.  So now the U.S. government has to do it.  According to Inside Mortgage Finance, U.S. government-related entities backed 96.5% of all U.S. home loans during the first quarter of 2010.  This was up from 90% in 2009.

We should really rethink a financial system where a few people make a ton of money off of the fact that everyone else is doing badly.  Sure a few people are laughing all the way to the bank, but America as a whole is hurting.

Just consider the following charts.  U.S. national income has never experienced such a radically negative change in modern times….

All of these economic problems have caused the revenue of the U.S. government to dramatically decline at the same time expenditures are rocketing into the stratosphere….

As the U.S. economy continues to tank, the U.S. national debt is going to keep spinning wildly out of control.  Back in 1980, the U.S. national debt was approximately 1 trillion dollars.  Today it is accelerating rapidly as it pushes past 12 trillion dollars and towards 13 trillion dollars….

The truth is that the massive deficits being run up not only by the U.S. government, but by governments all over the world, are something that is clearly not sustainable.  In fact, Warren Buffett recently made an interesting remark about how painful it is going to be when the debt party ends….

“How the world weans itself off huge deficit financing is going to be difficult to watch.”

In fact, there are some nations that are in bigger trouble with debt than even the United States is.  Japan’s gross public debt has reached 201% of GDP, and the only way that the government of Japan can avoid bankruptcy at this point is by borrowing ever-increasing amounts of money.

But the truth is that this game cannot be played forever.

There has never been a time when so many nations around the world have piled up so much debt so quickly.

When the sovereign debt bubble pops, things are going to get really messy and the dominoes will start falling really quickly.

But when that happens one thing is for certain – there will be a lot of people ready to make a lot of money by betting on the financial failures of others.

Loyal9.org

America’s Crumbling Infrastructure

One of the key signs that we are in the early stages of an economic collapse and that we are heading towards another Great Depression is America’s crumbling infrastructure.  The truth is that our infrastructure is literally falling apart all around us.  Thousands of bridges are structurally deficient and there have already been some very high profile collapses.  Over 30 percent of the highways and roads in the United States are in very poor shape.  Aging sewer systems are leaking raw sewage all over the place.  The power grid is straining to keep up with the ever-increasing thirst of the American people for electricity.  There have already been some regional blackouts, and unless something is done quickly things promise to get even worse.  The truth is that a nation’s infrastructure says a lot about who they are.  So what does America’s infrastructure say about us?  It says that we are a rusting, crumbling, decaying leftover from a better, more prosperous time.

Just consider the following facts about America’s infrastructure from the Pew Research Center website…..

*According to the U.S. Department of Transportation, more than 25 percent of America’s nearly 600,000 bridges need significant repairs or are burdened with more traffic than they were designed to carry.

*According to the Federal Highway Administration, approximately a third of America’s major roadways are in substandard condition – a significant factor in a third of the more than 43,000 traffic fatalities in the United States each year.

*The Texas Transportation Institute estimates that traffic jams caused by insufficient infrastructure waste 4 billion hours of commuters’ time and nearly 3 billion gallons of gasoline a year.

*The Association of State Dam Safety Officials has found that the number of dams in the United States that could fail has grown 134% since 1999 to 3,346, and more than 1,300 of those are considered “high-hazard” – meaning that their collapse would threaten lives.

*More than a third of all dam failures or near failures since 1874 have happened in just the last decade.

*According to the U.S. Environmental Protection Agency, aging sewer systems spill an estimated 1.26 trillion gallons of untreated sewage every single year, resulting in an estimated 50.6 billion dollars in cleanup costs.

The following are some additional facts from the U.S. Chamber of Commerce….

*A decaying transportation system costs our economy more than $78 billion annually in lost time and fuel.

*The United States must invest $225 billion per year over the next 50 years to maintain and adequately enhance our surface transportation systems. Currently, we’re spending less than 40% of this amount.

*U.S. transit systems earned a D+ rating from the American Society of Civil Engineers. Transit funding is declining even as transit use increases faster than any other mode of transportation – up 21% between 1993 and 2002.

*Costs attributed to airline delays – due in large part to congestion and an antiquated air traffic control system – are expected to triple to $30 billion from 2000 to 2015.

*By 2020, every major U.S. container port is projected to be handling at least double the volume it was designed to handle.

*Throughout the United States, railroads are projected to need nearly $200 billion in investment over the next 20 years to accommodate freight increases.

Are you starting to get the picture?

America’s aging infrastructure cannot handle the number of people that we have now.  With the population of the United States expected to hit 420 million by 2050, there are serious questions about how the national infrastructure is going to hold up under such a strain.

Already the infrastructure in many areas of the United States is beginning to resemble that of a third world nation.  The video posted below contains some of the highlights from a History Channel special about America’s infrastructure from a couple of years ago that highlights many of these problems….

So can anything be done about America’s crumbling infrastructure?

Of course.

State and local governments can spend the money needed to fix and maintain our infrastructure.

But that is not going to happen.

Why?

Because state and local governments are now facing unprecedented financial shortfalls.

In fact, it is more likely that expenditures on infrastructure will actually be cut.

According to a new report from the Center on Budget and Policy Priorities, after two years cutting spending on schools, health care, and other public services, U.S. states are preparing to carve even deeper into funding for 2011.

Of course the U.S. government could step in with necessary infrastructure funding, but considering the state of the U.S. national debt, it seems unlikely that state and local governments will be able to count on much more help from the folks in Washington D.C.

So what does that mean?

It means that America’s infrastructure will continue to rust, decay and fall to pieces.  Our grandparents and great-grandparents invested a lot of time, energy and money into building up this great nation, but now we are letting it rot right in front of our eyes.

What do you think that says about us?

The Federal Reserve Created This Financial Mess And Now They Expect Us To Pay Higher Taxes And Have A Lower Standard Of Living So We Can Pay Interest To Them

When you watch the mainstream news, how often do you hear them identify the Federal Reserve as the ultimate source of all of our financial problems?  Never?  Well, there is a good reason.  The Federal Reserve was created and continues to benefit the elite international bankers that are raping the United States blind financially.  Many of the same financial powers own large interests in the 6 gigantic media companies that dominate U.S. mainstream media.  So you won’t hear the truth from them.  On this website we go on and on about how bad the U.S. national debt is.  And it is really, really, really bad.  But rarely do you hear from anyone who we owe all of this money to.  Yeah, we owe large amounts to Japan and China and a bunch of other nations, but the biggest holder of our debt by far is the Federal Reserve.  Just like the owner of your mortgage or your car loan, they expect to be paid back – with interest.   

Now U.S. Federal Reserve Chairman Ben Bernanke is warning that the U.S. national debt could balloon to more than 100% of GDP by the year 2020.  For those familiar with national debt statistics, that is a very, very dangerous threshold to cross.  Basically the United States is in debt up to its eyeballs and the debt continues to grow at an exponential rate.

So what is the solution?

Well, according to Bernanke, United States citizens will soon have to make difficult choices between higher taxes and reduced social spending. 

Perhaps both. 

The truth is that either alternative will slow down the U.S. economy and will reduce our standard of living, but this is the situation that we have gotten ourselves into.

And we have got to service that gigantic debt that we owe to the Federal Reserve (among others).

In fact, a whole lot of government officials are talking about taxes these days.

And not about lowering them.

Some administration officials are floating the idea of a national sales tax and others are openly discussing adopting a European-style “value-added” tax.

Any way that they can drain more money out of us sounds good to them.

In fact, members of Barack Obama’s “fiscal reform commission” say that higher taxes must be considered as a way to handle the U.S. government’s mounting debt problem.

Of course they could just stop wasting trillions of dollars, but apparently that is too hard.

And so where will all of these new taxes go?

To managing our colossal debt of course.

The truth is that we have locked generations of Americans into debt slavery.

We have piled up the biggest mountain of debt in the history of the world, and our children and grandchildren will spend all of their lives trying to pay interest on it.

Haven’t we left them with such a wonderful legacy?

If you don’t understand who the Federal Reserve is or what they are doing to us, please watch the excellent 4 minute video below.  It does a great job of introducing people to the rotten core at the center of the U.S. financial system.  We encourage you to send this video out to as many of your friends and family as possible.  Perhaps if there is a mass awakening, Americans can elect politicians that will shut down the Fed and will reclaim America’s financial destiny….

Was The Economic Nightmare We Are About To Experience Foreseeable By Anyone With Half A Brain?

Has the economic nightmare that America is now entering been completely and totally foreseeable to anyone who was willing to look at the facts objectively?  Has the generation now running the United States recklessly destroyed the financial future of us all?  Will future generations look back and curse those who lived at this time for saddling them with so much debt?  When it comes to the financial condition of this country, most people want to make it into a Republican/Democrat thing, but the truth is that both parties have done a miserable job of managing the nation’s finances.  It would have been very helpful if at least one of the political parties had been the least bit interested in getting America’s financial house in order, but that was not the case.  Instead, both Republicans and Democrats worked together to pile up the biggest mountain of debt in the history of the world.  They worked together to build a “global economy” that shipped a huge percentage of our manufacturing overseas.  They worked together to build a system that highly favors the biggest corporations and the international banking elite.  Now American stands on the precipice of a devastating economic collapse, and many of our politicians seem actually shocked about what is happening.

But they shouldn’t be.  All of this has been building for a long, long time.  All of this was avoidable.  The fact that the economic problems of the United States have been so clearly foreseeable and yet nothing was done to stop them has a lot of people very, very upset.  Among those who are extremely upset are some of our readers…..

Suetonious:

How long has this been obvious? Certainly was obvious to me even in the 80’s. The demographics just weren’t there to support my generation. But I knew implicitly that we would be the ones stuck with the bill – with the scumbags in DC turning around, right about now, to tell us with feigned shock – “Gee, there’s no money for you guys! How did that happen?”

I could lay all the blame on these criminals, and most of it DOES lay with them. However, I have also directly and constantly experienced wilful obtuseness and ignorance on the part of Americans, with their fingers in their ears and their tongues flapping about with “LaLaLaLaLa” – every time anyone tries to point out the blatantly obvious regarding the financial End Game.

Americans are about to get what they have denied as impossible because it was not pleasant. Now there’s some real good thinkin’. Hope they get a clue in a hurry. Americans may be decent people – but that don’t count for much when it’s coupled with voluntary pig-ignorance.

Steve:

So many people missing the point…

There are no GOOD jobs out there. People work for money not for jelly beans. Young people are “lazy” because they don’t want to flip burgers for minimum wage or less? Are you Kidding? What percentage of people over 35 are willing to do this? The kid that made my BigMac today looked to be all of 14 so I’m guessing not too many. It’s about the money people! The generation that came before us is the one responsible for rampant inflation, the trade deficit, and the general dismantling of a once great nation and the so called family unit. YOU have left us with NOTHING! YOU have sold our birth right to the highest bidder. YOU have made us the future slaves of Chinese overlords. YOU are the people unwilling to hire the young at a wage they can actually live on.

If you are over 50 and you are reading this have the decency to feel shame for what you’ve done to your children and grandchildren. We are certainly ashamed of YOU!

DavidB:

Wake up – it’s not bloody marxists – it’s your own financial, industrial and political leaders that have caused this mess and you all sat back and revelled in it. For years, America has lived high on the benefits of globalisation (heaps of cheap imports) while not realising that there is a price to pay. That price is the wholesale export of your manufacturing to Asia and Mexico – along with the jobs. These have largely been replaced by low wage service jobs. The only alternative in order to maintain your standard of living has been to resort to debt – hence the credit crunch. The credit crunch is only a symptom.

As a non American – I can only wonder at how you spend more than the rest of the world combined on defence while your economy and financial stability collapses around you.

Dan:

It is clear that it is a combination of many things that have brought us to this point in US. Illegal immigration, huge government intrusion, over-regulation, health care costs, frivolous litigation, etc., I can understand why companies move overseas. Ridiculous taxation, regulation, intrusion, health care mandates, loss of freedom, etc. Just some of the things contributing to US economic trouble.

Get govt. out of the way and private sector would fix most of the problem and most Americans would benefit from the fix. Those left out of the prosperity of America, usually want to be left out. There are exceptions, and injustice it out there. But it isn’t Govt. that should deal with the social ills of our world. Where is the Church?

Lunatic Fringe:

From the edge, a brief explanation…

Anyway that’s the problem. USA debt has the same problem. At 100% debt to GDP, the Fed manufactures money out of debt. The problem is supply. When the world’s greatest economy starts to crater it takes the collective action of every nation in the world to prop us up. So far, Japan, China, and Great Britain have done so. If their economies continue to deteriorate, they won’t be able to. Japan and China are in a death dance with us. To save their existing treasury investments they must continue to invest in us or lose what is on deposit. The USA has an ungodly pipeline debt of 60 trillion coming due and payable in the form of Social Security and Medicare payments. California it seems, is a petri dish, a sneak preview of our coming collapse.

That’s why expressing debt to GDP is really a pretty antiquated way of seeing the problem, although that has been a universally accepted practice. Can we survive at 125% or 150% debt to GDP? Sure. As long as the Fed isn’t audited.

If that audit ever occurs, and TRUST ME IT NEVER WILL, the world will suffer a complete and total collapse. What we don’t know, it seems, isn’t hurting us yet.

Cat Callahan:

One thing that is not allowed is for people to wipe the slate clean and begin again. The republican congress enacted DRACONIAN bankruptcy legislation so that if you declare bankruptcy, your creditors can still come after you indefinitely for collect! Check it out! My husband and I are physically disabled and my husband has a fatal illness. My parents had left a small inheritance for our medical expenses. It is now confiscated before I have even ‘inherited’ it! They want us to have a good life? Bolderdash! Or they wouldn’t allow medical bills that bankrupt the average working person./ Try finding a could where the husband works 2 jobs and the wife three, who live frugally, and still can not pay off medical bills. If I get sick again, I think I will just welcome death.

Rick:

I’m back in school myself working on an associates degree because my “hard-working” and “genius” parents knew exactly what career I was going into. Then, when that didn’t pan out and I wouldn’t continue taking their marching orders, they threw me out on the street to fend for myself. I did that successfully for three years and put up with all their bitching and abuse about not working “hard enough” or “expecting other people to take care of me.”

Fortunately, I discovered that I have a great aunt and uncle who have been letting me live with them and go back to school. I’ve got a decent part time job at the school, but I am barely making enough money to pay rent to them. My advice is don’t give up and don’t be afraid to ask for help from family and friends. I would probably be living in a card board box if not for my aunt and uncle helping me.

For all those people saying why can’t you get 3 or 4 jobs to support yourself, I hate to break it to you, but employers are not going to hire someone who is working at another place and plan their schedule around them. They are only going to hire employees that are available 24/7 and not have to pay them above minimum wage.

This is the major crisis of our times right now. Instead of blaming and bickering, let’s do what we can to help everyone out.

JM Bullion

The Silent Entitlements Monster: Social Security, Medicare And Interest On The Debt Will Gobble Up Every Single Tax Dollar By 2020

There is a silent monster that looms menacingly over U.S. government finances.  Every politician knows about it, but very few of them ever want to talk about it.  This silent monster grows larger every year, and yet nobody seems to know quite what to do about it.  Those who have closely analyzed this monster all seem to agree that one day it will create a financial tsunami of a magnitude that is absolutely unprecedented, but there is vast disagreement about how to escape this financial tsunami or if it is even possible to escape it.  The name of this monster is “entitlements” – Social Security, Medicare and other social Ponzi schemes that the U.S. government has locked itself into funding.  It would be hard to understate the seriousness of the problem that entitlements present.  In fact, according to an official U.S. government report, rapidly growing interest costs on the national debt together with spending on major entitlement programs will absorb approximately 92 cents of every dollar of federal revenue by the year 2019.  By 2020, that figure will be up around 100 cents of every dollar of federal revenue.  So that means that interest on the debt and spending on entitlement programs will eat up everything the U.S. government takes in before a penny is spent on anything else.  That is a recipe for national financial suicide.

And unfortunately, the problem is only going to get far, far worse when you project things out beyond the year 2020.  Right now, interest on the debt and spending on entitlement programs like Social Security and Medicare eat up only about 10 percent of GDP.  By 2080, they are projected to eat up approximately 50 percent of GDP.  In fact, things are even more dire than the chart below indicates.  This chart is based on previous government figures that projected that mandatory spending will exceed government revenues at some point between 2030 and 2040, but the latest government figures now project that this will happen right around 2020.  So as mind blowing as this chart is, keep in mind that it actually understates the problem we are facing….

This week, there was news that the Social Security system is in much worse shape than previously projected.  According to the Congressional Budget Office, this year the Social Security system will pay out more in benefits than it receives in payroll taxes.  This was not supposed to happen until at least 2016.

Now it is happening in 2010.

It turns out that the “recession” that we have just been through has hit Social Security revenues really hard.

And unfortunately, as waves of Baby Boomers start retiring, these “Social Security deficits” are going to get even worse.

So where will the money come from to pay the benefits that are owed?

For now, the money will come from the $2.5 trillion Social Security Trust Fund that has been accumulated.

But keep in mind that the $2.5 trillion figure is extremely misleading.

There are not $2.5 trillion dollars sitting around in a bank account somewhere to pay these benefits.

The truth is that the Social Security Trust Fund does not contain any actual assets.

The only assets the Social Security Trust Fund has are IOUs from the U.S. government.

So basically the U.S. government owes the Social Security Trust Fund $2.5 trillion dollars, and now it turns out that the Social Security system is going to start needing that money.

So where will the U.S. government get that money?

Well, they will borrow it of course.

The reality is that the Social Security program is simply not sustainable.

Back in 1950 each retiree’s Social Security benefit was paid for by 16 workers.  Today, each retiree’s Social Security benefit is paid for by approximately 3.3 workers.  By 2025 it is projected that there will be about two workers for each retiree.

As a society, we simply have not been producing enough new workers to sustain the current system.

Of course the politicians all say the right things to make us think that they are going to do something about this crisis.  For example, Barack Obama recently had the following to say about the massive deficits the U.S. government keeps piling up: “It keeps me awake at night, looking at all that red ink”.

But the truth is that neither political party would dare propose a dramatic restructuring of Social Security or Medicare that would significantly reduce benefits.

Why?

Because it would be political suicide.

Say what you want about old people – the truth is that they vote more than the rest of us do.

Anyone who would dare “take away” their Social Security or Medicare would suddenly find hordes of old people voting against them in the next election.

But something has to be done.

The 2009 Financial Report of the U.S. Government was recently released, and it basically says that the U.S. government is facing financial Armageddon if something drastic is not done….

Absent a change in policy, under this scenario, the interest costs on the growing debt together with spending on major entitlement programs could absorb 92 cents of every dollar of federal revenue in 2019.

Keep in mind that this is before anything is spent on defense, health care, education, homeland security, job creation or anything else.

The following chart was pulled right out of the report.  These aren’t the projections of some Internet wacko.  These projections are in an official U.S. government report.  The implications of the chart below are absolutely mind blowing….

Keep in mind that the U.S. government and the U.S. economy are already on the verge of financial oblivion in 2010.  So what is going to happen if these projections are anywhere close to accurate?

In addition, the report also admitted that the present value of projected scheduled benefits exceeds earmarked revenues for entitlement programs such as Social Security and Medicare by about $46 trillion over the next 75 years.

$46 trillion!

Either the U.S. government is going to have to radically slash Social Security and Medicare benefits or they will have to come up with tens of trillions of extra dollars from somewhere.

And remember, the $46 trillion figure is just the “present value” of those future payments.

Because of inflation, the “actual value” of those future payments will be far greater.

In a section about Social Security and Medicare, the authors of the report confessed that “it is apparent that these programs are on a fiscally unsustainable path”.

Obviously something has got to give.

These programs cannot keep on paying the same level of benefits.

It is financially impossible.

But what are we going to do?  Millions upon millions of elderly Americans rely on these programs.

Are we going to reduce payments to a level where they can only afford dog food to eat and a shack to live in?

As a society, we are really between a rock and hard place.

If we continue on the same path, the United States government is going to go bankrupt.

But any politician who tries to cut benefits or raise taxes will likely face the wrath of the voters at the ballot box.

So for now the U.S. government just continues to spend even more money and continues to go into increasing amounts of debt – apparently hoping that somehow everything will just turn out okay.

But things are not going to turn out okay.  We are headed for a financial mess of horrifying proportions.

The truth is that it doesn’t matter how much the U.S. government cuts spending in other areas if it does not get entitlement spending and interest on the national debt under control.  If those expenditures are not addressed, it is absolutely guaranteed that the U.S. government will be swamped in red ink for many years to come.

But until severe financial pain starts happening, a large percentage of the American people are not going to be motivated to do anything about this problem.

But by then it will be too late.

The Mystery Of The Shemitah

All Money In The United States Comes Into Existence As Debt – So What Will Happen Now That Bank Lending In The U.S. Is Contracting At The Fastest Rate In History?

Most Americans who closely follow economics understand that all money in the United States comes into existence as debt.  Either the Federal Reserve creates it when the U.S. government borrows money, or private banks create it when they use fractional reserve banking to make loans to customers.  If lending increases, it is going to create new money and increase the money supply.  But if lending declines, it is going to take money out of the system and will decrease the money supply.  So why is this important?  It is important because without sufficient lending, the U.S. economy will seize up and grind to a standstill.  Unfortunately, we have created an economic system that is fueled by credit, and without enough credit businesses can’t expand or hire more workers, individuals can’t buy homes and cars and there will not be any hope that the U.S. economy will function at previous levels.

If you will remember, this is what happened at the beginning of the Great Depression.  The big banks severely tightened credit and it created a deflationary depression.

Unfortunately, the same thing is happening again.  In 2009 U.S. banks posted their sharpest decline in lending since 1942.  In 2010 so far, bank lending in the U.S. has contracted at the fastest rate in recorded history.  A “credit freeze” has struck the entire banking industry.  One indication of just how bad the credit freeze has gotten is to look at a graph of the M1 Money Multiplier.  It is now at the lowest point it has been in decades.  Why?  Because banks are simply not lending money….

But didn’t Bush and Obama insist that if we got cash into the hands of the bankers that they would lend it out and help all of us “Main Street” folks out?

It didn’t work out that way, did it?

Instead, the banks (especially the big banks) are reducing their lending, hoarding cash and shrinking the money supply.

If this continues, we may very well experience a 1930s-style deflationary depression, at least for a while.

Already we are seeing the effects of tighter credit hitting the economy….

*Federal regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the United States so far in 2010.  The closing of numerous banks on Friday is almost becoming a weekly ritual now.

*The FDIC is planning to open a massive satellite office near Chicago that will house up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a gigantic wave of failed Midwest banks over the next few years.

*The U.S. Postal Service, facing a $238 billion budget deficit by 2020, is being urged to consider cutting delivery to as few as three days a week.  As money continues to get tighter, we should expect even more government services to be cut.  In fact, some local governments around the U.S. are considering bulldozing whole neighborhoods just so they don’t have to spend money on providing those neighborhoods with essential services.

So will the U.S. government come to the rescue?

Well, some would argue that the unprecedented spending by the U.S. government over the past several years is the only reason why the U.S. economy has not already plunged into a full-blown depression.

But of course all of this government debt is only going to make our long-term problems even worse.

The Congressional Budget Office is projecting that Barack Obama’s proposed budget plan would add more than $9.7 trillion to the U.S. national debt over the next decade.

That is not good news.

Especially if the Federal Reserve refuses to keep “monetizing” all of this debt.

During a recent hearing, Federal Reserve Chairman Ben Bernanke warned Congress that the Federal Reserve does not plan to continue to “print money” to help Congress finance the exploding U.S. national debt.

So if the Federal Reserve will not finance this gigantic pile of U.S. debt, who will?

Already China and some other major foreign powers have reduced their holdings of U.S. Treasuries.

So who is going to borrow the trillions upon trillions that the U.S. government is going to have to borrow?

Perhaps the U.S. government will decide to stop spending so much and will start cutting back and will start being more fiscally responsible.

But don’t count on it.

You see, if the U.S. government does not keep borrowing insane amounts of money to pump up the U.S. economy the whole thing could come down like a house of cards.

Of course it is all going to come down like a house of cards eventually anyway.

There are several ways that all of this could play out (deflationary depression, hyperinflationary implosion, societal collapse, etc.), but all of them are bad.

The truth is that an economic collapse is coming whether you or I like it or not.  We had all better get ready while we still can.

Why Situps Don't Work

+ More