Boston University's Kotlikoff Explains Why The US Is Bankrupt

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Wed, 08/11/2010 - 12:27 | 515517 reload
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I hope for his sake he is not planning on going swimming or crossing a busy road anytime soon.

Wed, 08/11/2010 - 12:33 | 515535 Internet Tough Guy
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If you live your life in fear you are a slave.

Wed, 08/11/2010 - 12:51 | 515613 Clampit
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"We are turning into a nation of whimpering slaves to Fear -- fear of war, fear of poverty, fear of random terrorism, fear of getting down-sized or fired because of the plunging economy, fear of getting evicted for bad debts or suddenly getting locked up in a military detention camp on vague charges of 
being a terrorist sympathizer."

Wed, 08/11/2010 - 12:55 | 515637 aerojet
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That's because fear is all the Boomers have left.  And I would add that as soon as the fear is broken by the populace, the game is up.

Wed, 08/11/2010 - 14:10 | 515875 Ripped Chunk
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We are gettting closer.  All species, no matter how stupid reach a point where they are tired of being afraid. Then the situation changes.

Mon, 04/04/2011 - 12:32 | 1132877 kito
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just the other day, i heard the antelope were fed up with fear of the cheetahs continuous assault on their herds, and they are now staging "gorilla" warfare :)

Wed, 08/11/2010 - 14:38 | 515963 sgt_doom
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Negative -- David Rockefeller, Peter G. Peterson, Hank Greenberg and Henry Kissinger aren't boomers, but they are part of Tom Brokaw (the newsy whore) "The Greatest Generation" (Man oh man, did he ever get the generations mixed up!) who screwed the pooch most royally.

Wed, 08/11/2010 - 12:28 | 515527 whatsinaname
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I sense a few smiles lighting up on ZHer faces today..

Wed, 08/11/2010 - 12:48 | 515601 Rainman
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What he says is not really news to most of us. The fact that Bloomberg posted it is news.....their most popular view of the day.  

Wed, 08/11/2010 - 14:40 | 515976 sgt_doom
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+1000, Rainman, those of us paying attention realize that the US of A technically went bankrupt in 2004, and that Korporate AmeriKa is only capable of offshoring jobs (and bringing in foreign scab workers), peddling securitized debt and doing those godawful leveraged buyouts to further destroy companies and employment.

If they didn't offshore all those jobs to China, how would China ever afford to buy all those Treasuries which Goldman Sachs, JPMorgan Chase & Morgan Stanley speculate on their ELX Futures?

Wed, 08/11/2010 - 12:54 | 515628 Perseid.Rocks
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We can play tricks with the balance sheet for a long, long time, but when outflows exceed income and our debt is so high that we're borrowing to pay debt service, and interest is compounding on itself, then things start to break, promises (social security, medicare, medicaid) get reneged on, and debts are defaulted on. We're just about there right now.

Bennie better consider buying up ALL the treasuries, lest interest rates start ramping upward and we have to sell Old Faithful and Jellystone Park to the Chinese.

Wed, 08/11/2010 - 12:35 | 515533 Noah Vail
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So . . . even the establishment is starting to have bad dreams. Yes, Mom, there REALLY are snakes under my bed.

" . . . we have systematic failure of disclosure of what is really happening on the fiscal side." Uhm, methinks you mean systematic REFUSAL  of disclosure. The miracles of denile, not just a river in Egypt.

Wed, 08/11/2010 - 14:37 | 515947 hedgeless_horseman
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Take a moment to email the following message to your Congressman.  You can find there email here


U.S. Is Bankrupt and We Don’t Even Know It: Laurence Kotlikoff -


"Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future."


INSERT CONGRESSMAN'S NAME HERE, this is exactly why the people operating Enron went to prison. Do you believe that Congress is held to a lower standard than corporate management?

Wed, 08/11/2010 - 21:16 | 516961 Buck Johnson
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The elite and the financial leaders of this country have produced a web so intricate and complex, that it has caught even the spider/them.  They never thought that this would happen and know that it is, they are running scared and are wanting to keep everything quiet.  But as one person said, how long can our outflow be larger than your inflow of money.  Eventually it has to end and when it does, the promises as another said get reniged on and taxes go up and jobs get cut (both private and public including the federal govt.). 

Imagine if you will if all those 78 million babyboomers find out that as they are a few years or just got on to SS that it will be cut 50% or eliminated.  They will hit the roof, and go crazy.  What I think is going to happen is that there are two big lumps of money sitting on the market, pension funds and 401k's.  They will either by hook or crook make it mandatory that these have to be invested into US treasuries or US debt of some type.  This way it will mitigate or not make them make that announcement and allow them more time to figure out what to do.  It has already been trial ballooned already on more than one occasions having one the 401k's being invested in the SS fund (which doesn't make sense since we have been paying into it already), and 6 months after that seeing if they would invest in US debt/treasuries.


Wed, 08/11/2010 - 12:34 | 515541 Fidel Sarcastro
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Debt?  We don't have debt!  We're the United States of Arrogance, baby!!  We never have to pay debt back...USA...U S A...(chant with me) U...S...A!


Wed, 08/11/2010 - 12:36 | 515543 Overpowered By Funk
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That's all well and good, but you see the Fed has this thing called a printing press and they will print, print, print and print until it all get's better. A Nobel prize winning economist told that to a Nobel prize winning president. So, it's cool man.

Wed, 08/11/2010 - 12:37 | 515554 Noah Vail
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Hah, if they print, try importing with worthless dollars. We don't make anything any more, not even the clothes on your back or the shoes on your feet, nor the forks we feed our faces with. Wreck the dollar and we starve to death for lack of fuel.

Wed, 08/11/2010 - 16:34 | 516427 Nonconformist
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That is what aircraft carrier battle groups are for.  It isn't that difficult to convince the American public that the oil really should belong to the USA.  Don't expect the US to go under quietly.  The sense of entitlement is way too strong.

Wed, 08/11/2010 - 13:44 | 515794 BorisTheBlade
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Every taxpayer should get a Nobel prize, maybe then the whole thing is gonna work.

Wed, 08/11/2010 - 12:36 | 515546 Sulla
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No comment from Washington, I presume. Maybe Churchill was right - "America always does the right thing - when all other options are exhausted".

Wed, 08/11/2010 - 12:36 | 515550 ElvisDog
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Since when does "eloquence" = "wisdom"? I know that is how we choose our presidents, but I think we need to listen to what people say rather than how smooth and soothingly they say it.

Wed, 08/11/2010 - 14:16 | 515893 romanko
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Wed, 08/11/2010 - 17:18 | 516558 clotario
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So true! We should have elected nonsense-spewing Palin and that other guy...what was his name again? At least with her you knew you were being handed a plate of horsesh*t!


Please, although O might be a disappointment to all and sundry, remember the choice we were left with back in '08.

Wed, 08/11/2010 - 12:38 | 515551 Malaespina
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He is not bear enough, Boston U is bankrupt too!

Wed, 08/11/2010 - 12:39 | 515557 Jason T
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"they are lieing." so blunt as if it's all so obvious.  but yet it is so obvious...the lies.

Wed, 08/11/2010 - 12:40 | 515561 Turd Ferguson
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This is from JSM this morning. I feel this is 100% spot on.


Hi Jim,

Given today’s Federal Reserve balance sheet policy, could this be The Playbook?

1. The Federal Reserve feels constrained in their ability to purchase treasuries if they have to wait for mortgage backed securities to mature. They decide to sell this junk paper to free space on their balance sheet.
2. The Federal Reserve offers to sell the junk mortgage paper back to the Big Banks whom they purchased it from in the great bailout of 2008-09. 
3. The Big Banks only offer to pay market rates for the worthless paper, quite a discount to what is on the Fed’s books and what they were paid a short while ago (good news, an audit of the Fed on this is not likely). 
4. The Federal Reserve clears substantial worthless dollars from their balance sheet which allows for quite substantial purchases of treasuries. 
5. The Big Banks, realizing the last "dip at the bonus well" may have passed, devise a revitalized pretend and extend and mark up the recently purchased worthless paper back to a "reasonable mark to model level." 
6. The Big banks report record paper profits and more importantly, record bonuses. 
7. Main Street remains asleep as this policy is reported as non inflationary. 
8. Quantitative Easing accelerates toward infinity.

I doubt this playbook would make much of a stir with Main Street. Who cares, right? "They" are just trying to help us, right?

Perhaps a cheeseburger for $300 is the only thing that will get through to anyone. At that point, it’s too late.


Dear CIGA Glen,

You have put it all together. If this was not the playbook, it sure as hell is now.


Wed, 08/11/2010 - 12:53 | 515626 traderjoe
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Why does the private Central Bank need to clear up room on their balance sheet? They have a government granted monopoly on money/credit creation. They can simply create the create the credit/money for free - without any constraints (and probably even with some market encouragement) and then earn [free] interest on their entire balance sheet. BTW, banks receive 6% dividends on their ownership stakes of the FR. 

Wed, 08/11/2010 - 13:07 | 515600 MarketFox
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The gentleman is telling it like it is....

He mentioned to eliminate the income tax....and replace it with a consumption tax...

And he has it right about this.....

Just think about it...


Businesses wanting to domicile in the US....

Job creation via entrepreneurs....

Just to start....


This gentleman has it together....

Wed, 08/11/2010 - 12:48 | 515605 lynnybee
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..... the government is bankrupt, my kids are bankrupt, i'm bankrupt, my ex is REALLY bankrupt... so what else is new ! ?   What I want to know is who allowed this much money to be lent out in the first place !   When I was young (1960's) NO ONE in their right mind would allow me to borrow money !   We're all bankrupt, right .......... or, was it that the big banks were so greedy for a steady stream of interest payments TO THEM FROM ALL OF US !   Our young people are not experienced in finances & THEY KNEW IT & TARGETED OUR PRECIOUS YOUNG PEOPLE TO GO INTO DEBT FOR ANYTHING / EVERYTHING !    fuckers.

Wed, 08/11/2010 - 13:04 | 515657 divide_by_zero
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The NEA has targeted them from the first day in public school. Under-educated for the most part, and in place of education subjected to "progressive" indoctrination to do what the man says, practice *correct* group-think, & shout down opposition.

Wed, 08/11/2010 - 14:05 | 515863 VWbug
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if that's true then I would say parents have done a horrible even irresponsible job raising their children.

whose fault is it that no one is able to think for themselves?



Wed, 08/11/2010 - 12:49 | 515609 traderjoe
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It's so OBVIOUS that our country, the EU, Eastern Europe, Iceland, and the UK are fiscally bankrupt. I can't speak for the other countries, but the US is morally BK as well. There is no desire for change. There is no constituency for austerity. Everyone is sucking on the Gov teat. This will all end with so much disappointment, despair, and mistrust when the sheeple finally wake up and realize that there is nothing, and nothing more will be coming to them. I am both frustrated and worried. 

Wed, 08/11/2010 - 13:10 | 515685 lynnybee
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good.  I applaud you for being a truth-teller.   keep on talking true.   I told my adult children that long after I'm dead they will still be talking about this time in history.   My children grew up in a bubble, I've been trying to educate them that they will know both lives, the life they had as children in a bubble & their adult lives of chaos, revolution, deflation, hyperinflation & finally a return to some kind of sound money...... we are going back to colonial days if we are lucky.    if we are not lucky, we are going back to the 1400's of serfdom & subsistance living.   God help us all, but, I'm finally ready to face this great unknown & try to live through the hardship.     I cannot remember who said this, it was a few years ago that I read it (I think it was DAVID TICE, but don't quote me)  :   In 10 years from now people will be saying, "WHAT THE HELL WERE THESE PEOPLE THINKING !"

Wed, 08/11/2010 - 13:14 | 515700 Babalooee
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is that stand alone frustrated and worried, or taken from a long list? If stand alone, you got it made kiddo.

Wed, 08/11/2010 - 13:23 | 515737 Assetman
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I can't believe you forgot Japan! :)

Wed, 08/11/2010 - 14:09 | 515871 aerojet
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Wait a minute, let's not throw morality into the mix, okay?  Europeans are the ashsoles who invented the idea of voting themselves largesse from other people's pockets.  And let's not forget all the whorehouses over there (not that I care, but we are talking morality here).



Wed, 08/11/2010 - 14:40 | 515969 Temporalist
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Sex is not immoral. 

Wed, 08/11/2010 - 14:45 | 515988 VWbug
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whorehouses??  where??

um  my 'friend' wants to know...

Wed, 08/11/2010 - 18:06 | 516651 schadenfreude
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But having worlds biggest porn/sex industry is morally ok?

Wed, 08/11/2010 - 12:51 | 515616 Hunch Trader
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It would've been so much easier to let the tech bubble deflate in peace...US would probably be over it by now. But Greenspam couldn't let that happen and now here we are, 10 years later, with 10 times the problems...

Who is going to be courageful enough to let deflation happen and let bad debts and leverage be purged out of the system? If it's not done now, the US economy will turn into a surefire future crash, utter and total.



Wed, 08/11/2010 - 12:55 | 515634 traderjoe
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Yup, the first recession would have been the easiest. So many lost opportunities. But, this has been the plan all along...

Wed, 08/11/2010 - 14:12 | 515884 VWbug
VWbug's picture

I think that's a key point that doesn't often get discussed.

Krugman and his ilk all say we couldn't possibly let anyone default as that would actually cause pain.

I mean, can you imagine? Some people might actually have to pay for mistakes instead of being rewarded for them?

So now (or down the road i should say, as we surely have kicked the can a long way down IMO) we will suffer a whole lot worse pain when it all comes tumbling down.

I only wonder if krugman et al realize this and just expect to be dead by then?

Wed, 08/11/2010 - 12:52 | 515622 Oniram
Oniram's picture

I loved this article, I agree 1000000%


I am going to go practice with my shotgun after the bell. I am ready for civil unrest, but I do need to work on being more handy, I am a computer nerd, I need to learn a trade. A real trade.

Wed, 08/11/2010 - 13:20 | 515724 papaswamp
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Blacksmithing would be handy. personal favorite....alcohol distillation.

Medical uses, fuel or party drink.

Wed, 08/11/2010 - 15:25 | 516107 Moneygrove
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I want to learn how to brew my own beer , I think sam adams has a brew your own beer kit.  

Wed, 08/11/2010 - 14:15 | 515889 VWbug
VWbug's picture

so you are planning to shoot your neighbours?


Wed, 08/11/2010 - 14:43 | 515980 ColonelCooper
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Maybe he would if they kicked in his door at 3:00 A.M. to take his last can of Spaghettio's.  Can't say as I blame him.

You would do differently?

Not saying it will come to that, but there is neither harm nor shame is being able to defend yourself.

Wed, 08/11/2010 - 15:05 | 516005 VWbug
VWbug's picture

wow  you must live in some shit hole of a place.

me, I know all my neighbours, and we're good friends. I also have lots of other friends from childhood, and we still get together regularly, 40 years later.

Close family too of course.

And no, I don't live in fear that they will kick my door down at any time of day or night. I'd voluntarily help them you see?

That's what normal people do in times of disaster and distress.

The abnormal ones cower in their shelters waiting to be attacked, hoarding their 'precious' gold, like the greedy SOB's they rant and rave about.

They curse the rich and in the same sentence spout hopium of becoming rich by buying an ounce of 'physiçal' which they are going to defend to the death and then buy apartment complexes with.

I've seen hypocrisy before, but nothing like on this site.

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