Guest Post: Is The Debt Problem As Bad As They Say

Tyler Durden's picture

From Simon Black of Sovereign Man

Is The Debt Problem As Bad As They Say


On the rare occasion that I’m bored, I like to watch 24-hour news
television for entertainment. It’s hilarious watching the talking heads
spin out of control in apoplectic fits when they’re essentially arguing
the same point; they might be from different parties, but they’re merely
battling over small details of the same government-sponsored solution.

Recently I caught one of these talking head financial experts on TV
arguing about debt levels in the United States.  He was saying that the
US debt doesn’t matter all that much because the US government has so
many assets to offset its debt.

For example, he suggested that things like the highway system,
national parks, and strategic petroleum reserve would more than offset
America’s liabilities, so the looming national debt isn’t such a big
deal after all.

He couldn’t have been more wrong.

The Government Accounting Office (GAO) puts out an annual financial
report that looks and feels like corporate financial statements… of
course, the US government doesn’t have to abide by the same accounting
principles as the private sector, so they get to cheat quite a bit in
overstating their position.

The most recent report
is signed off by Tim Geithner and includes oodles of newspeak from the
Ministry of Plenty about how dazzling their economic recovery measures
have been. Needless to say, the numbers paint a different picture.

Even when you add up -all- of the assets, right down to every desk,
chair, and lifeguard stand, and even if you throw in a healthy boost to
the asset column to account for premiums in the market value for land
and “gold” in Fort Knox, the government is still in the hole to the tune
of over $10 trillion.  It would take more than 300,000 years to count
that high.

And yet, the fake recovery is vanishing, the dollar keeps falling
against anything of real value, and the average guy on the street is
realizing limited benefit for his share of the debt and inflation
burdens. How is this possible?

I’ve often said that bureaucrats and politicians have an extremely
limited playbook consisting of taxation, regulation, and inflation.
These three ugly sisters of bureaucracy effectively serve to steal from
people, make things more difficult for them, and rob them of their
purchasing power… and yet they’re dressed up as solutions instead of

Consider the case of Illinois– the state is completely insolvent and
running out of cash quickly. It doesn’t have the luxury of printing its
own currency, and is thus being forced to deal with its fiscal reality…
much like Greece.

Rather than trying to make their state more competitive in order to
attract talent and capital, they’ve opted for the old playbook… starting
with taxes. Specifically, Illinois lawmakers have targeted companies
like Amazon, arguing that online transactions through the company’s
Illinois-based affiliates are within the state’s sales tax jurisdiction.

For Amazon, the calculus involved is totally objective– once the
Illinois legislature passed this legislation, the cost of doing business
in the state exceeded the benefit, and Amazon cut all ties to its
Illinois affiliates.

Thousands of people across the state who used to earn a portion of
their living as an Amazon affiliate were stripped of their income thanks
to do good lawmakers trying to squeeze a little more dough out of a
productive company.

Peoria, Illinois based Caterpillar Inc. is in a similar position, now
threatening to leave Illinois because the politicians keep raising
income taxes. Now the financial powerhouse CME Group is echoing this
sentiment. The impact this would have to the state economy is

These steps that Illinois lawmakers are taking, along with their
destructive consequences, are reflective of what will happen when the
federal government is finally forced to deal with its own fiscal

$10 trillion in the hole and facing a steep downward trend, the US
government is either looking at substantially higher borrowing costs,
substantially higher inflation, or both. Investors are getting jittery
about loaning money to the United States, so they will either demand a
higher return, or the Federal Reserve will hyperinflate the currency to
mop it all up.

Regardless of the scenario, Congress will reach deep into this
playbook until they chase away every productive citizen and company they
can… In fact, it’s already happening.

The number of people renouncing US citizenship has been more than
doubling year-over-year for the last several years. Meanwhile, many
businesses are moving overseas, or at least focusing on international
operations and shifting profits offshore.

It’s easy for companies to move… much more difficult for people who
have emotional ties, fear, anxiety, etc. that maintains their
geographical inertia. As such, it will ultimately be the individual
citizens remaining behind who will be exploited like malnourished milk
cows to pay for the destruction.

In the coming days, I’d like to tell you a lot more about how I see this playing out. Stay tuned.

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MonsterZero's picture

We'll do it better next time, I promise!

jus_lite_reading's picture

Answer to the question is its much worse.

A little off topic but 200,000 Citi bank accounts were hacked.... while 48% of Amerikans think a great depression is coming....  and Tepco stock is being obliterated today which means that thousands of american retirement accounts havee been cleaned out...

Tin foil hats please!!!!


Republi-Ken's picture

Is that SAME 48% who do not know Republicans won the 2010 Election

and now control Congress and are now responsible for JOBS JOBS JOBS?

48% of Americans are either:  


B) TOO BUSY WITH AMERICAN IDOL to pay attention to debt

samslaught's picture

Not a big fan of Republicans but I am a fan of facts.  Republicans control the house, Democrats control the executive branch, and although nobody has a super majority in the senate I think there are currently 51 Democrats, 47 Republicans and 2 Independents.

CPL's picture

the US government is either looking at substantially higher borrowing costs, substantially higher inflation, or both.

When in doubt with money...go with worst case in terms of money.  I terms of government you take worst case then amplify it by 4.  Mainly because they are lying sacs of shit.

Richardk888's picture

Time for the govenment to take over and monitor the internet in the name of safety : (

rcintc's picture

Spot on Simon Black

falak pema's picture

Black is the dark face of reality...but he'll be back with more dark side is black...and alas its not beautiful!

Milestones's picture

Clever sentence!!       Milestones

Blotsky's picture

Hahaha! Watch this video, and then think of what Uncle Sam is doing to the economy!

 King George III, eat your heart out! Uncle Sam got ya beat!

dwdollar's picture

His analysis is always spot on, but his 'solution' is laughable.  Move out of the US, renounce citizenship, and go where exactly?  Give me a break.  There is no better place than the US.  This is the last stand.  The place where your back is against the wall.

dark pools of soros's picture

...with quicksand under your feet..   your move 



dwdollar's picture

Let me know of someplace better.  Please...

HoofHearted's picture

Chile, Switzerland, Australia if you can get the work permits, Colombia (surprisingly). Read Simon Black for more suggestions.

ibjamming's picture

I agree...if it get's bad will be worse somewhere else.


I'm not talking about in the inner city...THAT will be bad!  I'm talking a place in the country, a few acres, a place you can be pretty self sufficient on.  I think a place in the the better than being a FOREIGNER somewhere else when TSHTF.  Just my opinion...and my situation.  There will be LOTS of dead in the first 6 months...then it will level out at a sustainable level.

Unless...we go to war for ME oil and kick the can down the road another 20 years or until we start running low on CHEAP oil.

TapperIsTicked's picture

Can anyone tell me how to skin a corn and plant a chicken?

Slipmeanother's picture

Thats easy just pluck the corn and bury the chicken

trav7777's picture

are you not characterized as a foreigner in the US even now?

our history is systematically denigrated by whoever dictates the mass media message

Silver Dreamer's picture

I'm not going anywhere.  The banksters are the ones that need to be packing.

chumbawamba's picture

Right.  I'd stay and fight but, quite frankly, odds are clearly against me and stacking up ever more so.  I can't do this alone, and neither can the thousands of others like me who are trapped in this nightmare from which we can't wake.

Who am I supposed to rely upon for back-up?  My fucking neighbors to the left of me, the wife having a nice cushy corporate executive job in the health "care" industry and the husband having a cushy job teaching useless culinary skills to a generation of hopeful chefs who will only graduate to disappointment and destitution?  My fucking neighbors to the right of me, who are Chinese and know nothing but obedience to the State?  I talked to just about every neighbor up and down my block and warned them of what's to come, but most either want to just pretend that they didn't hear me or perhap they think I'm a pleasant but deranged individual.

I'm not a stupid man.  There's a time to fight and there's a time to run.  I know when to run.

The men (frauds all of them) who founded this nation were of wealth and means.  They were the elites of society in their day.  The elites of our society are content to thrive at the expense of the rest of us, as long as they get to be near the top of the pyramid.  I'm supposed to mount resistance in this kind of environment?  Give me a fucking break.

So where to go?  Anywhere but here.  At least I know what I'll be signing up for in advance, rather than being given the bait and switch from birth.  I'll take the (alleged) violence of Mexico, the socialism of Canada, or the despotism of Syria before I commit to staying in this continental cesspool of iniquity.

Goodbye, America, you decrepit piece of shit.  And good riddance to those who will be left behind.  Whatever happens to you will be your own damn fault.

I am Chumbawamba.

Imminent Crucible's picture

"Anywhere but here"? Not too sure about that, but otherwise I'm with you, Chumba.  I spent the winter in Mexico. Not Ciudad Juarez, not the D.F., not even Oaxaca. I spent it in Baja California--everywhere from Ensenada all the way down to Puerto San Carlos and back. There was no crime, no narcothugs in sight, no nothing except the blue Pacific and all the ceviche and huachinanga and Pollo al Carbon I could eat, and 10 pesos (80 cents) for a Negra Modelo.  The one little quirk you have to get used to is the armored hummers that roll by now and then with machine gun at the ready.

One quiet little fishing town I stayed in was so tranquil the landlady (a disaffected Canadianette from BC) left all her cabanas unlocked, with the keys on the table by the door. "There's zero crime here, and everyone knows everyone."  It felt just like my childhood in the 1950s.

It would be gratuitous to describe the fishing. And the total population of the state of Baja Cali Sur is barely equal to Fresno, CA.

Transformer's picture

And what will it be like in baja when the world financial system has collapsed, and hatred for all things American runs rampant?  Will Americans on foreign soil who have fled there with whatever wealth they have be looked at as good neighbors, or the scumbags who did in the world trying to escape with their wealth and live like kings in another country?  What will you do when the Hummer with the machine gun on top comes looking for you?

I can fully agree that one might be able to integrate in with the locals, it's the armored Hummer that bothers me.  And they are everywhere, the military industrial complex has seen to that.

jmcadg's picture

Dude, if you came to my country, I'd welcome you with open arms. It's not American people I despise, you are (mostly - as there are bad apples everywhere) good, decent people. It's scumbags like Dimon, Blankfein, Geitner et al that need to watch their backs.

Imminent Crucible's picture

"when the Hummer with the machine gun on top comes looking for you?"

The voice of ignorance compounded with the Dark Side. I can see you haven't spent much time in Mexico, particularly B.C.   What you need to know is that there are already hundreds of thousands of Americans living comfortably in Mexico--Guadalajara alone has between 30,000 and 40,000 US expats living there.

The Mexican govt and the local people welcome them because a) they spend money and b) they don't take jobs from Mexicans. The US State Dept has been after the Mexican govt for years to keep tabs on these people, to make them return every 180 days to renew their FMT's, etc, but the Mexican govt does nothing. They say, "Why should we interfere with these people? Most of them are retired, they make no trouble, they spend their SS checks here and hire poor Mexicans to cook and clean and keep the house up. It's not our problem--do your own damn policing."

The hummer is there to put the narcos on notice that the town still belongs to the legal thieves, not the illegal ones.

dwdollar's picture

Is that the same Canada and Mexico I'm thinking about?  The two places where it's ALREADY illegal to own a handgun?  Good choice...   /sarcasm

equity_momo's picture

So you dont advise me to move back home? Im in the UK currently and finding the cost of living unbearable. At least things are relatively cheap in the US.    Everythings about finding a balance. Liberty is the biggest deal of course  but where is true Liberty to be found? I dont see it in Europe and i dont really see it in South or Central America.  I hear you loud and clear and your frustrations are shared by the majority here , but what to do? Id love to run but it has to be somewhere that offers the right balance between liberty and cost of living.  We are all searching for the best standard of living but i happen to think that peaked globally a few years ago. Like fiat , its a relative game. Its spread might be closing from the wides but the US is still the best looking ugly sister for many with a choice.

FreedomGuy's picture

You make a good point. The other problem is even if you think there is some libertarian nirvana somewhere, the presence of the U.S. keeps many of these places free. Taiwan would be the newest Chinese province without the USA.

In my theoretical world the USA divides into red and blue. The red goes not Republican but libertarian very similar to its foundation. One has to take some sort of oath of liberty including not denying it to his fellow man. Blue states are free to go full bore collectivist with the much smarter collectivists we have raised here in the USA. They are never allowed to immigrate to red states without taking the oath. For safety they are never allowed to vote.

It's kind of like Californians who vote insane crap for their state. Wreck it, then move on to other states when its intolerable to wreck them (AZ, CO, NM, etc.) You cannot allow idiotic blue state types to become a political virus.

Many of us in the libertarian camps would be happy to let all the statists go somewhere and try to achieve their social justice collectivist dream voluntarily. However, they always insist on inflicting it on everyone else. It is a necessity because they know in the end their state fails without tax mules to fund and empower it. That's why under all their "caring" they are very intolerant and have claws and teeth.

I think the answer is to run internally into different parts of the U.S. that will resist the final socialist impulses. Looks for states with guts that resist the Feds consistently.

Hooter Shaker's picture

Don't let the door hit you in the ass.  I'm standing my ground even if I have to do it alone.

Abitdodgie's picture

I am in total agreement with you there is no place left to run too, so make a stand here when they come through the door for you open fire and do not stop until they are all dead.

boiltherich's picture

Renouncing citizenship is really only an option for those with dual citizenship anyway, and even then it is one of the most foolish things a person can do, because you will never ever get it back, and even getting a visitors visa after that is virtually unheard of.  If you do it you should know with no doubt it cannot ever be reversed.  Also, you can only renounce US citizenship from a foreign country.  You can't be in the US or on it's soil anywhere, it would not be valid.  If you take up residency in another nation and renounce citizenship you better know that you have citizenship somewhere else because going off to live in Belize or Costa Rica is not the same thing as being a citizen there. 

Rational Psycho's picture

I'm making my stand at sea. Buyin a sailboat, water purifier, fishing equipment and dehydrated food. I plan on island hopping the Bahamas and Caribbean while the US falls apart.

SheepDog-One's picture

Most of those 'national assets' have already been pledged as collateral over decades for Chinese loans.

MayIMommaDogFace2theBananaPatch's picture

Predictive Programming BITCHEZ!!! 

Hoover Dam in a yard sale -- Yosemite in the pawn shop.

<sarc> Awesome. </sarc>

RockyRacoon's picture

Yeah, like Treasuries?

From Bill Buckler at The Privateer:

A “Balancing Act” At The Fed:
Mr Bernanke and his colleagues at the Fed are reluctantly being forced to talk more and more about what their plans are when the official end of their “$US 600 Billion” QE2 hits on June 30. In the first place, QE2 is not $US 600 Billion or double the official level of QE1. It is $US 900 Billion or triple QE1. The Fed could not have bought the $US 112-115 Billion a month in Treasury debt that they have bought without the re-investment of “income” from its balance sheet. That is what it has done.
During his first post FOMC press conference ever on April 27, Mr Bernanke made it clear that the Fed would continue with this re-investment after June 30. Happily for Mr Bernanke, the Fed has only scheduled four press conferences a year (one every second FOMC meeting). That means that Mr Bernanke will not have to front the press after the next meeting which takes place on June 21-22. The next Bernanke press conference will take place at the FOMC meeting after that, on August 9. That’s six weeks after the end of QE2 and a week after Mr Geithner’s deadline for the Treasury’s debt limit.
If Mr Bernanke can actually delay his next press conference until August 9, he will have done very well.  But as June 30 approaches, the questions about what will happen on July 1 and after are becoming ever more urgent. One Fed response which is frequently quoted is their professed desire to shrink their balance sheet back down to the $US 750-850 Billion region - its level before the GFC hit. As recently as December 2007, the balance sheet stood at “only” $US 870 Billion. The Fed has also stated that they want to get the balance sheet back to being almost exclusively Treasuries.
Today, the Fed’s balance sheet is more than three-and-a-half times the size that it was in late 2007. Treasury holdings alone are twice as big as the entire balance sheet was back then. As The Privateer has pointed out many times, the $US 925 Billion in mortgage-backed securities in the Fed’s balance sheet would be worthless if they were not there. What about the $US 1.6 TRILLION in Treasuries?

gookempucky's picture

To the tune of just about everything as the chicago parking meter system-most if not all toll roads-water systems-most commercial property and by the look of things most residential housing--oops almost forgat the national forest's. Have to include the rest of the world as present and future landlords and not just china. As I had said to my city council in regards to sewage bonds---when we default=no flushy the crapper.

Mad Cow's picture

The fraud is immense and the brainwashing is nearly complete. I know it's been said a thousand times but lets just keep on doing it. The Fed is a private entity and the USGov does not need to borrow money from foreign countries, or the Fed. It's just theater! It's all bullshit!

Spoon boy: Do not try and bend the debt. That's impossible. Instead... only try to realize the truth.
Neo: What truth?
Spoon boy: There is no debt.
Neo: There is no debt?
Spoon boy: Then you'll see, that it is not the debt that bends, it is only yourself.

Bob's picture

Exactly.  It's interesting to see the Adult Thinkers roll in with their deep analyses--you'd think there were actually a viable future left for us under this crazy-like-a-fox bankster system! 

What charming idiocy.  We're looking at the same bullshit the Greeks are . . . it's a global phenomenon.  Now the useful idiots rush in to sweep up the scraps they can personally get their hands on as the bankster parade rolls on untaxed or otherwise restrained.

We must be responsible adults!  We must be responsible adults! 

Sounds like the twisted reality of chronically abused children still desperate for their abuser's love . . . at best.  I'll bend over better and longer this time, I promise! 

No "new" taxes.  Cut them taxes--keep all the productive capital flowing where it'll do the most "good."

Gotta keep that evil tool--the only one we have short of jails--outta the house.

James T. Kirk's picture

if therre is no debt, then the currency instantly becomes

worthless, because the frn value is based on debt.  anarchy,


Mad Cow's picture

Sorry James, the Federation is not going to work out. The Replicators are rebelling.

akak's picture

"The Federation", "The Replicators"?

When Sci-fi worlds collide!

akak's picture

Of course, MadCow --- I forgot about the Star Trek replicators!

Your inference of sentient replicators immediately suggested to me a reference to those of the "Stargate: Atlantis" series.

Mad Cow's picture

Stargate is a great series, even though they blatantly borrowed from other sci-fi, like many other sci-fi, I think that was part of the charm.

cougar_w's picture

Most sovereign "assets" are more like boat anchors than assets.

For example: Freeways are a sunk cost, not an asset. The asphalt and cement have zero market value once in place, and those materials are nearly impossible to use for anything else once deployed. The roadway thus created does have value as passage, but the value can only be extracted via regressive rents and tolls on users. A freeway's intrinsic value is to broader society as it facilitates commerce and movement, but these are hard to measure and the costs of annual maintenance fall to the state while profits go to individuals including corporations.

And miss a single year in maintenance and the whole thing goes to Hell. Fail to support the domestic auto industry and the whole thing goes to Hell. Fail to secure sources of affordable fuel for the fleet and the whole thing goes to Hell. You get the idea. The costs to keep the "asset" working are mind boggling and politically complex.

And that's just freeways. You can make the same case for airports, navigable waters, pipelines and flood control systems. And why stop with infrastructure? Cities are going bankrupt trying to keep themselves from falling into riots and ruin.

We have a lot of stuff, but it's not free and the value is difficult to extract. We cannot get rid of it, we can only struggle to maintain it. And if we ever let it go we'll never again have the funds, labor force and natural resources to get it back.

This is called being owned by your possessions.

Crabshack's picture

Exactly correct as usual big cat, but when you own an asset you can charge a "toll" for its use.

nercnumber's picture

The other night one of the other dad's at a dinner said this exact thing, that the US has much more assets than debt.  I couldn't argue otherwise.  This is perfect.

bigdawg's picture

Yeah, I heard a guy on the radio the other day stating the same thing...except he also included coal, oil, real estate, etc...not just US govt. owned assets.  So yeah, there are some assholes thinking that private assets should be pledged private assets against the that's perfect.