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If The US Was a Company, It Would be Bankrupt
Let’s pretend the US is a company.
For starters, this company has a massive debt problem. The official number is $14 trillion and counting, which is roughly the equivalent of one year’s annual production. On the surface, that’s not TOO bad.
However, if you treat the US’s balance sheet according to Generally Accepted Accounting Principles (GAAP) you have to also consider future liabilities in the form of Social Security and Medicare, which puts total debt at $65+ trillion: an amount equal to 5 years’ worth of production: a REAL issue.
A debt load of this size requires massive sales and cash flow to service it. However, the problem is that the company’s primary sales segment (tax receipts) remains below pre-Recessionary levels.
Now, the company has gotten a new CEO (the old one left after racking up this massive debt load). However, rather than trimming the fat from the company, he’s decided to INCREASE its operating costs/ annual spend. So the company is now having to issue MORE debt (roughly $150 billion a month) at the same time that it is trying to roll some of its OLD debt over.
This MIGHT work if the company’s current debt holders (foreign governments, especially China and Japan), weren’t already beginning to doubt that they’d ever get their money back. Indeed, according to the Treasury Department’s Treasury International Capital Data Foreign Governments particularly China have actually SOLD US debt in the last year.
Thus, the US has entered a debt spiral: a situation in which more and more debt needs to be issued at the same time that demand for US debt is becoming shorter and shorter in duration. Indeed, according to the Treasury, in the next 5 years the US will have 73 days in which it needs to roll over $20+ billion in debt and 46 days in which it needs to roll over $30+ billion. And this is WHILE issuing $100-150 billion in new debt per month.
This is already taking its toll on long-term US debt.
As you can see, the 30-year Treasury Bill has been bouncing along its long-term uptrend for months now. Whenever it finally breaks below this line, we’re likely to see the 30-year plunge to 105. This means MUCH higher interest rates which will kick the economy AND the stock market in the teeth.
And if we break below 115… look out below.
Graham Summers
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The federal goverment in its corporate capacity may have been taken into receivership (bankruptcy proceedings) and dissolved in 1920, 1933, whatever. But it's just the federal government, not the entire nation. Hypothecating the entire nation to creditors is illegal, treasonous, and simply won't be recognized ultimately. Moreover it's just a big game. When other nations lose confidence in FRNs and they collapse, the game is over, the debt will be defaulted, ignored, rejected, and creditors won't be able to take possession of collateral fraudulently pledged.
The only big difference is that this "Company" has a standing army that can enforce the collection of taxes and confiscation of its "shareholder's" assets. Other companies don't have that sort of power. This makes the Company that rules us very dangerous.
Yes , banks are corrupt, greedy and in bed with government in a conspiracy to save the capitalistic system as we know it. But what brought us to this point of insolvency? Stimulus Billy has it right. It was embracing globilization by retailers, multinational outsourcing giants followed by bankers who facilitated deficits by unloading debt to others such as China. In other words we sold out our manufacturing base with the blind faith that innovation and American ingenuity could overcome in producing jobs. Duh!. We are still in denial with QE I, QEII, QEIII and finally Quantitative Inflation or Quanitative Default
Never mind the entire US, if the Fed were a real bank it would be bankrupt three times over.
Oh, it's a shitty hedge fund too.
Every TBTF bank IS bankrupt, and they're still foreclosing on people's homes, extorting money from state governments, and collecting 30% interest rates on credit cards.
Stimulus Billy misspelled synergy---SINORGY
Kind of like a ninja borrower with an ARM. Nothing wrong with that is there?
The US is a company. It merged with Globalization, Inc. a few years ago. The underwriters said it would be win-win, synergy or some crap.
"The underwriters said it would be win-win, synergy or some crap."
They all attend the same motivational business seminars...when one see's these words used run like hell.
http://www.youtube.com/watch?v=ySO-gryuO-c
There is one problem - The US has unlimited demand for it's debt. Every single issue will be bought in its entirety by the Bernenk. So we have no real problem! Until we have a problem, then we have a problem.
That's very perspicacious. Why? Cause US debt trades as money, yet it, and Federal Reserve Notes are debt, which is not money. Money extinguishes debt.
Money does not subscribe to ordinary demand/supply thinking, there's only one thing you can never have to much of and that's money.
As long as as US credit (debt) trades as money, there is no problem for the US.
The real question is when will the biggest credit bubble of all time, burst? Then there is a problem, no doubt about that.
Does anyone have a link on the timeline for how much debt gets rolled over every year, and/or the average debt rollover in years? I have searched and wasn't able to find anything.
I think the last I heard is that the average rollover on outstanding debt is something like 5.5 years.
Do you think it's bad now? At the end of this decade we will look back and think how good 2010 and 2011 was.
Get ready, it will be a bumpy ride.
And if my grandma had a stick and balls she'd be a dude.
The point being that the US govt has powers and means that no corporation enjoys.
The ability to issue legal tender, taxation, the ability to pass laws and enforce them using force, etc.
That does not mean that a government can't bankrupt a nation. Many have done so.
Just that comparing the US govt to a corp as a means of extrapolating into the future is silly.
Precisement!
duh
A highly indebted company with no earnings can avoid bankruptcy for some time, just look at the situation in a rising stockmarket.
No earnings & no money? So what, issue more shares into a rising stockmarket, there's no shortage of buyers, that'll keep the company execs in yacht club membership for another six months.
Gold miners have been doing it just about since time began.
I hate to be a nitpicker but ...
"If the US Was a Company, It would be Bankrupt" is plain bad English.
The use of the subjunctive in this case is appropriate:
"If The US Were a Company, It Would be Bankrupt"Tsk. Tsk.
Minor point, but guessing from your post you can also put a price on it......want to tell it too?
The cries of desperation and fear of a dying bear ... LOL
all is well. all is well
Now that we are done pretending the USA is a mere company to be broken up and asset stripped, lets get back to reality.
The USA is a sovereign state and no comparison to any business or company has any meaning. If people want to run a great nation like a kitchen table they should stay around the kitchen table where they can do no harm.
The reality is that even if a country cant go bankrupt when payment demands are higher than funding available then something has to give. Only people who havent looked at the numbers believe that taxing the wealthy more, even 90 percent marginal rates, can solve this. Even if we cant go bankrupt our future is vastly higher taxes to support the baby boomers and other welfare whores and less.services and higher prices. Usually when this happens many in the population opt out of the system. The government cant tax free time and black market/barter economies. Everybody who is productive goes john galt to a degree. If we ended medicare medicaid and cut defense 80 percent it would be a bright future for america, but we wont.
Doesn't take into account Freddie and Fannie indebtedness that is now "off" balance sheet. Only guys like Bernanke can get away with this criminal activity.
I am long TBT leaps. Doing well so far.
NO SHIT, and this is news?
http://finance.fortune.cnn.com/2011/02/02/ready-for-100-year-treasury-bonds/?section=magazines_fortune
Banks were doing 20 and 30 year loans for cars in Thailand back in the 90's - it's not a new model. When the income can't meet the purchase price, just exend the term to lower the payment. Unfortunately, given the oil production reality and therefore the economic reality moving forward, credit can't survive. 100 year, or even 30 year bonds, may as well just be viewed as taxes, since there won't be a return of investment.
Economists don't get it when it comes to fossil fuels. See Stuart Staniford's piece here: http://earlywarn.blogspot.com/2011/02/long-term-trends-in-economic-outpu...
There is this website I visit and the title says: On a long enough timeline.......
What do you think, Leo?
Pensions will buy it. :)
It is becoming more and more ridiculous with each passing day...just paper everything over with extend and pretend...why not go with 1,000 year bonds to not kick the can down the road but launch it into orbit.
Without your space helmet, Bill, you're going to find that rather difficult.
I gotta say...that's good stuff right there...the cadence...the avatar...ROTFL.
+ one million 1,000yr. space bond's floating in orbit at 0.1% interest to ya.
The inevitable next ponzi step of spending what is not there to spend...eh? ;-)
A formula for, "if you can't make it then fake it" sort of thing.........but the reality looks like it is the path of least (social) resistance.
My wife was talking about the price of cotton tonight (and she is not a trader). She told me Banana Republic is asking $50!!! for a woman's cotton t-shirt.
Everything's going up because of these turds. It's absolutely insane to have a monetary system where just at the point where pricing is what matters to the people it's artifically raised to make things less affordable.
That said, I have to confess to being somewhat of a tightwad. Last fall I was strolling through a Walgreens and saw they had some nice Panama Jack flip flops they were trying to get rid of...two bucks a pair. I loaded up.
And now, it's about time to buy some winter coats ;-)
I dunno, I think the more people learn...the more we speak out here & in public maybe things can revert back to sound money principles...it will take time.
I don't jump up & down about it so much for myself as for those who will follow. We're kinda like orchard planters, we may not enjoy the fruit of our labor but our children will.
I love this site, a few more months of this and China will know that we know that they know that we think...
or...
Tick tock, tick tock, time to buy another Glock.
Graham, you're right arm, "the company’s primary sales segment (tax receipts)". This company needs to hatch a new product, and I suggest that the Economic Protection Agency be created, and eliminate the OLD EPA. Drill for oil, gold, silver, rare earth (a misnomer) right here in America. We have more natural gas than we know what to do with, yet we use half the corn crop to make ethanol, idiots are we. The national debt is a problem, but its a bigger problem because our children have begun to say, "since its not their obligation, they won't pay it" -Mike Kreiger.
Vote those fartknockers out of Congress (except Ron Paul) and start digging, fill those empty ships back to China with coal and whatever else they buy from Canada- what they have, we have too.
US Corporate law was repealed the day GM was saved, by a Harvard Law School grad no less.
The US of A is a Corporation. So is The STATE of TEXAS. So is The CITY of DALLAS - for instance. You are also a legal PERSON, and that is why your name is spelled in all CAPS on your birth certificate, Socialist Security Card, Drivers License, etc. The only way these corporations can suppose jurisdiction over you is by making you a CORPORATION. That is why Common Law (the Law of the Land) has been superceded by legalease (Admiralty Law, the Law of the Sea, Codes of Federal Regulation, et al), which is why the IRS can tax you, and you do not have Constitutional rights. Those are reserved for sovereigns only. (Google: "The power to create is the power to destroy. Supreme Court")
You can thank the 14th Amendment for this, which made slaves of us all to the Federal Government.
http://www.1215.org
The US is also bankrupt, and I do not mean figuratively. The US went bankrupt on March 9, 1933. We have been in bankruptcy ever since. You can thank the Federal Reserve Act of December 23, 1913 for this.
http://www.dailypaul.com/70415/u-s-congressional-record-march-17-1993-vo...
+100
In my personal experience:
We have been living in a fraudulent dreamworld generated by bankers and lawyers and the minions who serve them.
To break free of this dreamworld requires a personal revolution of mind, heart, and soul.
I began by ruthlessly questioning and closely examining those personal values which I had accepted without examining them closely.
Thus my personal, tiny, revolution began...
http://republicoftheunitedstates.org
If companies ran 401k's like government runs Social Security they would be in jail...LOL.
Yup the U.S. government is somehow going to have to find a way to finance debt that is equivalent to 27.8 percent of GDP in 2011. And you can bet your bottom $ it will be worse in 2012, 2013 and so on ;)
There is only 1 way governments can raise money that is CONFISCATION of private wealth, grab your wallet and RUN!
The more money you can get off-grid(precious metals, offshore accounts, etc.) the better and if you can afford it buy property outiside USA
we need to realize these are the GOOD DAYS
You mean will a country which owes one year's worth of GDP, which had much worse debt ratios than that in the past and was able to get back to an actual surplus, which has natural/mineral resources worth tens if not hundreds of years of GDP be able to pay it back?
You bet :-)