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We Owe How Much??
So, here's a formula: take $55 or so trillion of reported total debt (from the Fed's Z-1 report), and $100 or so trillion of unfunded liabilities, and toss in a modest portion of the derivatives that are effectively debt (any thoughts on that one?), and divide by 300 million Americans - we get more than half a million per capita. Anyone have some other suggestions for the formula to determine what the actual debt is for all, and per capita? ~ Ilene
We Owe How Much??
Courtesy of John Rubino.
One of the problems with the debate over the “national debt” is that there’s no generally agreed upon definition of that term. Is it what the federal government owes, or what it owes foreigners, or what the whole country, private and public sector together, owes? Does it include off-balance-sheet items and contingent liabilities?
There’s a hundred-trillion dollar gap between lowest and highest on this spectrum, which allows each commentator to confuse the rest of us by picking the measure that best suits their point of view. New York Times columnist Paul Krugman, for instance, uses “net debt” — the amount that the US owes foreigners — to argue that since this number is relatively small and slow-growing, we’re actually fine. Analysts using broader definitions of debt come to the opposite, more apocalyptic conclusion. Consider this from today’s Wall Street Journal, on the impact of off-balance-sheet obligations:
Smoke, Mirrors and Public Deficits
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By RICHARD BARLEY.
Are public debt and deficit numbers illusory? Perhaps, judging by the ruses employed by governments and identified by the International Monetary Fund’s Timothy Irwin in a recent staff note. Deficit crises in developed countries may only increase the allure of such devices, although they may do little to help in the long run..
European countries got creative as they strove to hit targets to join the single currency during the 1990s. In 2005, Organization for Economic Cooperation and Development researchers cataloged 192 cases of one-time measures and accounting maneuvers across Europe—50 in Greece alone—with effects ranging from negligible to 2% of GDP. In 1997, for instance, France took on the pension liabilities of France Télécom in exchange for a payment of €5.7 billion ($7.6 billion), or 0.5% of GDP.
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But Europe wasn’t alone in playing games. In 2003, the U.S. proposed buying 100 refueling planes via operating leases, which would have kept the cost from being recognized upfront. The Congressional Budget Office said that was federal borrowing in disguise and would prove more expensive than a normal purchase.
The euro-zone debt crisis has put these techniques front and center. Portugal hit its 2011 target only via a transfer of bank pension assets that shaved 3.5 percentage points off its deficit.
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Likewise, the U.K. is taking on the Royal Mail’s pension plan to pave the way for privatization. The plan brings with it £28 billion ($44.8 billion) of assets, thereby reducing the country’s 2012-13 deficit. But the U.K. is also taking on long-term liabilities on behalf of the company with a present value of £37.5 billion—which aren’t recognized immediately. So accounting transforms the Royal Mail’s pension deficit into a short-term gain for the U.K. budget but at a long-term cost.
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Keeping long-term liabilities out of the picture is a common tactic: In the U.S., debt was 62% of GDP in 2010, but including civil-service pension and other liabilities raises the total to 113%, Mr. Irwin notes. Public-private plans for infrastructure have also shifted upfront investment costs off-budget but have raised long-term debt risks—often through government guarantees.
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The crisis has narrowed governments’ options. One way to flatter the statistics is via optimistic growth assumptions, although skeptical markets and the rise of independent fiscal watchdogs such as the U.K. Office for Budget Responsibility make this difficult. Another way is to shift cash flows forward, as Germany, Greece, Portugal and Belgium did in the past via securitizations of future government revenue. This, too, may now prove a tricky sell.
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Investors trying to keep track of governments should remember Goodhart’s law: As soon as an indicator becomes a target for conducting policy, it loses its informational value. It also becomes a target for manipulation. That is a sobering thought given the euro zone’s obsession with deficit targets. They might just conceal problems building up elsewhere.
Then there are the “unfunded liabilities” of entitlements like Social Security and Medicare, which dwarf the official national debt. From a recent Zero Hedge article:
Massive $17 Trillion Hole Found In Obamacare
Two years ago, when introducing then promptly enacting Obamacare, the president stated that healthcare law reform would not cost a penny over $1 trillion ($900 billion to be precise), and that it would not add ‘one dime’ to the debt. It appears that this estimate may have been slightly optimistic… by a factor of 1700%. Because coincident with the recent Supreme Court debacle, in which a constitutional law president may be about to find that his magnum opus law is, in fact, unconstitutional, someone actually read the whole thing cover to cover, instead of merely relying on the CBO’s, pardon Morgan Stanley and Goldman Sachs’, funding estimates. That someone is Republican Jeff Sessions who after actually running the numbers has uncovered that the true long-term funding gap is a mind-boggling $17 trillion, just a tad more than the original sub $1 trillion forecast..
This latest revelation means that total underfunded US welfare liabilities: Medicare, Medicaid and social security now amount to $99 trillion! Add to this total US debt which in 2 months will be $16 trillion, and one can see why Japan, which is about to breach 1 quadrillion in total debt (yen, but who’s counting), may want to start looking in the rearview mirror for up and comer competitors. And while Obama may have been taking creative license with a number that is greater than total US GDP, he was most certainly correct when saying that Obamacare would not add a penny to US debt. Because the second the US government comes to market to fund a true total debt/GDP ratio of 750%, it is game over, and the Fed will have its hands full selling Treasury puts every waking nanosecond to have any time left for the daily 3pm stock market ramp.
Here’s a chart (compiled by John Williams’ Shadowstats) illustrating the impact of adding unfunded liabilities to the national debt:
There are two reasons that debt and unfunded liabilities are treated as separate things:
1) The practice allows government to hide its true obligations in the same way that Enron did — right up to the day it evaporated. In other words, it’s a legally sanctioned lie.
2) Debt and unfunded liabilities are, at first glance, different in some ways. Debt is a legal obligation that gives the lender recourse, i.e. some way of getting back some of their money. In the private sector a lender who’s not getting paid can seize the borrower’s assets or force the latter into bankruptcy court where a judge decides who gets what. With sovereign debt, the creditor (who lent money by buying bonds) can sell those bonds and use the proceeds to buy up the borrower’s assets.
Unfunded liabilities, in contrast, are simply promises that don’t carry a legal obligation. In theory, Medicare could be cancelled tomorrow by Congress. Just like that, the program and its associated unfunded liabilities would disappear.
So the question becomes, how real — and therefore how dangerous — are US unfunded liabilities? The answer is that because they represent a promise to tens of millions of retired baby boomers who expect to get free money and health care for the last 30 or so years of life, they’re effectively more real an obligation than a Treasury bond.
A politician who messes with the Most Selfish Generation’s free health care will find himself back in the private sector before the polls close in the next election. Compare this with the probable repercussions of stiffing China or Saudi Arabia on bond interest — some contentious headlines and a bit of turmoil in the foreign exchange markets that most voters would hardly notice — and it’s clear that unfunded liabilities have, if anything, a more solid claim on future economic activity in the US than does interest on Treasury bonds.
So our true national debt is government debt plus private sector debt plus off-balance-sheet obligations plus unfunded liabilities, which comes to somewhere around half a million dollars per man, woman and child, or two million per family of four.
We can’t pay this of course, so the story of the next few years will be the search for the least painful way of breaking our promises. And history is pretty clear on this: a country with a printing press will always use it before exploring the harder options of actual default, whether through non-payment of interest or cancellation of benefits.
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I like that the IMF national debt to GDP ratio includes all of the Anglosphere. It seems like a tacit admission that the Anglo nations are all, in fact, part of one global empire.
US/UK/CA/NZ/AU are all under the same rulers. Who they are isn't clear. Of course these supposedly sovereign nations are under nominally independent governments. But in terms of military and economic policy, they are all united as if one in the same.
'US/UK/CA/NZ/AU are all under the same rulers.'
Correct, all part of the Z-axis of the MIC-finance-intelli-CB model or otherwise known as 'democracy'. The model wouldn't be so bad if it didn't have a colonialist bent but as your little list suggests the evidence indicates that it's an expansionist ideology on par with the most extreme zealotry.
Glad I am not an American.
Didn't realize we Aussies had that much debt and liabilities. I guess the difference is we have always let our politicians know that we all know they are a theiving bunch of crooks, and this keeps them on their toes.
Guess the penny is finally dropping in the US.
Live Free or Die and Buy some Silver.
Before you get too carried away in Australia, you might wish to think about A$4trillion in total debt or A$170,000 per capita. I suggest youbetter not stop digging holes.
http://www.australiandebtclock.com.au/
government debt of A$489 billion, private sector debt of A$3.4 trillion which handily excludes state debt of A$158 billion.
http://www.theaustralian.com.au/national-affairs/state-politics/state-debt-blows-out-40-per-cent-as-borrowing-spree-comes-under-fire/story-e6frgczx-1226244932453
the numbers exclude compulsory superannuation which you guys started in 1992 and which is worth a trillion or so
http://en.wikipedia.org/wiki/File:Aus_super_funds_assets.png
in the US, pensions are unfunded. Good luck with keeping those savings when Governments globally default on debt.
Your nation's fate is tied directly to the fate of the rest of the Anglosphere. Australia isn't even a sovereign nation in reality, not on matters of national security, foreign policy, and economic policy. Of course you are, in fact, part of the British commonwealth and still subjects of the Queen and royal family by law.
My only qustion is whether the U.S. Anglo elites are running the show or whether it's the British Anglo elites/royal family. Perhaps most likely it is simply an alliance formed by the Anglosphere during and after WW2 to build a global empire with which to dominate the globe. Between the U.S. and the U.K. (and the rest of their holdings, like CA/NZ/AU).
Yep, bingo.
Didn't the US just send some troops to occupy Australia? Put another shrimp on the bar-B, mate.
ODIOUS DEBT - from Wikipedia
In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
I think we can apply for relief under this basic tenant.
No matter how you measure or slice it, we are NEVER going to be able to pay off the debt. With 10,000 new retirees every day - what are you going to do, just let them starve in the streets? Fuck it. Spend your FRNs now, while you can and buy something that has real value. We are well past the point where we can ever expect to fix our "debt problem".
"Most Selfish Generation’s free health care"
Free ... I don't think so. Over my career I have 'contributed' over $150,000. Give it back to me and I'll provide my own healthcare thank you.
No you won't--with inflation, $150K won't be worth Jack, Bear!
Ilene: It is so much simpler and yet more complex than your graphs above reveal. Though I do admire you for trying. My response is...
I never want to hear another word or sentence that starts with or contains the term unfunded liabilities. If you had used that term and the math to go with it in 1932, or 1947, or 1968, or 1993 we would all be looking at dire consequences. Over all those years there was indeed an erosion here but not dire. In fact the living standards of all people every place have risen.
You cannot match possible revenues and taxes or "projected" future costs of government (accrual accounting) with what government will take in or lay out (cost accounting).
You should know better than that. If you are not an accountant you should ask one, can you compare cost and accrual accounting to the same data? The answer is no.
Here is the real problem Ilene, taxes are at the lowest point in my life, and I am on the downhill slide to the dirt nap. Every whiner out there will give me a red arrow because they so hate government and redistribution of wealth downward but the fact is that taxes are low, and that our crony capitalist system is in effect a tax on the poor that continuously redistributes wealth upward far more insidiously than the government could even dream of redistributing down.
Of particular interest to me is the estate taxes. I say leave a million bucks cash to your kid, if you have a billion then leave a million to the next thousand closest relatives to enjoy or build upon, but anything over a million per person goes to the government in tax anyway. No more dynastic wealth getting transferred and protected by tax law.
As time goes by and there are ever more billions of people on the planet it will become clear that wealth has to be spread ever more widely. I do not ask any of you to be happy about that, but I will not respect you if you deny what we all know is true. I say right now that millionaires should be rare and there should be no such thing as a billionaire. The fact that there is a billionaire means that taxes are WAY too low. It cost me $200 to get a chassis alignment last week after hitting an unmarked ditch in a residential street because the city is too broke to fill holes. That is a tax as sure as if the city had just had the balls to tax the rich fuckers that have the cash to pay and I am dead tired of the whiners here that claim that all tax is theft. You have no morals and no integrity and you can pay up or stuff it and leave.
You want to do a civil war over paying your fair share? Bring it on. Or, do like your jesusfucker said and give fiat to fiat printers, if he were alive today he would have said something like that, but the next whining piece of shit that bitches about taxes is going to get it up the ass from me just before I do them.
We have problems, we can make solutions, but I am more than willing to go to war with many of the butt fucking retards here that cannot get along. They are more part of the problem than the Fed, and the biggest part of the solution will be their elimination.
RED ARROW THAT MOTHERFUCKERS!
There's no such thing as a "fair share." I'm not sure exactly what you're even suggesting. Are you saying taxes are a good thing because they redistribute wealth more evenly in some magical fashion? I haven't seen it in my lifetime. Taxes are just another part of the big scam that tells people they can have something for nothing while the elite pick winners and losers and socialize their losses. Your city didn't fill in the potholes because they have too many employees who are collecting their pensions and they blew all the money on a sports stadium or some other horrific boondoggle instead of doing what they were supposed to be doing. Everyone thought the good times would last forever.
If all of the governments in the US combined had the entire GDP of our country to spend it would still not be enough.that is the nature of government.
You know what bothers me most? It is the Greeks that invented the concept of democracy, but the idea did not take off in any real way till America came along. Now we are proof that it does not work and that is all thanks to the greedy fuckers that think what they have is THEIRS when in fact what they have came from the community they live in. So rack'em and I willl break, you want to see how nasty it can get? You are not and can not possibly be prepared for how nasty it can get. Work with the system or die and I mean it like I am betting my kids life on it.
I think to keep the whole thing going you have to have people who are basically altruistic and will pay decent wages, give back to the community, and treat people like human beings. Mega-corporations are not good at any of that, although they pretend to be.
of course you are right. you argue from fact and not concept. if you can stand it..try this one out for size.
http://www.zerohedge.com/news/150-years-us-fiat
my comments or 2327400
as we are in a SNAFU, this might provide some backbone.
for the record, I think the problems can be solved by simply writing an additional 5-8% in taxes direct to the rich and just get them off our backs for good (albeit over 15-20 years).
The wealth distribution you recommend has been tried. Its called communism and it is an abject failure. Your sentimental "love" of the poor will condemn most of them to starvation. Rich people SAVE and INVEST money. Sure, they spend a little of it on frivolous stuff, but the rest goes into the bank and the investments that drive the economy. Poor people are hand to mouthers where nothing good accumulates, no wealth, no progress, not even maintenance. Your society would fail miserably.
It has always been this way, and always will. I hope the world is not as stupid as you are, and your world never comes to pass.
You created a straw man ddtuttle. Boiltherich advocated a redistribution away from the heavily skewed reality of today to a more equitable position and you took it to the extreme and trotted out the old and tired commie line. Where did he mention communism? After attacking a point he never actually made, you then proceed to advocate trickle-down despite the fact that it has clearly failed very badly.
I very much doubt that boiltherich advocates a flat wealth distribution, he strikes me as a person who would instead advocate meritocracy. What he is inelegantly saying is that we today see wealth distributed on a Pareto curve (power law) to such an extent that it actively harms society. Most human traits follow a Gaussian distribution and where wealth strays far from this natural state, inequality-induced harm inevitably follows.
The following presentation of empirical data is required viewing and any opinion regarding wealth distribution is hollow without being aware of the facts on display: http://www.ted.com/talks/richard_wilkinson.html
Lo, a trickle-down theorist.
I'd say they're both wrong--the rich also dine on the poor via usury. Look at what Corzine did, look at what these big banks do to their customers through fees, look at the scam that higher education has become.
Next week we'll see the report about how Illinois is 80-125 Billion in
unfunded liabilities.
You either confiscate Sears Tower or cut pensions/health-care.
Buehler?
Buehler?
I'm not wooried until I get overflow exceptions in double precision floating point.
Why? You can always just write a big numbers class and keep on chugging.
For 32-bits:
1.7976931348623157 x 10308 (Max Double)No problem ... we owe it to ourselves.
Don't you ZH youngsters even think about touching my SSI. hehehehe :) /sarc is on
No sir, we wouldnt do that but the medium used may change.
How do you feel about 1500 Green Stamps a month?
Obama 2013: By Executive Order, I hereby confiscate all 401(k) accounts, and any and all bank accounts and safe deposit boxes in order to fund the purchase of additional weapons to combat the growing domestic terrorism that is now sweeping this country and to fund the new war with Russia and China. I have made this decision to ensure that all Americans will survive to witness my coronation as Supreme Ruler of the Free World.
Actually, they'll roll pensions into treasuries, possibly soon. They already have committees working on it.
Later, they may go after 401(k)s as well.
Roll them Federal pensions in treasuries ... they deserve one another
Im expecting them to call it "The American Retirement Protection Act of 201x" and will be sold as guaranteeing our retirements. Of course it will be nothing but an excuse to loot and leave another IOU, and a vast swathe of the country will fall for it.
This thread needs to be " UP Lifted"
There is something I dont understand here. This article claims that debt was only 62% of GDP in 2010- yet in reality it was over 90. It seems to take the somewhat weasely tactic of claiming that intragovernmental debt /holdings do not exist. This category popped up on Treasury reports when W took office, have I missed something and am I mistaken in my opinion that it was just a cheap way for him to make the numbers look better?
Can anyone show me something that proves intragovernmental debt is not repaid/redeemed either through the same revenue stream that everything else is or the sale of further debt? How is this repaid any differently then anything else, do they print up Double Soopersekrit Benniebux, or do they push the Delete key?
if by intragovernmental debt you are referring to social security trust fund, then what you are asking can't be proved. It all has to be paid from the same citizens no matter what name you give the tax structure. Listen to this interview with a SSA trustee. Its pretty good. The problem with the accounting is that they tax the citizens too much then buy government debt with the money which another branch of government promptly spends. People are expecting a return on that excess taxation, but it is never accounted for on the balance sheet of the offending government. Pure accounting fraud if a company did it.
http://www.youtube.com/watch?v=ITMEZImvNio&list=FL0G4qTT4TiR0yDtxbfv_5Vw...
Thanks for that link KingPin, that one is a keeper. Schiff demolished him as I see it.
I believe SS is a part of that intragovernmental debt, what I am specifically referring to is this:
http://www.treasurydirect.gov/govt/reports/pd/mspd/2010/opds122010.pdf
I picked the December 2010 report because of the percentage claim in the above article, this shows total debt at the end of the year as 14,025,215,000,000, which is a helluva lot higher as a share of GDP then is stated in the article. It lists a cool 4.6 Trillion as "Intragovernmental Holdings"- if you look at older Treasury reports that separate category didnt start until W got into office and I think its just smoke and mirrors to fool people. People frequently use the "Debt held by the public" section for % of GDP calculations that are considerably lower than what I think is the reality.
Im just fishing to see if someone has concrete information that the Intragovernmental side is anything but Uncle Sam shuffling money internally and leaving a trail of IOU's which can only be paid out of the general revenue stream and the sale of additional debt. This article says 62% debt/GDP ratio, as I read these numbers it was already well over 90% in 2010.
Any defenders of massive deficit spending out there have something to show intragovernmental debt is not paid for or discharged the same way as the "Held by the Public" debt?
Intragovernmental is when SSI taxes people at too high rate and as a result has extra cash collected that they didn't send out to current beneficiaries. They take this extra cash and buy general gov't bonds. As a result the the federal gov't now has the pile of money to spend as they see fit, and spend it--they do (on defense, welfare, etc etc).
At the end of the day the federal government is spending the excess taxes collected from social security. As of 2010 social security is already running in the red so this game is coming to an end. Now the SSI Trust fund will sell some of those bonds to cover the shortfall.
The boomers may receive their benefits. However, no promises regarding purchasing power were ever made.
Add to that the fact that most people don't even have a basic understanding of inflation and the upcoming generation have no jobs, and it's pretty easy to see where this ends---->national bankruptcy and a systemic reboot.
Think of this situation as running Windows ME.
The fact that the US is crashing and burning in a similar way to the USSR is fucking delicious irony.
Create a 'new' dollar to be used for future debt and keep the 'old' dollar to pay for current debt i.e. future Social Security Benefits ... oh, I guess that's what happening with the dollar to zero trajectory
nah, the US gov will just default on the debt and pay zero
Flemming v. Nestor
No tickee, no washee...
And that tickee will be either gold or silver.
Too put the above excellent article in a few words:
We have embarked on a 500 mile journey across a desert with enough fuel to travel only part of the way, a radiator that is short of water, an engine that needs overhauling, no spare tyre and a driver that is drunk.
No hard feelings ilene. www.usdebtclock.org
A bankster can't convince me I owe them anything other than a duty to handcuff them and throw them into prison.
They owe more than the money they've stolen.
“Unfunded liabilities” is just a scare tactic used by the bankster shills to scare everyone. They never offset it by the revenue that will be collected by social security payments in the future.
Let’s talk about the $7 trillion dollars wasted on the credit crisis—caused by banksters—saving banster butt. By the way banksters, the economy still stinks, please give back the $7 trillion dollars you said would save us.
I'm not trying to insult you, but I don't think you understand what unfunded liabilities even means. Unfunded liabilities is basically net present value (NPV). It's just a mathematical formula and is very difficult to argue with.
Many assumptions go into the “unfunded liabilities” calculation, which are never presented. To state this future number as fact is bullshit.
Let's say for the sake of argument that the figure is around $1Trillion, how much of your share (around $33K) are you willing to cough up?
Think EVERYONE has that kinda cash?
My last soc-sec benefits statement said I get something on the order of $2.5k per month, or $30k per annum when I reach retirement age. Assume I get that for at least 20 years thereafter, and assume no COLA to keep it simple. Assume there are at least 50m who have the same promise and it is 20 years out. Assuming a reversion to interest rates around 4.5%, the value today of that annuity is $163k or so, even more if I assume financial repression keeps rates lower in perpetuity. For the whole 50m, the annuity is worth $8T. Assume another 25m get 50% of that and another 12.5m get 25% of that. That pretty much covers the current work force and some of the current collectees, and we already have a conservative PV of more than $10T. Circa $20T if rates are assumed to be 2%, circa $4T if rates allowed to go to 9%. Forget future revenues, assuming they even exist (current revs equal circa one-half of planned outflows), since future revenues would be largely earmarked for future beneficiaries in addition to making up the shortfall for current beneficiaries.
That is just one piece of the pie, albeit a big one. Then there is Medicare and, now, Obamacare. And public servant pensions and healthcare and so on.
So yeah, if they draw the line under the current workforce and collectees, this mess can be managed pretty much only through inflation. Of course, that will blow out interest costs on the existing debt as it rolls into higher rates.
See, after all those years of giving out free money, it is hard to not have sympathy with the politicos when they say they have hard choices to make.