"The US Is Bankrupt," Blasts Biderman, "We Now Await The Cramdown"

Tyler Durden's picture

Submitted by Chris Hamilton via Charles Biderman TrimTabs' blog,

US is Bankrupt: $89.5 Trillion in US Liabilities vs. $82 Trillion in Household Net Worth & The Gap is Growing. We Now Await the Nature of the Cramdown.

There are many ways to look at the United States government debt, obligations, and assets.  Liabilities include Treasury debt held by the public or more broadly total Treasury debt outstanding.  There’s unfunded liabilities like Medicare and Social Security.  And then the assets of all the real estate, all the equities, all the bonds, all the deposits…all at today’s valuations.  But let’s cut straight to the bottom line and add it all up…$89.5 trillion in liabilities and $82 trillion in assets.  There.  It’s not a secret anymore…and although these are all government numbers, for some strange reason the government never adds them all together or explains them…but we will.

The $89.5 trillion in liabilities include:

  • $20.69 trillion
    • $12.65 trillion public Treasury debt (interest rate sensitive bonds sold to finance government spending)
      • Fyi – $5.35 trillion of “intra-governmental” Treasury debt are not included as they are considered an asset of the particular programs (SS, etc.) and simultaneously a liability of the Treasury
  • $6.54 trillion civilian and Military Pensions and Benefits payable
  • $1.5 trillion in “other” liabilities http://www.fms.treas.gov/finrep13/note_finstmts/fr_notes_fin_stmts_note13.html.
  • $69 trillion (present value terms what should be saved now to make up the present and future anticipated tax shortfalls vs. present and future payouts).
    • $3.7 trillion SMI (Supplemental Medical Insurance)
    • $39.5 trillion Medicare or HI (Hospital Insurance) Part B / D
    • $25.8 trillion Social Security or OASDI (Old Age Survivors Disability Insurance)
      • Fyi – $5+ trillion of additional unfunded state liabilities not included.

Source: 2013 OASDI and Medicare Trustees’ Reports. (pg. 183), http://www.gao.gov/assets/670/661234.p

These needs can be satisfied only through increased borrowing, higher taxes, reduced program spending, or some combination.  But since 1969 Treasury debt has been sold with the intention of paying only the interest (but never repaying the principal) and also in ’69 LBJ instituted the “Unified Budget” putting all social spending into the general budget reaping the gains in the present year absent calculating for the future liabilities. If you don’t know the story of how unfunded liabilities came to be and want to understand how this took place, please stop and read as USA Ponzi explains nicely… http://usaponzi.com/cooking-the-books.html

$81.8 trillion in US Household “net worth”

According to the Federal’s Z.1 balance sheet http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf, the US has a net worth of $81.8 trillion – significantly up from the ’09 low of $55.5 trillion…a $23 trillion increase in five years.  Fascinatingly, “household” liabilities are still $500 billion lower now than the peak in ’08 but asset “valuations” are up $22.5 trillion.  All while wages have been declining.  A cursory glance at the Federal Reserve’s $4 trillion in balance sheet growth in the same time period shows how the lack of growth in “household” liabilities (currently @ $13.7 trillion) has been co-opted by the Fed.

I believe it’s clear when incomes no longer supported credit and debt growth in ’08, consumers tapped out and in stepped the Federal Reserve to bridge the slowdown.  But what the Fed may or may not have realized is once they stepped in, there was no stepping out.

(Charles, would be great if you could export this chart from FRED to be included…or if you have a better idea to show this relationship, would be great???)


How We Got Here – Growth of Debt vs. GDP

45 years of ever increasing debt loads, social safety net growth, corporate welfare.  45 years of Rep’s and Dem’s in the White House and Congress bought by special interests and politicians buying citizens votes with laws enacted absent the revenue to pay for them.   We have a Treasury and Federal Reserve willing to “innovate” and wordsmith to avoid the national recognition of the true difficulties and implications of our present situation.  45 years of intentionally avoiding an honest accounting of our national obligations, mislabeling, and misdirecting to pretend these obligations can and will be honored.  45 years of cornice like debt and promise accumulation simply awaiting the avalanche of claimant redemptions and debt repayments.

First, an historical snapshot for perspective of the last time US Treasury debt was larger than our economy (debt/GDP in excess of 100% in 1946) and subsequent progress of debt vs. GDP…and why anyone suggesting there is a parallel from post WWII to now is simply ill informed.


  • ’46-’59 (13yrs)
    • Debt grew 1.06x’s ($269 B to $285 B)
    • GDP grew 2.2x’s ($228 B to $525 B)
    • ’60-’75 (15yrs)
      • Debt grew 2x’s ($285 B to $533 B)
      • GDP grew 3.3x’s ($525 to $1.7 T) Income grew 3.3x’s ($403 B to $1.37 T)
        • ’65 Great Society initiated, ’69 unfunded liabilities begin under a “Unified Budget”

Post-Vietnam War:

  • ’76 -’04 (28yrs)
    • Debt grew 15x’s ($533 B à $7.4 T) Unfunded liability 15x’s ($3 T to $45 T)
    • GDP grew 7.3x’s ($1.7 T à $12.4 T) Income grew 7.4x’s ($1.37 T to $10.1 T)
    • ’05 -’14 (9yrs)
      • Debt grew 2.4x’s or 240% ($7.4 T à $17.5 T) Unfunded liability 1.5x’s ($45 T to $69 T)
      • GDP grew 1.4x’s or 140% ($12.4 T à $17 T) Income grew 1.4x’s ($10.1 T to $14.2 T)
        • Z1 Household net worth grew 1.25x’s from $65 T to $82 T…


If the trends continue as they have since ’75, Treasury debt will grow 2x’s to 3x’s faster than GDP and income to service it…and the results would look as follows in 10 years:

  • ’15 – ‘24
    • Treasury debt will grow est. ($17.5 T à $34 T to $44 T)
    • GDP* will grow est. ($17 T à $22 T to $24 T)…income growth likely similar to GDP.

* = I won’t even get into the overstatement of economic activity within the GDP #’s…just noting there is an overstatement of activity.

So, while the Treasury debt growth rate skyrocketed from ’05 onward and the GDP growth slumped to its lowest since WWII, the unfunded liabilities grew even faster.

Drumroll Please – Total Debt/Obligation growth vs. Debt

Let’s go back to our ’75-’14 numbers and recalculate based on total Federal Government debt and liabilities:

  • ’75-’14
    • debt (total government obligations) grew 33x’s 168x’s ($533 B à $17.5 T $89.5 T*)
    • GDP grew 10x’s ($1.7 T to 17 T)
      • Household net worth grew 15x’s ($5.4 to $82 T) while median household income grew 3x’s (est. $17k to $51k) while Real median household income grew 1.13x’s ($45k to $51k)

*$89.5 T is the 2012 fiscal year end budget number, the 2013 fiscal year end # is likely to be approx. $5+ T higher, or debt grew 180x’s in 40 years vs. 10x’s for GDP / income….but seriously, does it really matter if debt grew at 10x’s, 16x’s, or 18x’s the pace of the underlying economy…all are uncollectable in taxes and unpayable except for QE or like programs.

Why Can’t We Pay Off the Debt or Even Pay it Down?

Take 2013 Federal Government tax revenue and spending as an illustration:

  • $16.8 Trillion US economy (gross domestic product)
    • $2.8 Trillion Federal tax revenue (taxes in)
    • $3.5 Trillion Federal budget (spending out)
      • -$680 Billion budget deficit (bridged by sale of Treasury debt spent now and counted as a portion of GDP)
      • = $550 Billion economic growth?!?
        • PLEASE NOTE – The ’13 GDP “growth” is less than the new debt (although the new debt spent is counted as new GDP) and the interest on the debt will need be serviced indefinitely.

Why Cutting Benefits or Raising Taxes Lead to the Same Outcome

While many try to dismiss these liabilities assuming we will continue to only service the debt rather than repay principal and interest; assuming we turn down the SS benefits via means testing, delaying benefits, reducing benefits; assuming we will bend the curve regarding Medicaid, Medicare, and Welfare benefits; assuming we will avoid further far flung wars and military obligations and stop feeding the military industrial complex; assuming no future economic slowdowns or recessions or worse; assuming a cheap and plentiful energy source is found to transition away from oil.  But all these debts and liabilities are someone else’s future income they are now reliant upon; someone’s future addition to GDP.  If these debts or obligations are curtailed or cancelled to reduce the debt or future liability, the future GDP slows in kind and tax revenues lag and budget deficits grow.  Of course I do advocate these debts and liabilities cannot be maintained, but austerity (real austerity) is painful and would set the stage for a likely depression where the nation (world) proceeds with a bankruptcy determining what and how much of the promises made can be honored until wants, needs, and means are all brought back in alignment.

So What’s it All Mean?

Let’s get real, austerity is not going to happen and we aren’t going to balance the budget.  We’re never going to pay off our debt or even pay it down.  We’re rapidly moving from 4 taxpayers for every social program recipient to 2 per recipient.  And ultimately, now we aren’t even really paying the interest on the debt…the Federal Reserve is just printing money (QE1, 2, 3) to buy the bonds and push the interest payments ever lower masking the true cost of these programs.  Of course, interest rates (Federal Funds Rates) have edged lower since 1980’s 20% to todays 0% to make the massive increases in debt serviceable.

Politicians and central bankers have shown they are going to print money to fulfill the obligations despite the declining purchasing power of the money.  It’s not so much science as religion.  A belief that infinite growth will be reality through unknown technologies, innovations, and solutions that in four decades have gone unsolved but somehow in the next decade will not only be solved but implemented.  Because it is credit that is undertaken with a belief that the obligation will ultimately allow for future repayment of principal, interest, and a profit.  But without the growth, the debt cannot be repaid nor liabilities honored.  Without the ability to repay the principal, the debts just grow and must have ever lower rates to avoid interest Armageddon.  This knowledge creates moral hazard that ever more debt will be rewarded with ever lower rates and thus ever greater system leverage.  The politicians and central bankers will continue stepping in to avoid over indebted individuals, corporations, crony capitalists, cities, states, federal government from failing.  It is a fait accompli that a hyper-monetization has/is/will take place…and now it is simply a matter of time until the globe either becomes saturated with dollars and/or reject the currency (so much to discuss here on likely demotion or replacement of the Petro-dollar and more…).  Because the earthquake (unpayable debt and obligations) has already taken place, now we are simply waiting for the tsunami.  Forget debt repayment or debt reduction…forget means testing or “bending cost curves”…we’re approaching the moment where even at historically low rates we will not be able to pay the interest and maintain government spending…without printing currency as this generation of American’s have never seen.  Bad governance and bad policy coupled with disinterested citizens will demand it.

Epilogue – So Where Do you put your Money?

No one can really know what will have value in this politicized crony capitalistic system as the hyper-monetization ramps up…all I can suggest is to hedge your bets with some physical precious metals, some minimal leveraged real estate, but also stocks and bonds and even some cash…because although there are natural forces in favor of the tangible, finite goods…there are also equally determined forces bound to push bond yields down, real estate and particularly stock prices up.  Unfortunately, the more you know, the more you know you don’t know…invest and live accordingly.


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Cattender's picture

so we're Bankrupt.. but, in a Recovery?? WTF??

ebworthen's picture

Yeah, and buy some stawks to support the ponzi.

mayhem_korner's picture



Wait..."ponzi" is not the short dude on Happy Days?

(Weak, I know.  But I'm two scotches in and that's the best I can muster.)

Yes_Questions's picture



Just two?




Come back when you're serious.



SafelyGraze's picture

safelygraze comment re: biderman got taken out

what gives?

Dutti's picture

Because safelygraze was in the downline  of "my sister made a million"


SafelyGraze's picture


of course.

thanks dutti.

Manthong's picture


It’s the Cram UP that I am concerned about.

Occident Mortal's picture

Come on guys.

The unfunded liabilities such as Medicaid and Medicare will just see entitlements watered down when the costs get too high. They will probably be sold off to JPMorgan along with some giant forced insurance bill that just happens to coincide with it. The government doesn't intend to default and collapse, with the flick of a pen they can do whatever the hell they like.


Same with pensions, the government can just push the pension age a little higher and bingo the liabilities are gone. Talk to people under 25 and most expect their pension rights to be removed completely before they ever reach pensionable age.



Thought Processor's picture



All roads lead to reset.



ActionJackson's picture

Yes, the gub'mint is really good at kicking the can down the road. Too bad for them that all roads end at some point.

teslaberry's picture

this is exactly the plan. all these obligations will be changed by law. '

'default' will be legally and slowly arranged as a series of legal maneuvers comprising unilateral negotiation between the government and its weakest creditors.

the people that will be most severely fucked are those with the least power, and those with the least voting power because of crony democracy (kronacracy, yea i just aid kronacry, you heard it here first !) .

who is the easiest to fuck over in a politically correct , hyper technological, effeminized , OLD , and SICK, society?

healthy working age men, that is who.

Dugald's picture


Make it three and try harder.....

stocktivity's picture

I keep telling you...It's all Bullshit!!!

rubiconsolutions's picture

I guess I'm a little confused. If every dollar in existence was manufactured by way of debt through fractional reserve banking then there aren't really any assets from a dollar perspective, right? Sure, there are physical assets which some own outright but in the final analysis isn't the whole system just one big Ponzi which will inevitably collapse?

Mercuryquicksilver's picture

What are you confused about? Does inevitable mean 1 month or 1 decade?

HardAssets's picture

Yes . . . the definition of 'inevitable' has gotten a lot of us in trouble. (or not, depending on what the definition turns out to be in the end)

Mr. Ed's picture

"…all I can suggest is to hedge your bets with some physical precious metals, some minimal leveraged real estate"

One thing IS inevitable: this kinda talk leads an ever increasing number of dupes willing to pay 5x - 10x or more than what land is actually worth... great advice Charles... got a little thing goin there with the NAR?

Mr. Ed's picture

diito...(WTF!  who maintains this editor?)

Mr. Ed's picture

...or is the real estate bubble not big enough for ya yet?

Global Observer's picture

Money is needed to transfer wealth (commerce), but not to create it. As long as those creating these tokens of value (money) restrict their creation to that needed for trading the wealth being created, there is no reason for the system to fail, ever. However when people confuse money for wealth and demand endless of creation of these tokens and the creators oblige, it is bound to end in a collapse of the system. But as long as a society is capable of generating wealth, collapse of one token of value is not a catastrophe, other tokens of value will quickly replace it. Hyperinflation of Zimbabwe dollar didn't cause their economy or social fabric to collapse. People switched to using the US$ and South African Rand instead of the Zim $. If the US too is capable of generating actual wealth, collapse of the US$ is not the end of the world, merely a temporary inconvenience. If, on the other hand, the US has little capability to generate wealth, it will be more than a temporary inconvenience when the US$ collapses, because then the country's overall consumption has to be limited to what it can produce in terms of actual wealth. What the internal distribution of the consumption of the wealth produced is anybody's guess, but a very large percentage will hve to settle for significantly less than what they have been consuming so far.

FredFlintstone's picture

I think you are generally correct, but it will be more than an inconvenience to the middle-aged and elderly. Just ask a Russian.

BrokusDickusMaximus's picture

So, let's just say that a soldier (hypothetical) came across a vast stack of physical gold bars while in the midst of the Operation Iraqi Freedom. This (hypothetical) soldier now needs to convert said very large bars into fiat Federal Reserve Notes to further his retirement after the devastaing and vicious divorce he endured. I mean Craigslist and ebay might not be an option. I can't eat this shit if you know what I mean. The ex is sniffing around hard because she thinks there might be a payday headed her way. Anybody know a buyer that can keep his f@#king mouth shut? Everything is so tracked and video recorded that it makes it hard to do what I want.

Its_the_economy_stupid's picture

BDM, Hypothetically, you're fooked. But actually, you're king o' the mountain.

ratpack1968's picture

Hypothetically, it makes it harder to do what you want when you post your hypothetical dilemma on a website that is accessed by a large audience.

Ying-Yang's picture

You might consider asking the NSA where to exchange said gold since they are aware of said hypothetical problem?

Silverhog's picture

No recovery here in southern Masshole. Retail store summer sales fell off a cliff early June. Many saying worse sales record in over 30 years for many long timer businesses. State Sale Tax dept will be getting quite a jolt this coming quarter. 

pazmaker's picture

Fall River/ New Bedford?

ThirteenthFloor's picture

Silverhog > Good comment.  As retailer cashflow falls, inventory and supplies will drop off.  Get the essentials now.  Winter will be short of supplies.

ThirteenthFloor's picture

Brain hasn't quite found out the body is dead.

Give it a few months.  They will not be peace for Christmas.

LetThemEatRand's picture

$69T in unfunded SS and Medicare liabilities?  Meet Ebola.  Ebola?  Meet $69T in unfunded SS and Medicare liabilities.   I'm going to go get a drink.  Talk amongst yourselves.

fonzannoon's picture

Oh the sweet irony. Biderman went Schiff. But only after he got everything else wrong first.



LetThemEatRand's picture

Did your wife forgive you yet for hitting her with the power washer upon her return from the City?  Still laughing at that one.

No doubt Biderman is a Johnny Come Lately.  It's going mainstream, which I think probably means something.

CrazyCooter's picture

I don't have a dog in this hunt (paying off debt with a small bit of metals and cash out of the system), but didn't Biderman run the "float shrink" ETF which is pretty much on the money with all this insane buy back BS going on that is proping up stocks?

Maybe he is an asshole. Maybe he is a con. But unless I miss something, he has it nailed (for now).

Of course, that can change in a few weeks when the modern world gets Ebola and survivors are selling blood transfusions for ... right, survivors are in the FEMA camps whose guards are selling their blood for tens of thousands of dollars.



fonzannoon's picture

he also famously went 100% short the S&P I believe around 1,500 on the nose.

LetThemEatRand's picture

Didn't know that.  Based on that, it sounds like he's a muppeteer.  So the S&P is probably poised to double from here.  

CrazyCooter's picture

Personally the ride I think I am on is "stawks double, food quadruples" or something along those lines.

The press will pretend that chalk water is milk (hedonics, etc) and we all ride down hill to hell.

Personally, I don't give a pinch of coon shit about biderman, I just know him from all the float-shrink-etf posts (he used to get a lot of traffic and even more hate) from a while back on ZH. Topically, it seemed like a good call. I don't have any money in the market and never will ... the rest of my life.

Fuck you Wall Street.



El Vaquero's picture

What?  The 20+ pounds of squash on my counter and the elk steak I had for dinner with said squash was pretty cheap when all costs were added up.  The strawberry-green chile jam I made the other day was pretty damned cheap too.  I've found that hot pickled green beans kick ass too for not that much.  Oh, and tested some of the mustard seed for pickling that I got from fucking Albertson's, and it germinates.  Guess what I'll be planting soon.


Food doesn't have to quadruple for everybody.

Bananamerican's picture

Well, yeah, but it's still 20 lbs of SQUASH El Vaq....

El Vaquero's picture

Squash is good.  I saw "organic" yellow squash for $3.99/12oz the other day.  I'm pulling that much out every one to three days, and then I have the patty pans, the zuchinnis, the patty pan-yellow hybrid, the zuchchini-yellow hibrid, and all of the winter squash that is just now starting to produce, as in the female flowers have finally appeared. 


PS, I didn't red you.  My grandfather hated squash, and he was born on a farm in the territory of New Mexico.  If you know anything about the native diet, you know that squash is kind of a big deal.

FreeNewEnergy's picture

El Vaquero, need to correct you. SQUASH IS AWESOME!

I have been harvesting mammoth spaghetti squash (from heirloom seeds) in my back yard for two weeks. Biggest one was over six pounds. They are beautiful, oval-shaped, yellowish, delicious and nutritious. And, they are a snap to prepare. Just cut in half, scoop out the seeds (save them, but one squash will produce enough seed that you'll never need any more), place face down in over, cook at 325 for about 30 minutes.

Comes out like spaghetti with a fork. I tried some with grilled chicken, sauteed olives, onions and my own home-grown broccoli in olive oil and butter. A little  garlic, pepper and grated cheese and I thought I had died and gone to heaven.

Best part is I didn't plant these three squash plants in my garden, because last year, I had three and they went everywhere. These three came up by themselves. Gotta love mother nature. Now they're battling with the equally-voracious three cucumber plants for domination of the garden.

These cucumber plants are serious climbers. Those I planted myself, near the seven-foot deer netting. Well, they've climbed up that and one actually reached over and grabbed ahold of a branch of a tree. I now have the only cucumber tree in America, or, at least in upstate NY.

But the squash is incredible. Figured the pioneers must have ate a lot of squash during the winter. It can be stored for as long as six months in proper conditions, without refrigeration.

Biderman may tout, gold, silver, stawks, cash, but my money's on Mother Nature and spaghetti squash.

LetThemEatRand's picture

Biderman was right, but for the wrong reasons.  If he were honest, he would have said "the economy is fucked, but go long because the Fed is going to paper it all over and it will work for a while."  Like most of his ilk, he defended the system on CNBC.

Hal n back's picture

actually Biederman said a few weeks ago in response to the question of when this market rally ends, he said it ends when the govt and Fed stop really printing, and when the corporations can no longer do buybacks.

conscious being's picture

Simple answer to that question. The market rally ends when Vlad says it does.

CrazyCooter's picture

One of my favorite, and little well known southern metaphors is approximately "two johns in a whore house fighting over a bible."

Its essential meaning is arguing a bout a particular truth when the actors are fatally flawed. The lesson extends from this, which is simply never seek truth from a flawed actor.

One can avoid a lot of trouble in life following this advice.