I’ll help the President along with his ambitious election promises.
The total value of federal debt outstanding is $12.4 trillion as of mid-February 2010. That was the maximum amount that the Treasury was permitted to borrow under the law until …
… President Obama and Congress raised the debt limit to $14.3 trillion. This is roughly the amount the CBO estimates will be required to keep the federal government from making drastic changes by the end of 2011.
Now, I do not make a distinction between the “debt held by the public” and the total federal debt outstanding, unlike the folks in government budget offices. What is the difference? A good portion of US debt is owned by government agencies itself – in the form of promises to pay future obligations. Since this is the U.S of A. and we always pay our obligations, let’s assume that those debts are real obligations.
But this $14.3 trillion of debt that is on the books merely scratches the surface of total U.S. federal obligations. What else are the Lords of Transparency hiding from view:
Let’s summarize the implied obligations of the Federal government for these wonderful programs (remember that in 1992 the government wrote into law that the obligations of Fannie and Freddie are NOT to be construed as federal obligations, so I am less optimistic than many others that the government will reduce payouts to seniors in the future, I tend to believe we are going to pay through the nose):
Total US Debt Obligations = $59.5 trillion. That is over 400% of US GDP. Has there ever been a country that did not default on its debt obligations when it is borrowing this much more than its output levels? And remember, not all of that GDP is available to pay obligations – the government is limited by how much it can extract in taxes before inciting a revolution – my guess is half this amount can ultimately be stolen from taxpayers. So, if you were to calculate a financial obligations ratio (much like mortgage companies do) it appears that we are borrowing over 8 times our disposable income. Would you ever be able to get a mortgage on those terms?
But I think I forgot a few things:
Forget the darn Constitution, why would I even try to argue than any of this was constitutional? The courts and the congress have brushed that aside for 200 years. All I can do is paraphrase a famous legislator, who spoke this in a different context. “Have you no decency?”
Is there EVER a point when the looters say that enough is enough? Is there ever a point when taxpayers understand that splitting the check ends up bankrupting everyone at the dinner table? Can’t I just sign a piece of paper now ending my obligations? Seriously – I’d buy a bond right now ending my obligations to these looters forever. But I will never have that option granted to me – even here in the land of the free. What is worse? Having your home broken into this year, with certainty, and the thief taking most of your valuables? Or knowing that your home will be broken into repeatedly every year until you die – and each time not knowing exactly when he will strike, or how much he will take?
Remember, it took hundreds of years of discipline by individuals to make us as rich as we are — and a mere 3 generations to destroy it all.
And World GDP ios estimated at $60.6 trillion (via Google search). So even if the US took every single dollar of production in the world, it still might not be enough.
More transparency.
My Way News – PROMISES, PROMISES: Is gov’t more open with Obama?
“Major agencies cited that exemption at least 70,779 times during the 2009 budget year, up from 47,395 times during President George W. Bush’s final full budget year, according to annual FOIA reports filed by federal agencies. Obama was president for nine months in the 2009 period.”
http://apnews.myway.com/article/20100316/D9EFLQB80.html
That leaves roughly $130, 000-$140,000 debt per person, not counting the homeless folks?
The most convenient way to repudiate our debt, which is denominated in dollars, is to print, or, more conveniently, to create balances denominated in dollars. If no one understands what is going on, we get Weimar Germany, but that’s not what will happen.
The Chinese aren’t the only ones figuring this out, by saying, hey, pay me more money on my T-whatevers. They of course hold a huge pile of dollars, which have to go somewhere.
Meanwhile, the rest of the world is waiting for someone to run for the door, keeping maturities on the short end, betting interest rates will rise for dollar-denomitated securities. Eventually that will happen, and it would be unwise to wait to ride the top of that crest.
What will happen is that our political class will debase our currency, because it is convenient for them to do so. Investors worldwide will demand higher interest rates. The days of the Missouri Pacific 4 3/4 income bonds of 2010 sold at par in 1954 are over.
Interest rates, beyond what the fed can control, will rise, even though the fed and the treasury can postpone the day of reckoning for a brief time. This is their conceit, and the game cannot go on, since they have not yet achieved total world domination. Unless every country is not free, no country can require everyone to dance to its tune.
There is reason for optimism, Wintercow. This movie was rerun in a different version in 1979, and I’d have to think a bit longer for other examples — Roman coin clipping comes to mind, and so does Rooseveldt — but they were unable to change the law of human nature.
I meant MOP 4 3/4 of 2020 and 2030. Got the maturity dates wrong, but the point is the same. The Fed, or the government cannot control interest rates unless they have an army that rules the world, in which case they can control everything, including smartass U of R professors and their progeny’s future.
Finally had a chance to go back and read all of this, eye-opening and unsettling.
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