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  1. #1
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    America's Coming Bankruptcy

    I found an interesting old thread about this topic; current presidential candidates have been rather quiet about it since then and now: very few new ideas or initiatives, the Titanic of social security, medicare and entitlement schemes apparently continues to sail inexorably toward an iceberg of debt many trillions in size!

    This appears to be a major crisis in the making, not limited to the US, of course. A growing elderly population coupled with a declining tax base make for some very scary numbers...

    Is the alarm justified?

    "The unfunded liabilities of Medicare begin maturing in 2008. The baby boom generation starts reaching the minimum Social Security retirement age in late 2008. The unfunded liabilities of Social Security begin maturing in 2012. And the boomers reach Medicare eligibility in 2011. The unfunded liabilities of Medicare and Social Security are estimated to be roughly 12 trillion dollars. The current debt exceeds 6 trillion and will exceed 8 trillion by 2012. Current GDP is roughly 10 trillion and the federal budget is roughly 2 trillion.

    Assuming 3% annual growth in GDP (extremely optimistic in my opinion), in 2012 we are looking at a $13.5 trillion economy. At 5%,interest payments for the United States government will equal half of all current federal revenues and federal deficits will be ballooning. I will ask the doubters four questions:

    Who will finance this profligate debtor? And at what rate?

    Who will this debtor tax to make payments on these debts? And at what rate will they be taxed?

    All democracies throughout history have ended in bankruptcy. When voters discover they can vote themselves payments from the public treasury, Pandora's box has been opened. The XVIth and XVIIth Amendments (both ratified in 1913) brought the US much closer to a
    democracy than to the republic given to us by the Founders. Prior to the establishment of the Federal Reserve in 1913, federal tax revenues never exceeded 6% of GDP as opposed to our current 20%. The 1912 dollar bought 99 cents worth of 1789 goods and services.

    In the US today, two out of every three dollars spent by the federal government are payments to individuals or groups for which no products are delivered or no services rendered. The 2002 dollar buys 5 cents worth of 1913 goods and services. The US began life
    with debts from the Revolutionary War of $75 million (that's right million with an M), but had reduced that to a mere 38 thousand dollars by 1836.

    The debt ballooned to a staggering 3 billion (that's billion with a B) after the implementation of the Federal Reserve and WWI. By 1965 it was a mere 325 billion when LBJ began cranking up the War on Poverty reaching the first trillion by 1981 and the second trillion by 1986. And we are still adding roughly a trillion every five years.

    If we do not turn the United States around a full 180 degrees within the next three election cycles, there will be no Presidential election in 2016. It is not politically possible to
    tax Americans sufficiently to pay the unfunded liabilities of Medicare and Social Security while financing our existing deficits. There are only two ways these unfunded liabilities can be met:

    Substantial additional borrowing; and running the printing presses to create more dollars out of thin air

    When the "full faith and credit of the United States" is a meaningless term and no one will accept dollar bills in exchange for goods and services, like all other democracies throughout
    history, the United States will be bankrupt. That day is going to arrive before 2016.

    Government taxes exceed the cost of housing, food, clothing and transportation for almost half of all American families. The NASDAQ bubble has burst. The DOW and S&P bubbles are rapidly deflating. The dollar and bond bubbles are precarious. The credit bubble is
    still inflating thanks to Americans who are taxed to the point of having to borrow to meet daily living expenses."


    America's Coming Bankruptcy - misc.invest.stocks | Google Groups

    Ha! And this was written in 2002, before the final bill for the Iraq War comes in, not to mention the housing bus, and heavy borrowing...
    Last edited by Hootad Binky; 19-07-2007 at 07:49 AM.

  2. #2
    I don't know barbaro's Avatar
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    ^ very good and real points.

    But most Americans have their head in the sand. Very oblivious to all of this. Most people (meaning more than 50&#37 think of the "here and the now."

    This year, I invested what little money I make into purely International stocks/funds.

    The Debt Train will hit the wall sooner or later. Could be a while. Maybe sooner. This, I don't think we know.

    Economists and financial "experts" cannot predict the future worht beans. But I do listen.

    Many successful people (Jim Rogers, Robert Schiller, Warren Buffett) have been making some very dire statements about the state of the U.S. spending and lack of attention to serious problems.
    ............

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    Yeah, what piqued my interest was an interview on CNN last month with a Congressman who has made it his mission to talk about this at every opportunity, in a bi-partisan way since no-one else is. They also had two economists come on, from both sides of the political spectrum, and everyone agreed that bankruptcy is a certainty if trends and policies are not immediately altered.

    But we've heard it before and no-one wants to dwell on it now...

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    monetizing the debt

    More debt, more money, more growth, more inflation, smaller debt payment

    works like a charm

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    Thailand Expat

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    Quote Originally Posted by Hootad Binky
    But we've heard it before and no-one wants to dwell on it now...
    Your solution?

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    I wrote about this a year or so ago.

    This was one thing that Maggie sorted out in the UK. It means our pensions are lower, but the country won't be bankrupted by looking after the old folks. It also places more emphasis on the citizens getting their personal pensions sorted out (not that I have mind).

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    ^ personal pensions so they can pissed it on a trip to the Carribeans ?

    or company pension that the CEO can use as his personal ATM ?

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    Quote Originally Posted by Marmite the Dog
    It also places more emphasis on the citizens getting their personal pensions sorted out (not that I have mind).
    The vast majority of Americans simply don't. I spent 30+ years working for the US Social Security agency. (In the US 'Social Security' is the name for the contributory retirement scheme. It's not "the dole" or public assistance.) I was always amazed at how many people were expecting to live on their Social Security alone, in spite of the fact that people are encouraged by various laws to set up their own retirement income plans. Until that mindset changes the problems will continue.

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    Democrat-spouting rubbish, Hootie. You are only looking at selected sectors of the US economy and the welfare state, which is nothing compared to that of Euro countries, which are already staggering under the weight of their overly generous handouts. You should be supportive of the US, because you know who the next superpower is gonna be? China. And see what you're gonna get for a pension if they rule supreme. Bladdy US bashers. You make me wanna hoist the American flag outside my overpriced, overtaxed flat in Canada. Find a solution instead of f* complaining all the time. You sound like the lesbian alliance.

  10. #10
    watterinja
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    When it does come time to pay, I'll bet the US will agree to pay cents on the dollar. Since they are still the world's largest economy, suppliers will happily agree. End of problem. It's all paper-wealth anyway.

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    There is a long thread on this in USDomestic Issues.

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    Italy Public debt 107.8% of GDP (2006 est.)

    United States Public debt 64.7% of GDP (2005 est.)

    We'll keep an eye on Italy.
    Last edited by attaboy; 19-07-2007 at 12:12 PM.

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    Quote Originally Posted by attaboy View Post
    Italy Public debt 107.8% of GDP (2006 est.)

    United States Public debt 64.7% of GDP (2005 est.)

    We'll keep an eye on Italy.
    Thank you, Attaboy for keeping things in a global perspective.

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    Quote Originally Posted by attaboy
    United States Public debt 64.7% of GDP (2005 est.)
    I was sent some info from a finance friend of mine showing US public debt at around 0% as of last year.

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    Not sure how 0% works. If Italy is any indication, the public debt could get higher in the USA and things could still be salvageable.

    Italy's national debt stood at 109.4% of GDP in 2001, down from 124% in 1995. The EU's mandated debt to GDP ratio is 60%.

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    What I'm saying is that there are figures to prove whatever the hell you want them to prove if you know where to look.

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    You're absolutely right and I can prove it.

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    Quote Originally Posted by Jet Gorgon View Post
    Democrat-spouting rubbish, Hootie. You are only looking at selected sectors of the US economy and the welfare state, which is nothing compared to that of Euro countries, which are already staggering under the weight of their overly generous handouts. You should be supportive of the US, because you know who the next superpower is gonna be? China. And see what you're gonna get for a pension if they rule supreme. Bladdy US bashers. You make me wanna hoist the American flag outside my overpriced, overtaxed flat in Canada. Find a solution instead of f* complaining all the time. You sound like the lesbian alliance.
    What's stopping you from moving to the country you love so much, then?

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    Quote Originally Posted by buad hai View Post
    Quote Originally Posted by Hootad Binky
    But we've heard it before and no-one wants to dwell on it now...
    Your solution?
    An RRSP, I guess (registered retirement savings plan).

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    Quote Originally Posted by Jet Gorgon View Post
    Democrat-spouting rubbish, Hootie. You are only looking at selected sectors of the US economy and the welfare state, which is nothing compared to that of Euro countries, which are already staggering under the weight of their overly generous handouts. You should be supportive of the US, because you know who the next superpower is gonna be? China. And see what you're gonna get for a pension if they rule supreme. Bladdy US bashers. You make me wanna hoist the American flag outside my overpriced, overtaxed flat in Canada. Find a solution instead of f* complaining all the time. You sound like the lesbian alliance.
    Do you live in Canada? How will the government pay the pensions of aging baby-boomers with a shrinking tax base? What does China have to do with anything? If you know so much, what's the solution, then?
    Last edited by Hootad Binky; 20-07-2007 at 12:56 AM.

  21. #21
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    Quote Originally Posted by Frankenstein View Post
    Quote Originally Posted by Jet Gorgon View Post
    Democrat-spouting rubbish, Hootie. You are only looking at selected sectors of the US economy and the welfare state, which is nothing compared to that of Euro countries, which are already staggering under the weight of their overly generous handouts. You should be supportive of the US, because you know who the next superpower is gonna be? China. And see what you're gonna get for a pension if they rule supreme. Bladdy US bashers. You make me wanna hoist the American flag outside my overpriced, overtaxed flat in Canada. Find a solution instead of f* complaining all the time. You sound like the lesbian alliance.
    What's stopping you from moving to the country you love so much, then?
    Edit: deleted, changed my mind.
    Last edited by DrB0b; 20-07-2007 at 02:05 AM.

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    I don't know barbaro's Avatar
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    Quote Originally Posted by Frankenstein View Post
    Quote Originally Posted by Jet Gorgon View Post
    Democrat-spouting rubbish, Hootie. You are only looking at selected sectors of the US economy and the welfare state, which is nothing compared to that of Euro countries, which are already staggering under the weight of their overly generous handouts. You should be supportive of the US, because you know who the next superpower is gonna be? China. And see what you're gonna get for a pension if they rule supreme. Bladdy US bashers. You make me wanna hoist the American flag outside my overpriced, overtaxed flat in Canada. Find a solution instead of f* complaining all the time. You sound like the lesbian alliance.
    What's stopping you from moving to the country you love so much, then?
    Mr. Frankenstein, it's not easy to move to a foreign country and apply for residency or citizenship status. Also, noting negatives in a countries tax and economic policy does not mean one has to try to emigrate.

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    Thanks for the info, Attaboy; I like how HK is the lowest at 1%, but then, it's a money churner with few social programmes, altho that might be different now that the mainland is in charge.
    OK, I'm going to try to answer all the charges brought against me, altho as Marmie said, you can find stats and graphs to support anything you want, and I don't have any.
    FrankS, I cannot move to the US, because I don't speak the language (I can write it, tho). If I could, I would move to the Olympic Peninsula.
    Hootie, you throw Canada into the ring and then ask me what China has to do with your argument. Well, what has Canada got to do with anything here? Most western democracies are heading toward bankruptcy and raising personal taxes to save themselves. Canada is also busy hugging illegal immigrants, criminals and a few trees. I moved back to Canada mainly because I got fed up with being an alien; however, I work for a NY bank online so I think Americans like me, too.
    Anyway, I put China in there, because it is who we should be watching out for, if the world makes it past 2012. The Chinese are looking 100 years ahead, while the ROW is lucky to figure out entrees for lunchtime tomorrow.
    The US would go bankrupt if foreigners pulled out of its fixed income and equity markets.
    OK?

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    Quote Originally Posted by Jet Gorgon View Post
    If I could, I would move to the Olympic Peninsula.
    I grew up 20 minutes from there. Are you in Vancouver or Victoria? B.C.?

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