Thread: The strongest economy in the world

Originally Posted by sabang

The US is almost certainly out of recession

Originally Posted by robuzo

The financial sector has turned into a vast financial bubble machine, semi-detached from the real economy.

Oh yeah, never mind semi - detached....it's totally detached!

Originally Posted by Jet Gorgon

The latest asset bubble is being inflated with no-interest and low-interest Fed money and guarantees. Within that expanding bubble, large banks can leverage bets worth hundreds of billions of dollars into financial markets and compete with each other to make "trading" profits. And as long as the bubble is expanding, there are no losers on the other side of those trades ... except for us suckers in the real economy who ultimately, and inevitably, will pay the costs when the bubble bursts.

Originally Posted by Jet Gorgon

This problem is much, much larger than perfidy of any one bank.

Originally Posted by robuzo

It won't stop -- it can't stop -- until we redesign the financial sector from the bottom up.

Right on all counts. The thing is, the system didn't get that way by accident. This was designed in, sanctioned by laws passed by lawmakers who are paid for by lobbyists. Corruption by any other name would smell as corrupt.

Originally Posted by Jet Gorgon

Originally Posted by sabang

The US is almost certainly out of recession

US out of recession as economy grows by 3.5 percent
October 30, 2009

After four successive quarters of contraction, the US economy grew by 3.5 percent in the third quarter from July to September this year, signaling the end of the recession
US out of recession as economy grows by 3.5 percent | Global Crisis News

This from the annual meeting of the American economic Association, a long line of the most respected economists in the US states that the crisis is far from over, and thus contradicts the optimistic Wall street bankers and Government officials.





"US Financial Crisis Far From Over, Economists Say


Published: Monday, 4 Jan 2010 | 12:37 PM ET

America's financial crisis is nowhere near over, according to top economists who largely contradicted the growing chorus of Wall Street bankers and government officials who say the worst has passed.
"The recession is not over," said Michael Intriligator, professor of economics at the University of California, Los Angeles.
He predicted economic output would not return to pre-crisis levels until 2013, while the job market would not fully recover until 2016.
The views expressed at the annual meeting of the American Economic Association here stand in sharp contrast to rising optimism in the banking sector, which analysts say has benefited disproportionately from government bailout efforts.
U.S. gross domestic product expanded 2.2 percent in the third quarter, but the sustainability of the recovery remains the subject of fierce debate.


Talk is rife of "upside risks" to economic growth, which, on median, is predicted to climb over 3 percent during 2010, according to Reuters polls.
But Simon Johnson, an economist at MIT's Sloan School of Business, said that by propping up the financial sector, government efforts to date are only delaying another inevitable crash.
By giving large financial institutions the assurance that they are too big to fail, and thereby offering an implicit guarantee to excess risk-taking, the administrations of Presidents George W. Bush and Barack Obama have made the problem worse.
"The crisis is just beginning," Johnson said. "Have bankers won? In the short-term, absolutely. The immediate opportunity for change has already been missed."
That's because a broken political system leaves politicians beholden to the financial industry, argued Joseph Stiglitz, Nobel laureate and professor of economics at Columbia University.
The Myth of Innovation
For that reason, Stiglitz said, what has so far emerged in terms of regulatory reform proposals is far too meek to have any effects. "The regulatory reforms on the table are totally inadequate," he said.

Stiglitz said the idea that record banking profits were warranted because of a large degree of "financial innovation" was plainly wrong.
MIT's Johnson went further. What he calls the "mythology of financial innovation" was really "a way to extract rents out of consumers."

http://www.cnbc.com/id/34688471

^ Thanks for that.

An article on what we know: the jobs that disappeared won't be back. In the recession of the early 2000s, those jobs that disappeared never returned - but more and more people are added to the labor force.

It's the same this time around:

Even in a Recovery, Some Jobs Won't Return

• Article

By JUSTIN LAHART

Getty Images Veterans and family members wait on line to attend a job fair Nov. 23, 2009, in New York City.

Even when the U.S. labor market finally starts adding more workers than it loses, many of the unemployed will find that the types of jobs they once had simply don't exist anymore.
Employment in Selected Industries

See how many jobs were gained or lost in selected industries from November 2007 to November 2009.

• Video: Finding a Job in Uncertain Times

The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators.

Many of the jobs created by the booms in the housing and credit markets, for example, have likely been permanently erased by the subsequent bust.

"The tremendous amount of economic activity associated with housing, I can't see that coming back," says Harvard University economist Lawrence Katz. "That was a very unhealthy part of the economy."
Unhealthy but a boon for men without a college education. One in three jobs, or six million total, have been lost in the manufacturing sector since 1997, the last year the sector posted job gains. The upsurge in construction jobs accompanying the housing boom provided these workers in manufacturing with an opportunity to earn decent wages.

Now that door, too, has shut. With 1.6 million jobs lost over the last two years, the construction sector has accounted for more than a fifth of the jobs lost since the recession began.

For more highly educated workers, finance may no longer offer as many high-paying jobs as it has in the past. Thomas Philippon, an economist at New York University's Stern School of Business, estimates that the financial sector's share of the economy was nearly 20% larger than it should have been. Since the start of the recession, the financial sector has lost 548,000 jobs, or 6.6% of its work force. Mr. Philippon's estimate suggests there will be further pressure on financial jobs.

In other areas of the labor market, the recession accelerated job losses that were probably coming anyway. In November, there were 36% fewer people working in record shops than two years earlier, according to the Labor Department. There were 23% fewer people working at directory and mailing list publishers, and 46% fewer at photofinishing establishments. Those are jobs that, with the advent of mp3 recordings, Google and digital photography, were likely disappearing anyway.

Link & Entire: Even in a Recovery, Some Jobs Won't Return - WSJ.com

This is an Op-Ed by Pat Buchanan. Note the 5 things mentioned near the middle of the article.

Is America's financial collapse inevitable?

Posted: January 14, 2010
8:10 pm Eastern

© 2010

We were blindsided. We never saw it coming.

So said Goldman Sachs CEO Lloyd Blankfein of the financial crisis of 2008. He likened its probability to four hurricanes hitting the East Coast in a single season.
Blankfein was reminded by the chairman of the Financial Crisis Inquiry Committee, Phil Angelides, that hurricanes are "acts of God." Financial crises are manmade. Yet Blankfein was backed up by Jamie Dimon of JPMorgan, who said, "Somehow, we just missed ... that home prices don't go up forever."

The Wall Street titans thus conceded they did not foresee the housing bubble ever bursting and they did not consider the possibility of a collapse in value of the sub-prime mortgage securities piled up on their books.

Backing up Blankfein's plea of ignorance and incomprehension is this: The crisis killed Lehman Brothers and would have killed every one of them had not the Treasury and Fed, neither of which saw it coming, either, intervened with hundreds of billions in bailout cash.

Yet there were those who warned a housing bubble was being created like the dot-com bubble; others who predicted the Empire of Debt was coming down – as, today, there are those warning that the United States, with consecutive deficits running 10 percent of gross domestic product, is risking an eventual default on its national debt.

The warnings come from the Committee on the Fiscal Future of the United States, chaired by Rudolph Penner, former head of the Congressional Budget Office, and David Walker, former head of the Government Accountability Office and author of "Comeback America: Turning the Country Around and Restoring Fiscal Responsibility."

With that share of the U.S. national debt held by individuals, corporations, pension funds and foreign governments having risen in 2009 from 41 percent to 53 percent of GDP, Penner and Walker believe it imperative to get the deficit under control. Unfortunately, it is not possible to see how, politically, this can be done.
Consider. The five largest elements in the budget are Social Security, Medicare, Medicaid, defense and interest on the debt.

With interest rates near record lows, and certain to rise, and back-to-back $1.4 trillion deficits, this budget item has to grow and has to be paid if the U.S. government is to continue to borrow.

Second, with seniors on fire against Medicare cuts in health-care reform, it would be fatal for the Obama Democrats to curtail Social Security or Medicare benefits any further this year. Next year, they will not only lack the congressional strength but any desire to do so, after their anticipated shellacking this fall.

The same holds true for Medicaid. The Party of Government is not going to cut health benefits for its most loyal supporters. Indeed, federal costs may rise as state governments, constitutionally required to balance their budgets, cut social benefits and beg the feds to pick up the slack.

This leaves defense. But the president is deepening the U.S. involvement in Afghanistan to 100,000 troops, and the military needs to replace weaponry and machines depreciated in a decade of war.

Where, then, are the spending cuts to come from?
Can the administration cut Homeland Security, the FBI or CIA after the near disaster in Detroit? Will Obama cut the spending for education he promised to increase? Will he cut funding for food stamps, unemployment insurance or the Earned Income Tax Credit in a recession? For the near term, the entitlements are untouchables.

Link: Is America's financial collapse inevitable?

Originally Posted by Milkman

This is an Op-Ed by Pat Buchanan. Note the 5 things mentioned near the middle of the article.

Is America's financial collapse inevitable?

Posted: January 14, 2010
8:10 pm Eastern

© 2010

We were blindsided. We never saw it coming.

So said Goldman Sachs CEO Lloyd Blankfein of the financial crisis of 2008. He likened its probability to four hurricanes hitting the East Coast in a single season.
Blankfein was reminded by the chairman of the Financial Crisis Inquiry Committee, Phil Angelides, that hurricanes are "acts of God." Financial crises are manmade. Yet Blankfein was backed up by Jamie Dimon of JPMorgan, who said, "Somehow, we just missed ... that home prices don't go up forever."

The Wall Street titans thus conceded they did not foresee the housing bubble ever bursting and they did not consider the possibility of a collapse in value of the sub-prime mortgage securities piled up on their books.

Backing up Blankfein's plea of ignorance and incomprehension is this: The crisis killed Lehman Brothers and would have killed every one of them had not the Treasury and Fed, neither of which saw it coming, either, intervened with hundreds of billions in bailout cash.

Yet there were those who warned a housing bubble was being created like the dot-com bubble; others who predicted the Empire of Debt was coming down – as, today, there are those warning that the United States, with consecutive deficits running 10 percent of gross domestic product, is risking an eventual default on its national debt.

The warnings come from the Committee on the Fiscal Future of the United States, chaired by Rudolph Penner, former head of the Congressional Budget Office, and David Walker, former head of the Government Accountability Office and author of "Comeback America: Turning the Country Around and Restoring Fiscal Responsibility."

With that share of the U.S. national debt held by individuals, corporations, pension funds and foreign governments having risen in 2009 from 41 percent to 53 percent of GDP, Penner and Walker believe it imperative to get the deficit under control. Unfortunately, it is not possible to see how, politically, this can be done.
Consider. The five largest elements in the budget are Social Security, Medicare, Medicaid, defense and interest on the debt.

With interest rates near record lows, and certain to rise, and back-to-back $1.4 trillion deficits, this budget item has to grow and has to be paid if the U.S. government is to continue to borrow.

Second, with seniors on fire against Medicare cuts in health-care reform, it would be fatal for the Obama Democrats to curtail Social Security or Medicare benefits any further this year. Next year, they will not only lack the congressional strength but any desire to do so, after their anticipated shellacking this fall.

The same holds true for Medicaid. The Party of Government is not going to cut health benefits for its most loyal supporters. Indeed, federal costs may rise as state governments, constitutionally required to balance their budgets, cut social benefits and beg the feds to pick up the slack.

This leaves defense. But the president is deepening the U.S. involvement in Afghanistan to 100,000 troops, and the military needs to replace weaponry and machines depreciated in a decade of war.

Where, then, are the spending cuts to come from?
Can the administration cut Homeland Security, the FBI or CIA after the near disaster in Detroit? Will Obama cut the spending for education he promised to increase? Will he cut funding for food stamps, unemployment insurance or the Earned Income Tax Credit in a recession? For the near term, the entitlements are untouchables.

Link: Is America's financial collapse inevitable?

"Defense" needs to be in quotes. During WWII they called it the "War Department," which was a hell of a lot more honest.

"Jamie Dimon of JPMorgan, who said, "Somehow, we just missed ... that home prices don't go up forever." Well, a poor li'l Master o' da Universe can't be expected to know everything.

A Financial Crisis Inquiry Committee would be a good opportunity to clap those bastards in irons. They're criminals.

they are only criminals because we let them to be,

blame the regulators and politicians, they have been sleeping, again

This Congressional testimony over a year old but it's worth seeing. Note the website of Walker and Peterson: www. pgpf.org



Walker on C-Span:



Jan of 09, but worthy of watch, IMO.

Originally Posted by Milkman

Is America's financial collapse inevitable?

Dunno about collapse but in the case of the mortgage market in the US the amount of debt in the marketplace exceeds the ability of those who earn incomes to service it.

The boom times since Reagan were arguably not based on innovation & production, but rather debt leverage & asset inflation, as a result of that, the scale of the excess is going to be matched by the length of the adjustment.

This is why I feel America is back in negative growth, the excesses are different this time, retail numbers over Christmas were poor, consumers are still struggling, the end of this is still some way off.

^ Thanks for the great insights, Spin. I remember hearing about how Reaganomics caused economic growth, by supporters and as you note the economic expansion was because of what you cite: leverage and asset inflation. Also, I presume lower interest rates helped, after Volcker was replaced by Greenspan by the Reagan administration.

Here is an article on taxes by David Walker, on taxes and why taxes will likely (perhaps certainly) will be increasing.

Commentary: Why your taxes could double
Commentary: Why your taxes could double - CNN.com
* Story Highlights
* David Walker: If you've survived filing your taxes, you still have to worry
* He says the nation's debt is unsustainable and will require tax increases
* He says people should urge government to get fiscal house in order

By David M. Walker
Special to CNN

Editor's Note: David M. Walker served as comptroller general of the United States and head of the Government Accountability Office from 1998 to 2008. He is now president and CEO of the Peter G. Peterson Foundation.

(CNN) -- Even under the best of economic circumstances, tax season is a tense time for American households. The number of hours we collectively spend working on our returns is probably a lot more than government agencies claim.

The burden in financial terms is even greater: A recent independent survey found that the average American's total federal, state and local tax bill roughly equals his or her entire earnings from January 1 up until right before tax day.

Now imagine that tax bill doubling over time.

In recent years, the federal government has spent more money than it takes in at an increasing rate. Total federal debt almost doubled during President George W. Bush's administration and, as much as we needed some stimulus spending to boost the economy, the nonpartisan Congressional Budget Office now estimates total debt levels could almost double again over the next eight years based on the budget recently outlined by President Obama.

Regardless of what politicians tell you, any additional accumulations of debt are, absent dramatic reductions in the size and role of government, basically deferred tax increases. Remember the old saw? "You can pay me now or you can pay me later, with interest."

To help put things in perspective, the Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008. The numbers used to calculate this figure come directly from the audited financial statements of the U.S. government.

If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country.

Even broken down, the numbers can be tough to swallow. Yes, you've paid your taxes, but you still bear a significant share of the government's own financial burden.

To help this news go down with a smile, the Peterson Foundation is supporting a campaign designed to help Americans understand what Washington is doing to us, rather than for us.

Meet Owen & Payne (www.owenandpayne.com), partners in a fictional accounting firm that specializes in helping Americans fill out the "new" Form 483000, which spells out how our elected officials are putting our nation into more and more debt and how that bill eventually will have to be paid: By doubling your taxes. The campaign is all in fun, but the intent is very serious.

Unless we begin to get our fiscal house in order, there's simply no other way to handle our ever-mounting debt burdens except by doubling taxes over time. Otherwise, our growing commitments for Medicare and Social Security benefits will gradually squeeze out spending on other vital programs such as education, research and development, and infrastructure.

Personal savings, while experiencing an uptick lately because of the recession, have been too low for too long. As a result, when our government has to borrow money, it must increasingly turn to lenders overseas.

Effectively addressing these issues will require tough choices and comprehensive reforms, including budget controls, changes to our entitlement programs, reductions in health care costs, other spending cuts, and yes, tax increases. But as the old saw goes, paying now, or paying soon, won't be as painful as paying later.

So as you file your tax returns this year, bear in mind that no matter how much you're paying now, you'll pay much more in the future because of Washington's failure to get its finances in order. If you don't like the idea, then get informed and get involved. And by listening rather than punishing, help encourage our elected officials to speak the truth about our financial condition, even if it means reforming entitlements, cutting spending, and yes, raising taxes.

The opinions expressed in this commentary are solely those of David M. Walker.

Link: Commentary: Why your taxes could double - CNN.com

America... plz.... the country that gave every asshat without a job a mortgage for 200k to get a house which they could NEVER pay for, which helped throwing half the world in economic recession... including my country.... i say FUCK EM!
its time you get your ass handed to you by china. its about time you reaped the shit you sow....
america the greatest economy... give me a break, hot stinking air economy if u ask me....

Bankruptcy/Insolvency, on the way. Notice the dramatic increase that started earnest in 1972.

What else happened in that year?

http://trueslant.com/michaelpollaro/...ruptcy-part-2/ ...
In Part 1 of this series, I made the case for a U.S. government that is quite literally out of control, a government that has committed to obligations so big, that unless policies change, it’s a government that’s on its way to bankruptcy.
Starting with the simple fact that the U.S. government has NO money, that it must tax Peter to spend it on Paul, I posited that in addition to the ever constant cry for more government spending in support of Paul, it’s the way the government taxes Peter that allows the government to spend so much on Paul. Lay the bill bare and it’s likely Peter throws a fit. But mask Paul’s true cost and it empowers the government to commit to obligations far beyond the ability of Peter to ever pay the bill.
I then introduced the 3 kinds of government tax forms – Tax Peter now, Tax Peter later and Tax Peter don’t tell him – and further posited that it is the latter two, Tax Peter later, better known as borrowing, and Tax Peter don’t tell him, namely the inflation tax, which have been instrumental in masking the true cost of Paul and putting the U.S. government and therefore Peter in a deep financial hole.
In Part 2 of this series, I will expand this discussion with facts, figures and charts. I will demonstrate that the tab being run by the U.S. government is years in the making, regardless of which political party is in charge, and it’s going from bad to worse. I will further demonstrate that the policy of deferring the costs of all this spending largesse, by Taxing Peter later via borrowing instead of Taxing Peter now, has helped create obligations so huge, a bill so big, that it may never be paid. And finally, I will make the case that as a result of all this the U.S. government is on its way to bankruptcy, more than likely through a stealth default on those obligations via the Tax Peter don’t tell him policy of inflation. In other words, by devaluing those obligations by printing money.
With that as an intro, if you have not yet read Part 1 of this series, I would encourage you to do so now. You can find Part 1 of the series here.

———–

Part 2. Peter’s bill, going from bad to worse to No Can Pay
Let’s begin this discussion with where it all starts, with government spending.
As we saw in Part 1 of this series, the U.S. government is spending itself silly. The 50 year spending record is shown below:

Official government spending for fiscal 2009, representing budget and off-budget appropriations, was $3.5 trillion. That’s about 25% of GDP, the highest share of government spending relative to GDP in this 50 year study. Yes it’s been with ups and downs, but it’s been a steady rise throughout this 50 year study, from a low of 17% in 1965 to today’s 25%. And if you include the supplemental appropriations for the Iraq and Afghanistan wars and various other off-off-budget items, government spending clocks in even higher, at about $3.7 trillion or 26% of GDP.
If that’s not enough to give you pause, the recent acceleration in government spending will. Take a look:

In fiscal 2009, the year over year growth rate in official U.S. government spending was 18.2%, second only to the 23.4% year over year rate recorded in 1975. And if you add in those off-off budget appropriations, that growth rate rises to 24%, the high for this 50 year study.
For sure, 2009 is not just a one year spike. Rather, it’s indicative of a worsening trend that had it’s genesis at the turn of the century. It began with a George W. Bush led government that decided that a few big stimulus packages, a war on Iraq and Afghanistan and a generally more gentle conservatism (meaning mega new safety nets like prescription drugs), not to mention a bailout of the financial industry, were must haves; and it was put into hyper-drive by an Obama administration and a supportive Congress that seem to think that every economic and social issue can be solved by the government. Indeed, since 2000, government spending has been growing at an annual rate of about 8.5%, more than double the rate seen in the 1990s, and a trend that has taken government spending from about 18% of GDP in 2000 to today’s 26%, an increase of 44%.
The government cannot continue to grow at rates faster than the economy, forever. Said more pointedly, the government can not continue to take from Peter, the producer, to spend on Paul, the consumer, at ever higher amounts, in perpetuity. One must produce before one can consume, lest there is nothing left to consume. Continue down this spend-now-ask-questions-later path and you eventually run out of Peters. You eventually end up with a basket economy, with no one left to pay ANY bills.
With this in mind, let’s now move to the taxing side of this equation; i.e., how has the U.S. government been paying for all this spending.
First up, Tax Peter now taxes, more politely known as government receipts. Here’s the 50 year record of government receipts against government spending:

To say that receipts have tanked would be an understatement. In fact, at a minus 16.6%, 2009 marks the biggest year over year decline in this 50 year study by a country mile. Granted, receipts always weaken in a recession as unemployment grows and business profits shrink, but the fact is, except for a brief period around the turn of the century, when a Tech Bubble put a temporary charge in receipts , receipts have been lagging government spending throughout this 50 year study. And since 2000, those trends have picked up some real steam, witness the deteriorating deficit:

To solidify the point, if one takes the ratio of receipts to spending, again putting aside the Tech Bubble spike, the long term trend is blatantly clear – receipts have not been keeping up with spending, with the last couple of years being a site to behold:

At a ratio of 0.60 we have by far the lowest ratio of receipts to spending in this 50 year study. And not to belabor the point, but if you include those off-off-budget appropriations, the ratio drops to 0.57.
As an individual, such a trend would likely give you reason to worry. It would likely lead you into making some adjustments to your spending patterns. Not so if you are a politician. If you are a politician you keep spending, fund the excess of spending over receipts in the capital markets and then brag about all the wonderful things you’re doing for Paul.
Here’s the 50 year record of government borrowing versus government receipts:

The fact is, when politicians deem it’s time to step up spending, it’s time to Tax Peter later.
Now, years of opting for the Tax Peter later venue has created quite a tab for Peter. In Part 1, I touched on just how big a tab that was. Now for the details, and with it the real meat of this discussion.
The cumulative impact of the Tax Peter later policy is embodied in what the U.S. government calls gross debt. Here’s the 50 year record:

And here’s the year over year growth rates:

And finally here’s the 50 year trend versus GDP:

Gross debt is growing right along with government spending. At $12 trillion, it’s up 18.8% from 2008 and zipping along at an annual rate of about 8.5% since 2000. At 84%, the ratio of gross debt to GDP is the highest in this 50 year study, and to underscore the acceleration since 2000, up 47% from the 57% of GDP seen in 2000.
To repeat, these trends are not sustainable. The government can not continue to take from Peter, the producer, to spend on Paul, the consumer, at ever higher amounts, in perpetuity. Eventually you run out of Peters. Eventually there is no one left to pay the bills.
How close are we to running out of bill-paying Peters, you ask? It’s hard to say, but the trends are anything but encouraging. In fact, they are downright scary.
To see why, let’s have a look at the ratio of the U.S. government’s gross debt to receipts, in essence a measure of the amount of years it will take Peter to pay all those Tax Peter later taxes:

Does this look like a healthy trend to you? Peter is currently looking at a bill that based on 2009 receipts will take him close to 6 years to pay. That’s a double from 2000 and by far the biggest burden in this 50 year study.
If 6 years doesn’t scare you then buckle up, because this is only the tip of the iceberg. And I do mean tip.
Enter the U.S. government’s unfunded liabilities for social security, medicare and prescription drugs. This is government spending to come, locked in by virtue of the commitments the U.S. government has made to Paul. Despite what the politicians would have you believe, there is NO money anywhere in the government coffers for these commitments. They are taxes yet to be, but taxes sure to come. And whether they come in the form of a Tax Peter now, Tax Peter later or Tax Peter don’t tell him venue, they are coming, and they are coming in size.
As I discussed briefly in Part 1, depending on the source and calculation methodology, these unfunded liabilities are estimated to be anywhere from $50 trillion to $100 trillion. Below is an itemized accounting, under representative best and worst case scenarios:

The representative best case scenario is sourced from the U.S. government’s latest 2008 Financial Report of the United States, roughly guesstimated by yours truly for 2009 exposures based on the increase in unfunded liabilities in 2008. The representative worst case scenario comes via US Debt Clock.org, a site dedicated to spreading the facts about the U.S. government’s financial status. Given that there are a number of other credible sources that track closer to US Debt Clock.org calculations than to the U.S. government’s calculations, you can probably guess which scenario I think is a more accurate representation of the cost of those unfunded liabilities.
With that in mind, adding unfunded liabilities to gross debt, we get the full picture of the U.S. government’s obligations and in turn Peter’s future bill:

Under the best case scenario, Peter’s in the hole for $65 trillion, 4.6 times GDP and 31 times 2009 government receipts. Under the worst case scenario those obligations are a staggering $119 trillion, 8.4 times GDP and 57 times 2009 receipts. That’s right, it will take Peter any where from 31 to 57 years to pay all the U.S. government’s obligations based on current tax receipts.
These obligation totals are surreal and they are growing at about $5 trillion best case, and at about $9 trillion worst case, per year. That’s somewhere between a 35% to a 65% take of GDP.
This size of an obligation, one that’s growing at this kind of pace, can not be covered simply by upping Peter’s tax rate. If tried, it wouldn’t be long before the economy simply collapsed under the tax burden. And the claims by one politician after another that the U.S. can grow its way out of this financial hole are quite frankly bunk, especially if the government decides to take taxes rates higher. The math simply does not work.
In a word, this bill is a burgeoning disaster.
Although political opinion is not the purview of The Contrarian Take, please allow me one short digression…
Perhaps, if our politicians had come clean long ago, and not tried to mask the true cost of Paul, perhaps then America would not be in this hole. Perhaps Peter would not be stuck with such a huge bill, a bill he likely can never pay. And even more importantly, perhaps Paul would not now be so dependent on Peter for a life style, indeed a level of security that he can not possibly keep. But alas, that was not the case. And it is a moral tragedy.
With that out of the way, let’s proceed.
As you know, there is a third option for the U.S. government, to make good on all these obligations. It’s the Tax Peter don’t tell him venue, the inflation tax. This venue is of course the politicians’ favorite taxing venue, and already in active use. And with what the U.S. government now faces, it’s probably looking more and more attractive to those same politicians with each passing day. In fact, short of reneging on the government’s obligations; namely, through outright default – by cutting spending or simply by defaulting on the government’s debt – those politicians, with the help of their accomplice, the Federal Reserve, could very well view the inflation tax as the ONLY way out of this mess.
In the meantime, before we reach this point, I anticipate a lot more borrowing, higher tax rates too and of course increasingly more inflation. If you will, a delaying of the inevitable while the bill becomes even larger. But the inflation tax as THE tax, the ONLY tax, I don’t think we are there quite yet.
In Part 3 of this series, the prospects for an acceleration in the inflation tax and what might need to happen first…

Link included in quotes at top.

When Bill Gross of PIMCO writes and speaks, I pay attention.

Here is the Ring of fire. The US, is squarely in it.

PIMCO: The US Falls Into The Sovereign Debt Ring Of Fire

Vince Veneziani | Jan. 26, 2010, 10:42 AM | 7,014 | 12
Print
Tags: Economy, PIMCO, Debt, Financial Crisis
In the latest PIMCO investor letter, Bill Gross brings up a chart he likes to call "The Ring of Fire."
As you can see, this chart/graph details the amount of debt a country has in relation to their GDP.
Countries in the fire zone are headed for hell in a handbasket.PIMCO predicts these countries, which include the U.S., will increase public debt to greater than 90% over the next few years, which will in turn stall growth.
PIMCO: The most vulnerable countries in 2010 are shown in PIMCO's chart "The Ring of Fire." These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years' time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.
Don't miss: The world's 10 biggest sovereign risks >

Link: PIMCO: The US Falls Into The Sovereign Debt Ring Of Fire

People are moving. 3000 per month leaving California.

^I'm not sure that graph is correct regarding Florida:
More Leave Than Come From Other States | TheLedger.com
ORLANDO | For the first time since the 1940s, more people moved out of Florida last year than new residents moved in from other states as the economic slump has halted years of explosive population growth in the Sunshine State.

Excellent piece by Simon Johnson, who now is part of the Huffpost business team:
Simon Johnson: Bernanke's Reappointment: A Colossal Failure Of Governance
Excerpt:
Unfortunately, two massive failures of governance at the level of the Senate also spring to mind: first, the strange case of Alan Greenspan, which stretched over nearly two decades; second, Ben Bernanke, reappointed today (Thursday).>

Greenspan, as you recall, was worshiped as some sort of economic magician. Even his most asinine comments were seized upon by a legion of acolytes. Instead of providing meaningful periodic oversight, every Senate hearing was essentially a re-coronation.

And now we can look back over 20 years and be honest with ourselves: Alan Greenspan contends for the title of most disastrous economic policy maker in the recent history of the world.

Some on Wall Street, of course, would disagree - arguing that the financial sector growth he fostered is not completely illusory, that we have indeed reached a new economic paradigm due to the Greenspan tonic of deregulation, neglect, and refusal to enforce the law. Prove the ill-effects, they cry.

What part of 8 million net jobs lost since December 2007 do you still not understand?

And now the same Greenspanians and their fellow travelers rally to the support of Ben Bernanke's troubled renomination. Certainly, they concede that Bernanke was complicit in and continued many of Greenspan's mistakes through September 2008. But, they argue, he ran a helluva bailout strategy after that point. And, in any case, if the Senate had refused to reconfirm him - financial sector representatives insist - there would have been chaos in the markets.

since post 1

The strongest economy in the world
"The American economy is the strongest in the world and growing faster than that of any other major industrialized country. It grew at an annual rate of 5.3 percent in the first quarter -- the fastest growth in 2 1/2 years. It has added more than 5.3 million jobs since the summer of 2003, and employment is near an all-time high. The unemployment rate (4.6 percent) is well below the average for each of the past four decades. Mortgage rates remain near historical lows, homeownership remains near a record high, and sales of new and existing homes reached record levels in 2005. Real disposable personal income has risen almost 13 percent since President Bush took office; and core inflation rose just 2.3 percent over the past 12 months. The Dow Jones industrial average has risen from under 7300 in 2002 to above 11,000 for most of this year. Tax revenues are at an all-time high -- and so is total household net worth."

And that is not the only good thing to be said about the good ole USA. More here:

Untitled...

Here is a variety of updates on the US, by Max Keiser:

What is Thomas C. Mountain (cool name) doing in Eritrea? Dodging bullets?