According to an article in Forbes from nine years ago, the real debt of the USA was at that time $120 trillion when welfare liabilities were taken into account:
Even then according to the above article the debt to income ratio was:
somewhere around 5,082%
In the intervening 9 years the situation has got a lot worse as well. According to some estimates, the current situation is over $200 trillion, which amounts to a debt per citizen (everybody whether they pay tax or not) of around $500,000 very roughly and a debt per taxpayer of probably over a million dollars, this amount is more than the average US citizen pays in taxes in their lifetime (and the government just keeps on spending more regardless).
In this video John Titus includes clips from prominent officials that suggest the powers that be are starting to tacitly acknowledge the problem is real (text summary included under the video with reference links):
He also includes graphs and official documents that show the trajectory we are on.
The only way out is to either default on the debt or to trigger inflation as is already happening (which is another way of defaulting really), and the consequences will be huge, and it is probable that the US dollar will cease to be the world’s reserve currency as a result of the devaluation (Federal Reserve chair Jerome Powell practically admits it in the included clip).
I’m not a whiz at finances, but thats what it looks like to me. Nobody in government is going to do anything about it, because they are the problem!
The entire government bureaucracy should be reduced by probably something like 95%.
Get rid of all the dead weight. When pigs fly!
I am trying to get an Austrian School economist I know to give me a comment on the two articles you link to, Chauncey. If and when I get it I will post it.
By definition “bankrupt” means insolvent, the USA (or any other sovereign nation that creates its own currency) can never be insolvent, because the Federal Govt. of the US can create any amount of dollars that it needs. So the answer is no, the USA is not, and can never be, bankrupt.
The problem is that, while the Govt. can create credit, which is all money is, it cannot create the essentials of life; “you cannot print food”. The US has moved from an economy that produces goods and services to an economy that consumes those goods and services produced by others. Britain did the same thing many years ago, starting with the move away from production and towards capital investment and money manipulation. This process was essentially completed under the Thatcher regime.
I believe the era of dollar dominance is coming to and end. When it does American’s will have to create real value to exchange for imports, or revert to an economy that produces real value itself.
I have had a theory about the two economy’s; the economy of goods and services versus the economy of money manipulation for some time. I recently discovered Dr. Tim Morgan’s blog “Surplus Energy Economics” that explains it much better than I can.
The reversion of the USA to a productive economy, if it can happen at all, is going to be very painful indeed. It will require a complete makeover of attitude and activity from top to bottom of our society.
The USA was once a meritocracy, not any more; that is going to have to change. “A day’s work for a day’s pay”; are you kidding? Affirmative action, diversity, non-discrimination, civil rights BS, lawfare against essential infrastructure; it all has to stop.
Will it?
I think you’re probably right technically that a country can’t be bankrupt. The authors are using the word here just in the sense of a country reaching a point where it has to borrow to meet its liabilities, while simultaneously having no prospect of increasing economic growth, and so it’s reached a point where the debt will just go up and up, unless something really drastic is done to curb spending.
What has long baffled me is why people are still buying government bonds when interest rates are so low and inflation looks set to kick off in a big way (i.e. the bonds will quickly lose their value), in this climate the idea that government bonds are one of the safest investments seems quite mad to me. If people ever do stop buying bonds I suppose that is when the real trouble will start, Weimar Republic scale money printing will be the only option left.
Given the idiocy that goes on in politics it seems extremely unlikely that anybody could get elected on a severe austerity manifesto anyway (David Cameron’s government tried to introduce mild austerity measures but they got heavily attacked by the media for that). Another thing that baffles me though is - why didn’t the media just tell us the truth that the austerity measures are essential to avert a catastrophe? It really seems as if the powers that be want a catastrophe, that is the only conclusion I can come to.
As for being an economy of money manipulation I can’t entirely see why a country could not theoretically support itself mainly from a banking sector, but it would have to be very good at banking. Given everything that has happened since 2008 I’m afraid it doesn’t look as if the West is very good at banking either these days - “Mortgage Backed Securities” spring to mind. At best though a country that was entirely dependent on its banking sector would be very vulnerable in the event that other countries started to get “good” at banking.
I’ve been “following” that blog for years but I’m afraid it mostly goes over my head and I seldom manage to read a whole post. I think the gist of his argument in general is that the era of seemingly endless economic “growth” is coming to an end, and that this is primarily because energy is becoming harder to extract (the surplus energy phrase refers to the usable energy that is left after the energy is extracted, some energy being used in the extraction). He certainly sees the same looming problems that I do, quote (from the introductory page):
The first such trend is the growing inevitability of a second financial crisis (GFC II), which will dwarf the 2008 global financial crisis (GFC), whilst differing radically from it in nature.
The second is the progressive undermining of political incumbencies and systems, a process resulting from the widening divergence between policy assumption and economic reality.
The third is the clear danger that the current, gradual deterioration in global prosperity could accelerate into something far more damaging, disruptive and dangerous.
However I fear he is far too narrowly focused and maybe (I could be wrong) fails to see that our problems are as much social (primarily the fact that the middle class is vanishing) and political (primarily the unintended consequences of welfare policies) as to do with energy supply. Being entirely frank I think that some of his assumptions are just plain wrong, for example:
Critically, all economic output (other than the supply of energy itself) is the product of surplus energy
That seems to me to take no account of technological innovations particularly that SAVE energy, that are really the product of brain power, which is fuelled by the endlessly abundant stuff called food, oxygen, and water. Cars have become far more fuel efficient over time for example, and there are lots of other examples of energy saving innovations of course.
Governments spend too much because people have unrealistic expectations of what governments should do, it’s not just about the availability of energy.
I agree it is heavy stuff, I am fascinated by it and the subject of economics and societal development generally so I plow through it as best I can.
This is a link to his report;“The perfect Storm”:
The relevant paragraph about US bankruptcy is:
“An underlying federal debt and quasidebt total of some $57 trillion, on top of private, bank, state and local government debt of $44 trillion, could be used by America’s critics to argue that the United States is bankrupt. Any such inference, if not fundamentally mistaken, most certainly would be premature. America may be technically insolvent (in the sense that her collective liabilities far exceed any remotely realistic calculation of the net present equivalent of future income streams), but she is not illiquid.”
Your comment about endlessly abundant food, oxygen and water, is wrong. Oxygen may be abundant but water and food are becoming less so, in fact, water disputes are at the core of many of the world’s troublespots: For example between Egypt and Ethiopia over the latter’s plan to dam the headwaters of the Nile. Also between India and Pakistan over India’s plan to divert the Indus in the Himalayas to serve India’s need for water.
In fact energy, and therefore food, shortages are critical to current problems in Lebanon, Ceylon, Pakistan and others. This is coming soon to western economies, we can see the start of this particularly in the UK.
I apologize to Ms Becker for the link, it is to a document 84 pages long (half of it is pretty pictures), but the subject matter is of crucial importance, and his conclusions, that I (FWIW) agree with are alarming to say the least.
In my opinion, the root of all these problems is the Marxist’s “climate change” fairy tale, a manufactured “crisis” used to push their “solution” of “green energy”, which is a Trojan Horse to hide their agenda to destroy the economy, capitalism itself, and thus bring about the collapse of society.
Why do people have unrealistic expectations of what governments should do? - Because leftist government, media and academia have conditioned them to!
There would be no problems with energy and food production if it weren’t for the killing of it by leftist policies. We have plenty of oil, if we were just allowed to drill for it! Remember fracking? The Keystone pipeline??
In California, for example, food production would be booming if they hadn’t banned the use of water for farming, to protect an “endangered” species of fish.
I hope you are right Liz, but I think this is all “noise”. The fundamental issues are in plain sight now; the world economy has peaked and major changes, and not pleasant ones, are coming.
The Austrian School economist I consulted says yes, the US is insolvent. But it can keep going by borrowing money because the US dollar is the reserve currency. The government prints money to pay the ever mounting costs of the debt. Reckless printing of money causes costs to rise (inflation being inevitable when “too much money chases too few goods”) and devalues the currency. The country - everyone in it - gets poorer. Ultimately the crash must come. He reckons it will come “about 10 years from now - but it could be sooner”. He adds that talk of the Chinese yuan soon replacing the US dollar as the reserve currency is nonsense.
I think and hope I have summed up his reply accurately. Some of you will know all this. Although I listened in person to two of the greatest economists of my time - Milton Friedman and Friedrich Hayek - and though I know how important it is to remember what they taught, I am benumbed by the Dismal Science. (Not proud of it!)
Thanks for that summary! Yes, I’ve heard a similar explanation also, and it makes sense.
I envy you getting to hear both Hayek and Friedman speak! But even if I had, also, I’m sure I’d remember even less of it than you!
I don’t follow the energy argument at all. Seems very obscure. Could you make it clearer, Chauncey?
There’s an immense quantity of “dirty” energy - the best kind - to be had but for the fanatical environmentalists stopping the dumb politicians from getting it.
Thanks Jillian that’s an interesting perspective. I’m certainly no expert on economics but I fear nobody really knows exactly when “the crash” will come but I still tend to think that “the great reset” is one and the same thing.
The main point that I was trying to bring to people’s attention in my post above was that the real debt of the US including unfunded liabilities seem to have grown from $120 trillion to $222 trillion in just 9 years. Regardless of anything else I think it’s pretty clear that the US therefore is on a trajectory towards a crash, and I couldn’t help noticing that even under Trump the problem has just continued to get worse. I’m not sure who’s right about the reserve currency status either but it seems to me that it must be in some doubt when the crash does come.
I think it really just boils down to the idea that oil etc is getting harder to extract and therefore energy is becoming more expensive, which is (as you and Liz commented) a situation that politicians are greatly exacerbating. If I was going to be blunt I would have to say I think that he is one of those writers who makes things seem more complicated than they really are.
Just one more thought about this timeframe though, and that is assumptions might not have included the possibility that the powers that be might greatly accelerate the process. For one thing that has already been happening since the start of 2020 - COVID-19, the Going Direct plan, and now the war in Ukraine (whether precipitated deliberately by the globalists or not) may not even be the end of it. Remember that Klaus Schwab himself warned us that a coming cyber plandemic may be much worse than the “COVID-19 crisis”.
