It's Not Politics, It's Math

Here is a quote from a blogger that pretty much sums up the real issues that are not being addressed (and the reasons why) by any Presidential candidate other than Ron Paul:

"Financial Armageddon is entirely, easily predictable: the bankruptcy of government in the U.S.A., at every level: Federal, State, County and City. The prediction follows from very simple mathematics: entitlements which grow at 8% a year cannot be supported by an economy which grows at 3% or less.....

The mainstream media blames "the housing slump" for government shortfalls...

The problem isn't a tax shortfall, it's a structural deficit between outlandishly generous pensions and healthcare benefits and what the economy can support....

I have often reprinted this little chart to graphically illustrate what bankruptcy looks like. We all read these mind-numbing numbers--unfunded Medicare obligations, $43 trillion, and so on--and then move on to sports or celebrity gossip or the latest bread-and-circus political "news."

Here is the link to the entire blog: http://www.oftwominds.com/blogjuly08/ba ... y7-08.html

Manny

Nice post and no doubt the numbers portend financial armageddon in a static sense.

However, the issue for me is ... When? The world-as-we-know-it isn't falling apart today, tomorrow, next week or next year.

Financial armageddon has been predicted since I was a boy. The ability of the US Treasury and the FED to manipulate the debt and money supply of the US also factors in. It could be decades before foreigners demand payments or wealth from the US. Foreign debts could be defaulted on. Rapid inflation could destroy previous obligations, etc, etc. There are many tricks left in the sleeve of Uncle Sam and so long as the petrodollar and nuclear armament remains supreme, they can perform the prestidigitation.

The only problem that arises is if changes happen very quickly. The only trigger I can think of are derivatives. To my layman's way of thinking, they are a house of cards. I have to study them more. If markets for them remain open and free there is likely no problem but if they become secretive and manipulated, they will never be properly valued and fortunes will topple.

chabbo wrote:Here is a quote from a blogger that pretty much sums up the real issues that are not being addressed (and the reasons why) by any Presidential candidate other than Ron Paul:

The "Financial Armageddon" you speak of is new to me & bares looking into. There are many things I find attractive about Ron Paul. His honesty & guts at the forefront (Contrary to what people think here, I have not ruled out voting for Ron Paul in November. The only 2 I have absolutely ruled out are Bob Barr & John McCain.)

Barr for his cheerleader role during the partisan Clinton impeachment proceedings...Unforgivable

McCain for promising to be GW Bush's third term....Unforgivable
(his speech last night was written by Bush speech writers!)


I admit to leaning towards Obama, especially with Biden's fgn. policy experience to help him, but...He hasn't totally made the sale yet due to his lack of great experience. My mind is still open, but closed to Barr & McCain.

With all due respect, mikeandgerry, I do see a rather rapid deterioration in the state of global economic affairs between this year and last year and the year before that, so I would say the global economy is unravelling at an alarming rate. Indeed, you may be right to suggest that the state of the derivative markets will be the catalyst for it.

Granted, the Fed and the Treasury have many methods available to delay "Armageddon" in the US, but it is highly unlikely that they cannot avoid it, certainly globally. I am sure you would agree with me that it is only prudent to deal with probabilities and not remote possibilities when trying to plan for the future, and that it is more likely than not that the American people will not be able to absorb through increased taxes the 50-99 trillion dollar obligations confronting it. Therefore, what is the plan?? Although you mention the bag of tricks available to the Fed Reserve and the Treasury, I would suggest that these little "tricks" are only likely to make the medicine to correct it that much harder to take (ie., that it would deepen any economic downturn and delay its recovery). My point is not to state that this economic collapse is imminent (although there is a compelling argument to be made), but rather that neither one of the major candidates deem it (our expeditures grossly exceeding revenues) even worthy for discussion in a meaningful way. Let me ask this, how long could we manage our personal affairs in this fashion before we even discuss the real options available with our appropriate family members, and how long before we would have to declare personal bankruptcy if we managed our household the way the US Government has managed theirs? The point is, no one wants to dicuss a real viable plan to address it. What is even more troubling is the fact that the American taxpayers are not even asking the questions and demanding the responses from these candidates about their plans to balance the budget and address the insurmountable financial obligations the American taxpayers face in the near future. That is the point of my raising this issue. How bad does it have to get before the American people respond to this fiscal mismanagement, especially in light of a Presidential election 6 weeks away?

Manny

Devil505:

Here is an article that appeared last year about the financial obligations the American taxpayers have to look forward to: http://www.usatoday.com/news/washington ... dget_N.htm

Note in the article last year this statement:

"Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.

Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest.

This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years."

I have seen other articles describing 99 trillion dollars in obligations rather than the 59 trillion dollar number used here. Take your pick. Either way, it is not pretty. Again, I ask, what is Obama's plan or McCain's plan to address this taxpayer liability? Isn't it too important to leave to the Fed and/or the Treasury to handle through manipulating markets?

Manny

Have any of you fine gentlemen heard fo silver eagles and gold eagles, Maple leafs, Brittanias, how about Kugerrends. I can take a $1.00 dillar bill and use it for toilet paper. but when the s#%@ hits the fan, thats all a dollar bill will be worth. The govt. keeps printing money like it's going out of style, because it is going out of style. If there are not EXTREME changes in govt. spending by Democrats and Republicans yes, they are both guilty. the whole thing could collapse. The govt. borrows money so much that all it would take is for China or Saudi Arabia to call our loans and that would be it. China holds over one Trillion dollars worth of our debt!! The crash would make 1929 look like a picnic. All one needs to look at New Jersey. In 1992 the state of 8 million population had a 2 Billion dollar debt. Today that number has grown to 32 billion! Thats $4,000 for every man woman and child in the state!!! My fair share would be $20,000 and I don't even live there! Do you have that kind of money laying around? All I can recomend is that start buying silver and gold coins. They allways have been money and they allways will be money. A monitary crash will cause inflation that WILL wipe anybodys life savings almost instantly. If you busted your butt and spent years saving up 100,000 for retirement, then the dollar collapses,100,000 may only buy a loaf of bread. Look at Germany after ww1, Wheelbarows of money just to go grocery shopping. look at Argentina during the 1970's or even Turkey, how about Venezuala. The spot price today for silver is $12.85. Gold is 802.00 oz.I would seriously recomend buying some. any coin dealar sells them or ebay also sell coins. They will never go bad or loose total value.