Thread: US 'could be going bankrupt'

US 'could be going bankrupt'
By Edmund Conway, Economics Editor
(Filed: 14/07/2006)

The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank.

A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.

Prof Kotlikoff said that, by some measures, the US is already bankrupt. "To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked.

According to his central analysis, "the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds''.

The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries - including the UK - which have deficits north of 3pc of GDP.

Prof Kotlikoff, who teaches at Boston University, says: "The proper way to consider a country's solvency is to examine the lifetime fiscal burdens facing current and future generations. If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country's policy will be unsustainable and can constitute or lead to national bankruptcy.

"Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke."

Experts have calculated that the country's long-term "fiscal gap" between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars. The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.

The figure is massive because President George W Bush has made major tax cuts in recent years, and because the bill for Medicare, which provides health insurance for the elderly, and Medicaid, which does likewise for the poor, will increase greatly due to demographics.

Prof Kotlikoff said: "This figure is more than five times US GDP and almost twice the size of national wealth. One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143pc."

The scenario has serious implications for the dollar. If investors lose confidence in the US's future, and suspect the country may at some point allow inflation to erode away its debts, they may reduce their holdings of US Treasury bonds.

Prof Kotlikoff said: "The United States has experienced high rates of inflation in the past and appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century."

Paul Ashworth, of Capital Economics, was more sanguine about the coming retirement of the Baby Boomer generation. "For a start, the expected deterioration in the Federal budget owes more to rising per capita spending on health care than to changing demographics," he said.

"This can be contained if the political will is there. Similarly, the expected increase in social security spending can be controlled by reducing the growth rate of benefits. Expecting a fix now is probably asking too much of short-sighted politicians who have no incentives to do so. But a fix, or at least a succession of patches, will come when the problem becomes more pressing."

http://www.telegraph.co.uk/money/main.j ... xcity.html

We are already bankrupt. In 1993
It's big businesses and the World Bank that is selling us out.

True, We are already bankrupt financially and morally as a nation.

W

"When the problem becomes more pressing?" How about now! When states like New Jersey have to shut down some government functions, thats a clear sign the feds are not far behind.

I've heard that China is keeping us afloat. Scary huh? Today there are talking heads on t.v. saying if this Lebanon thing worsens we may be paying $ 20 eventually for a gallon of gas. What are we going to do with our new amnesty guests when our economy crashes?

Hold on a minute. "We" are not bankrupt. The federal entity is bankrupt. The only way that any of you are bankrupt along with it is if you fell for one of the federal scams making you party to the "common debt" (read: the federal bankruptcy). The federal government holds a status in law of "foreign corporation" relative to the several states and the sovereign citizens thereof, and those citizens are, relative to the federal corporation, nonresident aliens. The relationship is akin to shareholders of a corporation. The shareholders are indemnified against the debt of the corporation and can lose no more than their shares in the corporation. That already happened in 1933. Unless you have become a subject thereof, the federal government is now well and truly a foreign corporation whose shares are held by foreign bankers.

That the federal government is undoubtedly bankrupt is the reason that we need to get its grubby mitts off our property and make it stop buying up lands on the soil of the several states, because every parcel that it buys is a parcel that is deeded over to the same financial interests that control the UN and its organs and wish to destroy this free nation.

Good!! I just purchased a canoe I don't really need and I was feeling buyers remorse. Thank God I'm not bankrupt.

Originally Posted by andyt

Good!! I just purchased a canoe I don't really need and I was feeling buyers remorse. Thank God I'm not bankrupt.

Well, read the disclaimer before you start jumping for joy. Do you have a federal franchise number? That would include an SSN, TIN, ITIN, etc. If you do, then you are unwittingly pledged to the common debt unless you exercised your reservation of rights pursuant UCC 1-207. There are any other number of agreements that could also serve to subject you to the common debt. For example, if you have received any government benefit and not provided a reservation of rights, then you are deemed a party to the common debt. That's because, unlike a contract under our native common law (which requires knowledge, will and intent on the part of each contracting party), in order for a UCC agreement to be considered binding under international mercantile law, all that needs to happen is for you to exercise the benefit of the given agreement.

One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143pc.

And how about a forth answer:

*Hermetically seal our borders
*Make sure EVERYONE using taxpayer funded benefits and services PROVE they are eligible.
*Fine companies and businesses using illegal labor 1/3 of their net worth for the 1st offense and forfeiture of the the business for the 2nd offense. The business would then be auctioned, or liquidated, will ALL proceeds going towards the deficit.
*Pull out of the UN and all NAFTA, CAFTA ect. trade agreements giving relocated companies a 2 years deadline to get their asses back in the U.S.
*Place a 10 year moratorium on CEO salaries that limits total annual compensation to 10 million (including bonuses).
*Campaign funds limited to $1 million on a federal level, $500,000 on a State level, and $100,000 on local lever (make the candidates themselves WORK, not hired PR machines!).
*No one can run for office if their net worth exceeds $5 million, with paid post presidential speaking engagment/appearance compensation not to exceed $1.00 per.

I can dream can't I?

If you do, then you are unwittingly pledged to the common debt unless you exercised your reservation of rights pursuant UCC 1-207.

Touche! Gawd, I wish all Americans knew that WE, the people, are the unwitting credit card of the federal government.