Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19
The Exponential Stocks Bull Market Explained - Video - 13th Mar 19
TSP Recession Indicator - Criss-Cross, Flip-Flop and Remembering 1966 - 13th Mar 19
Stock Investors Beware The Signs Of Recession / Deflation - 13th Mar 19
Is the Stock Market Still in a Bear Market? - 13th Mar 19
Stock Market Trend Analysis 2019 - 13th Mar 19
Gold Up-to-Date' COT Report: A Maddening Déjà Vu - 12th Mar 19
Save Fintech? Ban Short Selling. It's Not That Simple - 12th Mar 19
Palladium Blowup Could Expose Scam of Gold & Silver Futures - 12th Mar 19
Next Recession: Concentrating Future Losses & Bringing Them Forward In Time As Profits - 12th Mar 19
The Shift of the Philippine Peso Regime - 12th Mar 19
Theresa May BrExit Back Stab Deal Counting Down to Resignation, Tory Leadership Election - 12th Mar 19

Market Oracle FREE Newsletter

Stock and Finanacial Markets Trading Analysis Worth

The USA is Driving towards National Bankruptcy

Economics / Analysis & Strategy Feb 03, 2007 - 12:49 AM GMT

By: Dr_Martenson

Economics

I have a question for you. Let's say you're driving down the road, at night, along a busy highway, 10 miles from the next exit, and the oil warning light suddenly blinks on. What do you do? Are you the sort that pulls over or keeps on driving? If you're the sort that keeps on driving, upset mainly because you don't have any black tape to put over that pesky red light, then you might as well stop reading right now because we're about to pull over.

First a set of definitions; when liabilities exceed assets by an amount that cannot be serviced by any conceivable future revenue stream, then one is said to be ‘insolvent'. When current cash flow cannot service current debt payments, then we say an entity is technically bankrupt. And finally, when a debt payment is missed, then a default has occurred, the entity is actually bankrupt and all sorts of legal machinery kicks into high gear.


In one of my previous articles I wrote about the fact that United States budgetary and fiscal officials revealed to us that in order for the United States government books to net out to zero there would need to be $53 trillion in the bank, today, earning interest. Of course there isn't any public money of that sort, or any sort, in the bank.

SCREEEECH! <-- That's the sound of this article pulling over to the side of the road

Stop. Why is this not our #1 topic of debate in Washington DC? If we suspect that we are insolvent as the Comptroller and Treasury Secretary have indicated, then it's questionable as to whether it does us any good to debate, say, the finer points of federal education reform or a new flag burning amendment. As noted above, insolvency precedes bankruptcy and bankrupt nations cannot afford to do anything so why talk about anything else? We have a bright red oil light lit up on our national dashboard yet the Democratic and Republican leadership continue to drive on bickering about who should have brought the black tape to put over the warning light.

What would it mean if our nation went bankrupt? A good analogy would be New Orleans. The city is bankrupt; it's a mess, and can only rebuild with federal (outside) assistance. New Orleans completely lacks the ability to rebuild on its own because it doesn't have the funds and its economy is pretty much destroyed. But if the US goes bankrupt, who will help us rebuild? If the answer is ‘nobody', then you might want to take a trip down to The Big Easy to see for yourself what this country is going to look like in a few years.

The good news is that because the problem only grows more intractable with every passing day, our dithering politicians will have fewer options to chose from when the crisis hits thereby making their jobs that much easier. The bad news is that the more time we spend in denial, the less time remains for us to get busy and do something about it. There is even the danger that if we wait too long, we will face a potentially unfixable problem on the scale of what the Soviet Union experienced – catastrophic economic failure.

During my time as a consultant, I had ample opportunity to witness a very clear phenomenon. If the person at the top of an organization was ethical, for the most part so were all the rungs and layers beneath them. Conversely, an unethical leader usually presided over an unethical organization. As a social animal, we tend to take our cues from above.

Our federal government is now several decades into a reckless love affair with unrestrained profligacy. Because we've lacked any clear, moral leadership for so long, it is easy to find reflections of this behavior peering back from every corner of society.

Consider the evidence:

  1. State pension shortfalls running towards a trillion dollars

  2. Municipal pension shortfalls in the hundreds of billions of dollars

  3. Corporate pension and healthcare deficits of one-and-a-half trillion dollars

  4. 401K savings of only $53k per 55 year old worker

  5. A national savings rate that has steadily eroded since the early 1990s falling from 10% to negative 1.5% , a condition last seen at the depths of the great depression in 1933

The Great Bust Ahead: The Greatest Depression in American and UK History is Just Several Short Years Away. This is your Concise Reference Guide to Understanding Why and How Best to Survive It
$9 (50% discount)
The Great Bust Ahead: The Greatest Depression in American and UK History is Just Several Short Years Away. This is your Concise Reference Guide to Understanding Why and How Best to Survive It

In summary, the list above indicates that at the federal, state, municipal, corporate, and personal levels nobody is saving for the future. I could probably tick off a few more but since I'm out of fingers on my non-typing hand let's agree that pretty much covers it. We are not saving for our future, we are all in this together, but it will take leadership to get us out.

It is imperative that we return to our heritage of saving and investing for the future. Somehow we've forgotten that a period of living beyond your means must always be balanced by an equal amount of living below your means. The belief that debts can be compounded forever is dangerously naive as it merely shuffles the bills off to the future as though they could be forever hidden by time.

Leaving aside the obvious moral parallel between this behavior and the fable about The Ant and the Grasshopper , this insolvency issue, large though it appears, is merely a symptom; an effect rather than a cause. At the root of it all is our monetary system, which we need to understand before we can begin to posit solutions.

Let me be clear – I think that while it was operating well, our monetary system was a great system, one that fostered incredible technological innovation and advances in standards of living. But every system has its pros and its cons and our monetary system has a doozy of a flaw.

It is run by humans.

Oh, wait, that's a valid complaint but not the one I was looking for.

Here it is: Our monetary system must continually expand, forever.

Which means it has a math problem in the same way that a beached whale has a breathing problem. In each case we have a massive organism that was optimized for a very different set of conditions than those in which it currently finds itself.

This will be the topic of our next article.

In the meantime, be on the lookout for DC politicians seeking to buy black tape.

All the best,

Chris

By Dr. Chris Martenson
http://theendofmoney.com

Dr Martenson is the creator of The End of Money economic seminar series, has extensive experience analyzing and communicating financial information.  Dr. Martenson combines a scientist's attention to fact and analysis (PhD, Duke University, Pathology and Toxicology) with a solid understanding of finance and economics (MBA, Cornell, Finance) with strategic thinking (4 years as a management consultant) to produce an insightful and powerful lecture. He is currently devoted to researching, writing and presenting economic and financial analyses delivering his message via his website, lecture series and is currently working on a related book & movie.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Richard Wicks
12 Feb 09, 23:58
The reason we don't discuss the debt

The reason why gay marriage, flag burning, school prayer, and other absolutely irrelevant garbage is promoted as important things is because the country is obviously bankrupt.

The bailouts are nothing more than a bunch of politicians looting the taxpayers before the final collapse. The bailouts are going to take all the money of all the savers by causing hyperinflation. Of course gold and silver bugs are going to escape it to some extent, but they are such a minority nobody cares.

The only person in Federal government I can see is competent and/or honest is Ron Paul, the US media as well as the US population shit all over him - so they deserve what they get. Hunker down, and prepare. Our course is set.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules