U.S. Debt Actually $200 Trillion?

[feyri]

Arnaud Mares from Morgan Stanley's London office wrote a report in late August on this exact subject. Unfortunately I can't find it online any more.

If I recall correctly it argued that when you consider the US's Social Security, Medicare, Government Pension Obligations and its guarantee of Fannie & Freddie that total debt is significantly larger than what is ever quoted. Also that debt is often calculated as a percentage of GDP, but that isn't a good reference as GDP isn't necessarily the best indicator of a Governments potential debt servicing cash flow. The US’s ability to raise revenue compared to GDP was lower than most countries. When you combined the two issues, the US goes from a middle of pack debt/GDP ratio to the worst Total Obligations/Ability to raise revenue ratio in the world closely followed by the UK.

 

[Martinghoul]

Arnaud is very good... Been arnd and worked in all sorts of interesting places.

In general, a lot of interesting work on the unfunded liabilities (not just the US) has been done by an academic by the name of Jagadeesh Gokhale.

 

[Ed Breen]

Kotlikoff constructed the highest possible number so that he could impress and alarm, so that he could get press and speaking fees... a Rubini light...a phoney Rogoff... a Faber wannabe. His construct is similar to so much hyperpole in the idiot press, like the representation of derivative liabilites where they print a huge number for liability without ever explaining that the number comes from adding both sides of a counter trade along with all the hedging strategies that manage the risk... as if none of it was paired risk. Its hyperbole for the ignorant, and Kotlikoff wants to be the new hero of the stupid (Tell him that Elizabeth Warren has that locked up)...you would think no hyperbole is required to show that our debt situation is serious.

When you conflate all the soveriegn federal debt, the state and local debt, the private debt, the contract obligations of the state, local and federal government pensions, the contingent liabilities of the GSE's (without any credit for any assets), you can come up with a big number.

But, what does the number tell you? Its just a number that makes you dumber.

There is a difference between the obligation to perform presently and annually on the debt service of accrued sovereign debt and the contingent obligation to guarantee a possible future loss on a portion of a GSE portfolio that has some valuable collateral assets along with hedging programs. There is a different consequence that results from defaulting on sovereign debt owed to foreign investors and restructuring of entitlement programs for citizens once those programs become unsustainable.

Each of these obligations has a different charactor and each poses a different problem, a different solution and a different level of present and future risk. Kotlikoff is not explaining that to you; he conflates all this different problems as if they were all the same. He misrepresents in order to shock and to get attention through hysteria. I would not look to him to solve anything.

 

[drcha]

There is a difference between the obligation to perform presently and annually on the debt service of accrued sovereign debt sold to foreigners and the contingent obligation to guarantee future loss on a portion of a GSE portfolio that does has some real assets that have value and some hedging programs. There is a different consequence that results from defaulting on sovereign debt owed to foreign investors and restructuring entitlement programs for citizens that become unsustainable.

Each of these obligations has a different charactor and poses a different problem. Kotlikoff is not explaining that to you; he conflates it as if it is all the same and uses it to get attention through hysteria. Don' t look to him to solve anything. [/B]

Amen.

There is no reason for you to worry about the fact that you owe $100 on your house (or even your credit card) over the next 20-30 years if your house payment is $5 per year and your job is paying you $25 per year--especially if your job is guaranteed!!! And this is the case for our government. Tax payments are guaranteed, so the feds will always have money coming in. Therefore, adding up all the obligations of govt. as if they were due and payable today makes no sense.

Taking up arms and burning things down (just like writing sensationalist books) is not a solution to anything.

 

[Martinghoul]

Quote from Ed Breen:

He misrepresents in order to shock and to get attention through hysteria. I would not look to him to solve anything.

Noooooooo!!!! A pundit making sensationalist fear-mongering comments to the medai? Say it ain't so!

 

[bearice]

I think USA should sell Alaska to pay-off its debts. Anybody any idea how much is Alaska worth?

 

[MKTrader]

Quote from drcha:

Amen.

There is no reason for you to worry about the fact that you owe $100 on your house (or even your credit card) over the next 20-30 years if your house payment is $5 per year and your job is paying you $25 per year--especially if your job is guaranteed!!! And this is the case for our government. Tax payments are guaranteed, so the feds will always have money coming in. Therefore, adding up all the obligations of govt. as if they were due and payable today makes no sense.

Taking up arms and burning things down (just like writing sensationalist books) is not a solution to anything.

Way to avoid actually talking about unfunded liabilties and the devastating effects of trying to pay for them (astronomical tax rates or money printing to oblivion).

Your example is worthless and has nothing to do with the real world. There's a reason the former U.S. Comptroller General walked away from his job when no one listened to him...

 

[Martinghoul]

Quote from bearice:

I think USA should sell Alaska to pay-off its debts. Anybody any idea how much is Alaska worth?

Well, Emperor Alexander II sold it in 1867 for $7.2MM, so it's probably worth at least as much .

 

[Humpy]

Quote from Martinghoul:

Well, Emperor Alexander II sold it in 1867 for $7.2MM, so it's probably worth at least as much .

Minus a bit if Sarah Palin goes with it ?

 

[Humpy]

Its called the California disease

lots of wealth in the hands of the few who don't want to pay their taxes so there isn't enough to pay all the expenses.

Nobody much cares about the almost unpayable US debt not realizing that the US is like the banks - too big to fail