The U.S. Economy: Stand by for more worse news

I'll call that 12 Trillion dollars and note that is not the total debt the government owes to the public, but ONLY the federal debt ALREADY OWNED by the public. For example, the Social Security Trust Fund, SSTF, will be 100% paid to public, not returned to the Federal government and much, if not all of it, before the 30 years bonds already owned by the public mature, which you do consider federal debt. Those SSTF funds the public will collect now total 2.7 Trillion dollars:

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12.0+2.7 = 14.7 trillion. Debt to be paid by federal government only due to one agency's obligations to the public (or in the case of defense department's already on the books obligations, to contractors of the industrial military complex).

So just considering this one government agency , SSTF, temporarily holding funds for the public (not to return to the federal government) the Federal debt is now 14.7 Trillion dollars. There are of course many other agencies the federal government owes dollars to, mainly related to retirement plans, cost of caring for injured veterans and cost of military programs high tech toys not yet billed. Just the F-35 cost estimate as of 23 Feb13 is: “$396 billion to buy 2,456 jets by the late 2030s, but program is plagued by cost overruns ...” not to mention the F-22 jets or took up the cost of the two new different design of destroyers for shallow waters and the very expensive* “stealth” ships any or 10,000 Chinese fishing ships in the S. China Sea can radio in the location of with 30 meter accuracy using the Chinese version of the GPS system.

All told, several trillion more debt for federal government to pay than the 16.8 trillion I and the debt clock people say is federal debt, falling due before the 30 year bonds you do admit are federal debt, must be paid.

SUMMARY: You are making a distinction without a difference – all the 16.8 trillion dollars plus many trillion more will be claimed, even if some of it is now legally owned by a government agency with obligation to pay the public or DoD contractors later.

We agree on all that. Problem is:
(1) That the government revenues are growing more slowly than the government costs are. I.e. the federal debt is growing;
(2) Interest rate are atypically low now (half of what is normal) so when they return to normal, the cost of carrying even just the already created debt doubles as the old bonds mature;
(3) The national productivity as measured by the GDP is growing slower than the debt. (Debt to GDP is now 105%)

Nonsense. Have you not heard of the internet? You can live anywhere now buy and sell on the NYSX and most of the large corporation's income now comes mainly from Asia, especially China. All the big auto makers for example, even though the US ones have done well recently, are expanding there as that is the largest market and fastest growing one is.

*Four billion each, as I recall.

 

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Yeah if you count future projected spending as deb and call it debt then you can jack up the debt numbers. But then like your “real unemployment” numbers you wouldn’t be measuring debt. You would be measuring existing debt plus future projected expenditures minus projected revenues. That is hardly a fair, reasonable or useful measure.

Unfortunately for you and those like you Billy T it is a very important and relevant distinction. You can scare more people by including fictional debt to jack up your debt numbers just like you do with your unemployment numbers - add future spending without future revenues to existing debt and you can really exaggerate the debt numbers and scare a lot of people into doing stupid things.

No, we don’t agree. As previously stated government revenues are going up and government expenses are going down…faster than at any time in the last half century. Interest rates will rise as the economy recovers – assuming no intentional and unnecessary Republican induced debt default – and the interest paid by the government for new government debt will rise. Interest rates for existing government debt will not rise with the exception being for some savings bonds and TIPS bonds which is a small portion of existing debt.

No not nonsense. It doesn’t matter where you live. If you earn money in The United States, it can be made subject to US taxation regardless of where you live. I have investments in some European countries and believe me they are not the least bit hesitant to tax my investments in those countries with or without the internet.

And again you are ignoring the fact that European countries like Sweden have effective tax rates that are almost double US tax rates and they have had those taxes for a very long time. And their economies have grown faster than the US economy over the same timeframes. Our Canadian brothers and sisters to the north have higher tax rates than we have here in the US. There people are not fleeing Canada for the states. In fact it seems more Americans are seeking to immigrate to Canada than Canadians who want to immigrate to the US. And large industrialists are not going to move their oil wells to a lower tax state, manufacturers are not going to move their facilities to a lower tax state, and stores like Wal-Mart are not going to wrap up their stores and move to a lower tax state. This Republican notion that the little people have to kiss and rub their bellies so they will keep their wealth here is just silly in addition to being wrong and is not supported by the evidence. The federal government doesn’t tax wealth. It taxes income.

Businesses and investors make investment decisions based on the business value. If an investment makes business sense, investors are going to be there to advantage themselves regardless of the tax incentives. If a business investment doesn’t make sense, it doesn’t make sense regardless of the tax issues. And then you have that unpleasant little fact that all other industrial/developed countries have higher tax rates than we have in the US. And the rich have not and are not fleeing those states and their economies have out preformed ours (e.g. Sweden).

 

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Don't miss the text and photos at the end. - Less than half of my post here:http://www.sciforums.com/showthread...l-Superpower&p=3102317&viewfull=1#post3102317

Then, to illustrate your "distinction without a difference" I note you consider the obligation to pay $10,000 in 2043 (recently issued 30 year bond) as part of the federal debt but paying out of 2.7 TRILLION dollars to retired people from the Social Security Trust Fund completely 10 years sooner or the approximately equal amount in medical expenses to be paid out in the next 13 years! is not, according to your "distinction without a difference" now part of the federal debt as it is not yet legally owned by the people or doctors who will receive these funds from the federal government.
I also note that very few bonds ("Saving Bonds" only by and large), which you considered part of the federal debt are legally owned by the ultimate beneficiaries. I.e. 99+ % of bonds, not owned by foreign governments (central banks usually) just like stocks are owned by financial institutions like brokerage firms and “held in trust” for the ultimate beneficiaries. That is why they can lend them to others who want to borrow and sell them (sell “short”) and buy them back later.

In passing I will note that vast amount of gold held by Comex is sort of “held in trust” but does have defined owner. Each bar has a number on it indexing who or what firm owns it. Less than 7 million ounces now, and rapidly falling is owned by Comex and for each bar there are more than 50 people or firms “long” i. e. can asks for delivery of EACH bar. Many are now doing that now. (They don't want to get stuck with just a promissory note when the vault is empty.) In fact slightly more than 2/3 of all this “demand-able gold” has been drained form Comex's vault in the last eight months! I. e. At that rate the vault will be empty by the end of the year! I.e. the traded "Paper Gold" will be unbacked – NOTHING BUT PAPER.

Yes, I agree with the now bold sentence too (although not sure its end is true); however, you are ignoring or did not understand my point(1) of three, which was:
(1) That the government revenues are growing more slowly than the government costs are. I.e. the federal debt is growing;
Point is: government expenses > revenue = Debt increasing. Not important that the rate of revenue is rising faster than in last 50 years. It can continue to do that for the next 50 years as US goes deeper and deeper into debt, even on a per capita basis. I think we even agree that interest required for Treasury to sell 10 year or longer bonds has nearly doubled in slightly more than a year. Certainly your and other's tax bills are increasing more slowly but of course the full impact of rapidly growing interest cost paid to carry the growing debt is not immeditely felt as old bonds, still have their specified interest rate, (except for the TIPs , which have the principle to be paid at maturity increasing now.)

Here too you don't understand. You had suggested that US could climb out of debt by taxing the rich more and I noted that there was a surge of rich people giving up their citizenship and US residency to not owe any taxes to the US. Yes, if they remain US citizens living elsewhere does not remove their obligation to pay taxes on all their income regardless of where it is earned. US is about the only country that supports “double taxation” (Local tax and US tax on same income but the burden is eased by the foreign tax credit credits, in many cases.) So, in summary, yes it is nonsense to think the rich can pay for all Americans living beyond their means, driving the US ever deeper into debt. If that is attempted they will give up their passports and leave as some are already doing, now that Swiss Banks will in 2014 give the IRS information on their not declared earnings.

Not ignoring, but as you have now twice brought it up, I will comment:
Yes all the Scandinavian countries do have about double US tax rates and prosper. They keep all their population healthy as possible with essentially zero out of pocket medical expense, so all get the needed vaccinations, not just the well off and live about three years longer, on average, than Americans do. I. e. are productive longer and that with much more economical preventative and early care when ill does explains in part of this prosperity with high taxes.
More important, by far, is their essentially free education thru post graduate school, if you want it, makes for a population, unlike that of the US with its local funding of terrible schools in poor neighborhoods, ALL well qualified to earn a good living in the modern world instead of become thieves and drug dealer to live well, until caught and join by far the world's highest percentage of costly prisoners. Each US prisoner, is not only non-productive but makes ~3 others non-productive members of US society. That is why the cost per prisoner exceed the tuition at most, if not all, Ivy league schools! (It was “all” a few years ago, but I have not seen recent data and tuitions are rapidly rising, making the average graduate of college take a $28,000 debt along with the diploma when they graduate.)
More important still in explaining why US is going deeper into debt is its “military industrial complex” which make only things to be destroyed at a total cost of more than the TOTAL COST of next 16 greatest DoD spenders in the world!
In the long run, perhaps worse for US prosperity is the lack of ability in Congress to fund very beneficial projects which have first “pay off” more than a decade into the future as China can and does. For example the US could use mainly existing rivers to transfer Great Lakes water to the US's thirsty S. West at a small fraction of the cost China has paid for the world's largest water transfer project, now nearing completion after planning starting in 1950s! They will move slightly more than 50% of the Nile Rivers annual flow to their water short NE from their SE rivers more than a 1000 miles away!

SUMMARY: Yes, high taxes, well spent like in Sweden, do make for prosperity and low taxes, spent stupidly,* like in the US on the Military Industrial Complex, terrible schools for the poor leaving them unqualified for jobs that do exist (except making license plates in a prison), and with little preventive health care, etc. etc. make for a nation about to collapse economically with growing per capita debt burden “second to none” in the world!
* For example the very costly, high tech, “stealth” destroyer, for the “Tilt East” that any of ~10,000 Chinese fishing boats can continuously report the exactly location of with their version of GPS!

Billvon lives in US's SW and has photo voltaic generation system providing more than his electrical needs, but should make sure he also has a good well and guns to defend his water or that may all be useless before his PV system debt (if typical) is paid. 2021 is only 8 years away.

 

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All of that was a bunch of gobbledygook Billy T. The fact is what you are trying to do is count estimated future spending, without the associated estimated revenues, as debt. And it isn’t. It is just that simple. So the US debt situation is nowhere near as dire as what you are portraying it to be.

What the US needs and was severely lacking during the George Junior administration and has been lacking since Republicans took over the House is responsible fiscal policies. The US faces a couple of fiscal challenges. First, it needs to grow its economy faster and to do that it needs fiscal policies which place more money into the hands of the middle class and less into the hands of the wealthy. Because middle class people send the money on goods and services thereby creating economic demand and economic growth rather than sticking it in some Caribbean bank account. The nation needs to reverse the huge wealth transfers from the middle class to the wealthy that were initiated some 35 years ago by President Reagan with his regressive tax policies.

Second, it needs to bring its healthcare costs in line with those of other developed countries. The US healthcare system is bloated, inefficient and increasingly ineffective. That has to stop. The traditional solution has been to transfer those costs from individuals to government without addressing the underlying cost issues – largely to protect the powerful healthcare special interests (e.g. physicians, pharmaceuticals, insurance companies, etc.). And Obama and his Democrats have made a first stab at that with Obamacare.

Three, it needs to invest more in infrastructure and research and development. In order to be a competitive and wealthy country, you need infrastructure. You need hard infrastructure like roads and state of the art communication and power systems. And you need state of the art soft infrastructure like an educated and capable workforce, intellectual properties, and legal and regulatory systems.

Contrary to Republican ideology, Americans don’t need to be polishing and kissing the Buddha bellies of the wealthiest among us and praying for their blessings and living in fear of their anger. Instead Americans need to be making the necessary changes outlined above. It means more short term spending/investments and less long term spending. It means not holding Americans and holders of American debt hostage to political demagoguery. It means reforming our political processes to severely curtail the special interest abuses in Washington (i.e. take the special interest money out of our political system).

I think on this we can largely agree. We need a government that works for the people and not for the special interests that fund our political campaigns and politicians. We need campaign finance reform and stronger ethical requirements for our elected representatives and Supreme Court justices. I think Supreme Court justices should be subject to recall. Elimination of athe "Fairness Doctrine" has led to more extreme and homogenous Republican Party. Frank Carlson was my kind of Republican. Unfortunately they broke the mold with Frank.

As long as our government and political system remain dysfunctional, we are going to have troubles.

 

To Joepistole: I agree with most of your last post, as it is agreeing with me, but would like you to clearly explain why you include the pay out in 2043 of the principle of a recently issued 30 year Treasury Bonds as part of the "federal debt" but don't consider the certain pay out of ALL of the 2.7 TRILLION dollars now in the Social Security Trust Fund by ~2033, ten years sooner as part of the federal debt. Do you believe men from Mars will come and pay that 2.7 trillion so the federal government does not need to? - If that is not your belief, how is this "distinction without difference" explained? The government has a decade longer to try to collect the revenue needed for the 30 year bonds you include in the current government debt than to fund / redeem the IOUs sitting in the Social Security Trust Fund. How are these "IOUs" different from the bond IOUs? Both are to be paid with yet to be collected revenue.

That question is not "gobbledygook" but I bet your answer to this question will be.

Only difference I know of it is that 99+% of Treasury bonds* are owned and held by private agencies, like brokerages firms, "in trust for the beneficiary" and the 2.7 trillion is owned and held by Social Security Trust Fund, a government agency "in trust for the beneficiary."

* AFAIK, the only bonds the treasury issues with a person's name on it are the so called "Saving Bonds" and I' not sure, but think even those are no longer issued with your name on them anymore. - It has been decades since I owned any. Even then, they were not any asset your could sell - you could only turn them in to the treasury for a deeply discounted payment much less than their face value.

 

US's population is growing older and poorer:

And more gloomy:

Perhaps it all gets much worse on or before Halloween 2014?

 

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Anyone read this? Not seen by me in Brazil but seems to reflect my expectations for Joe American (not the rich).

Please quote parts if you have read it.

 

Already been paid off.

Are you now becoming a prepper?

 

What about the well? Do you have a good one, and guns to defend the water from those who don't, when lakes Powell and Mead are dry.
(You saw last part of long quote in post 623, but others may need this reference.)?

Not the normal type of Prepper, but I did move to Brazil nearly 20 years ago and have my cash (very liquid funds, not stocks) about equally divided between the two countries. I am starting to convert US stocks into cash now, using my losers to off set gains. I think it may be a little early still, perhaps a year, but would rather be safe than sorry. I use open ended GTC sell orders with price a few percent higher than the market and forget about them. A just after the "no taper now" news, I sold my 500sh of BG for just under $40,000. I bought it long, long ago when Bunge was a Brazilian company with HQ in Brazil.

 

I don't get the traft for economy, most run on plastic.
The economy really rely's on valuable occupational proportion as a welfare great for inhabitants of the country, that's really what economy is being able to give people occupational security, that's what the economy is related to heaha the great economy of self...

 

* Human interest focus of article is on a former corporate leader who made more each hour than the sum of his current three jobs pays in a month, yet he thinks he is lucky as most 75 year olds can find even one job to make ends meet. See a Graphs & Charts summary of the growing problem here:http://www.bloomberg.com/infographics/2013-23-19/end-of-retirement.html
Bloomberg won't let it copy, or I would have posted it. As article notes: Be good to your kids - You'll be living with them.

 

The very LAST people I want 'managing' the Great Lakes (partially owned by Canada) is the US CONgress (or the Chinese People's Republic). These water systems are fragile, and if people 'out West' can't manage theirs - then they need to move somewhere else or find their own solutions.

They could move to MI as an example, MI alone could produce enough food for the entire nation and then some.

As for China's 'forward thinking' - come on BillyT, you're going to use China as an example of responsible environmental resource management?

 

Sort of but with the understanding that they have a lot of needs to help their people, much like the US had 100 or so years ago.

When I was just a child, not yet a teenager, my dad took me to Pittsburgh, then self promoted as the "Steel capital of the world." On a windless day the smog from the coke ovens made it impossible to see across a wide street but many were given good jobs in the growing industry. Give China some slack - they can't over night end the burning of coal, but are world leader in alternate energy system investments, and even in coal fired power plants have developed the world's most efficient ones (Super critical steam) not to mention the more conventional alternate energy system - many hydroelectric dams / flood control systems including the world's largest at the Three Gorges site. China is running "rough shod" over individual rights to met the "greater good"

For example no public hearings - just action so they could build the world's most efficient, attractive and >1Km long, airport for the Olympian in less time than England spent in public hearing for a minor expansion at Heathrow. Same is true as they build the world's largest and highest speed rail lines, or the amazing "half Nile" artificial river that moves more than 50% of the annual Nile water flow 45 m up hill to water short Beijing NE area. See photos of last two of these three projects in post 623 of this thread. Here is the airport photo:

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Linear internal trains move passengers and bags to/from oval parking lot (or buses) to their gate, fast.

 

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I'm reasonably certain there was no such thing as a "reserve currency" while the gold standard existed.

 

Sure there was. Global banks exchanged pounds or letters of credit in pounds when "The sun never set on the British Empire," not gold.

 

Times are tougher now for most Americns, not already wealthy:

a 22Oct13 up date:

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Part of US conversion to a nation of part time jobs, may be due to Obama care, which I favor, as ALL should have access to good medical care, (and quality primary education opportunities) as they do in Scandinavian countries where populations know that is desirable and economically beneficial for their country instead of huge prison populations that per /capital cost more annually than "Ivy league" schools do even though it does require paying ~50% of your income to government in taxes. Also a large part of reason why US's total medical cost (including insurance company and legal profits of the US's "for fees & profits" system) are 2 to 3 times higher per capita than in Scandinavia is that poor wait until very ill to seek help at the hospital's emergency room. The US life expectance is 2 or more years LESS than in Scandinavia, where it is nearly free to ill person.

 

Dollar becoming less desirable:

 

News now, no "stand -by" needed:

Number of people on Food Stamps as of July 2013 (latest official data) was 47,637,407 See this and state by state data at: http://www.fns.usda.gov/pd/29snapcurrpp.htm
"The United States population on July 4, 2012 was: 313,933,954" This quote from: http://www.census.gov/popclock/

Thus 47,637,407 / 313,933,954 = 0.1517434 and 1 / 6.62 = 0.1510574 I.e. on most recent "Independence Day" one in every 6.62 Americans was dependent even for their food.

But the government will make that number look better by throwing 3.8 million Americans now getting food help off the roles. This is much much like how it reduces the unemployment number by not counting those who have looked for work, typically a year, before concluding that was just wasting their time and money as US produces only 130,000 or so new jobs per month when ~200,000 per month are needed just to keep up with the growth in the potential labor force. Or like the CPI is lessen when Jane can no longer afford her preferred Dove soap and switches to lower cost Ivory and the government says : "Wonderful, cost of personal hygiene is dropping. - Reduce that cost in the calculation of the CPI."

 

Especially in 2014:

I'm not happy about it but it is looking more and more like I may be correct that the coming Halloween is going to be scary - real scary for most.