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There’s small choice in rotten apples
By 2014 the level of explicit Treasury debt (as opposed to raided and now unfunded mandates like Medicare and Social Security Trust) is likely to be significantly above 100% of GDP. By then, interest will absorb double the tax revenues as now.
This is generally well known. What is generally less well known is that in the USA, as in so many ailing European states, this explicit perspective reveals
Less than half the truth of what has been implicitly promised by the state in the way of future benefits…
There are studies, such as the one by the Frankfurt Institute in November 2008, that reckon with a total debt level for the USA of up to 600% (!) of GDP.
The Swiss Banker further quotes the study of a Canadian Asset Management firm for relevant financial data.
We minority remnant have been saying this for some time, based on unfunded mandate obligations and derivatives with some 7 bad years of consuming entire US GDP, assuming it stays the same instead of contracting further.
We are not government monopoly mass media, which ignored the Frankfurt report that created a crater in US markets last Fall.
But that too is only part of the truth. A look at who are the most important creditors of America’s highly indebted public finances reveals something truly remarkable. It is the public authorities themselves!
In other words, 40% of the public debt is intragovernmental holdings such as Medicare. We have been saying for some time that the Social Security Trust was robbed by Peter government to reduce the deficits in Paul’s trade and budget.
The Social Security Trust and many other government agencies do not hold cash. They hold IOU promises from the Treasury, intergovernmental debt. If both pockets are empty, neither can really loan to the other.
The Swiss banker gets it:
Unusual, remarkable, or rather, alarming.
Debtors are now simultaneously creditors.
He correctly points out that if the US Federal balance sheet were consolidated, it would wipe out the value of both the Treasury and Agencies like the Social Security Trust, Medicare, Medicaid, FDIC, FNM, FRE, GNMA, OPIC, PBGC, SBA, and the US Treasury would have to raise another 40% of the public debt to stay solvent.
