Spiraling to Bankruptcy

incometaxcartoon423lIf the Government confiscated everything, the social programs would still be $50 trillion short and the Government would still be bankrupt. Furthermore, no company or individual would be left with anything.

The economy is in bad shape. Some say it is worse than any time since the Great Depression. I believe it is actually worse than the Great Depression because of the level of debt. At the time of the Depression, neither governments nor individuals were deeply in debt. We were a nation of savers. Now we are a nation of spenders, living beyond our means. Individuals and governments at all levels are over their heads in debt, some literally drowning.

The debt problem is intractable. This conclusion is not economic but mathematical. It literally is mathematically impossible to get out from under the level of existing debt. To demonstrate, only the Federal Government will be dealt with. Such a focus greatly understates the actual problem, because it ignores personal debt and lower-level government debt. States and municipalities have grown well beyond sustainable levels and are running large deficits. Some defaults have already occurred. Individual bankruptcy filings are soaring as are foreclosures.
Government Violence Tolstoy 001

Promises Beyond Reality: The Federal Government admits to over $12 Trillion dollars in debt. In reality, its obligations are multiples of that figure. The unfunded promises from Social Security and Medicare total around $100 trillion. That is, to properly fund the forecasted future deficits in Social Security and Medicare, $100 trillion would have to be put in the fund today. This liability is growing at the rate of about $5 trillion per year! The Government has promised benefits that they cannot honor. These programs are Ponzi schemes that make Bernie Madoff look like Mother Teresa. As evidence, the total net worth of the country (the country’s total assets less liabilities) is slightly above $50 trillion. If the Government confiscated everything, the programs would still be $50 trillion short and the Government would still be bankrupt. Furthermore, no company or individual would be left with anything.

Send in an Additional $1,525,000 With Your Tax Return : To further put the problem into perspective, the Federal Government owes about $112 TRILLION in actual debt and social promises. Assuming a total population of 315 million people, the portion of Federal Government debt that is owed by every man, woman and child in this country is about $381,000! Or, a family of four owes $1,525,000 of which they are unaware. This amount is in addition to whatever mortgages, credit card debt, car loans or other loans a family might have.

Would You Give This Man a Mortgage? The magnitude of the numbers is so large that they are incomprehensible to the average person. Another way to understand the absurdity of the Federal Government’s condition is to reduce it to family terms. The Federal Government collects about $2.5 Trillion in total revenues a year. That is from all sources of taxes and fees. Think of that as an individual’s annual gross salary. The debt owed by the Government can be looked at as a great big mortgage. Thus, we have a family that has a mortgage 44.8 times greater than gross salary. That would be the equivalent of a man earning $50,000 gross salary having a mortgage of $2,240,000! An interest-only mortgage at 6% would require the family to pay annual interest of $134,000 per year. A conventional mortgage would be much higher. The example becomes even more ludicrous when one recognizes that taxes, food, clothing, savings, etc. all have to be subtracted from gross pay to determine what is left for debt service.

gopWhen we shift back to the Federal Government, the family analogy becomes even more absurd. The Federal Government has nothing left from their “gross pay.” Their “living expenses” actually exceeded their gross pay by $1.2 trillion last fiscal year. That is, they spent almost 50% more than they made. Comparable behavior is budgeted for the next ten years.

Debt Death Spiral: The Federal Government is in what is known as a Debt Death Spiral. They are unable to pay the actual and implied interest on their debt. Hence, the unpaid balance is added back to the amount owed, making the problem worse next year. This debt spiral is growing exponentially. There is no way to escape a certain mathematical end — BANKRUPTCY.

Do not count on collecting Social Security if you are less than 55 years old. Do not count on Medicare in anything approaching its present form. On top of utterly bankrupt programs they want to impose Obamacare. The Cato Institute estimates the cost of what has been proposed at over $6 trillion for a ten year period. They do not adjust for the fact that no major new government program is lucky to come within 5 times its initial estimate.

Mathematics vs. Politics: Are the politicians nuts? Yes. Is the country heading for bankruptcy? Yes. Is there anyway to avoid this end? No! Not unless you repeal the laws of mathematics! That cannot be done, despite legislators’ inflated opinions of themselves.

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8 Comments

  1. Let us not fall into the trap that the government loving leftists wish us to.
    That trap is to blame “greedy bankers” and corporations for this situation,the blame is on our government that allowed this to happen by interfering in the markets with the FED/Fannie Mae/Freddie Mac and by giving out the bailouts that the public was vehemently against.
    The way I see it is that every aspect of this terrible issue(and almost all other catastrophes in history) is at the foot of big,oppressive,unconstitutional,greedy,coercive government!
    Only when people are able to see this will they prosper and live free.

    1. Dave,
      In my opinion, you are absolutely correct. Yet, as we have seen, truth in science is no longer to be assumed. Truth in government has never been assumed. Thus the knowledge necessary has to come from non-government sources and non-government controlled sources (mainstream media). Given the government school system, it is difficult for most people to think in these terms. Thank goodness for the internet and alternative media. Before long, I suspect that these sources will come under attack.

      Monty

  2. Viva von Hayek!!!!!

    Knowledge is power’s worst enemy – because it’s the people’s power. Hence 100yrs of compulsory indoctrination that precludes the below, and this website – enjoy!

    Democracy: the God that Failed
    http://mises.org/media/1099

    The Fed and the Power Eilte
    http://mises.org/media/2787?silverlight=0

    Introduction to the Financial Elite
    http://thehiddenevil.com/introduction.asp

    The Creature from Jekyll Island: a Second Look at the Federal Reserve by Ed Griffin
    http://uk.youtube.com/watch?v=F3TAh1gy6rc&feature=related

    A CHRONOLOGICAL HISTORY OF THE NEW WORLD ORDER
    http://www.crossroad.to/Excerpts/chronologies/cuddy-nwo.htm

    Wall Street, Banks, and American Foreign Policy
    http://www.lewrockwell.com/rothbard/rothbard66.html

    Big Business and the Rise of American Statism
    http://praxeology.net/RC-BRS.htm

    The Great Depression, World War II, and American Prosperity, Part I (video)
    http://mises.org/multimedia/video/Woods/Woods5.wmv

    The Great Depression, World War II, and American Prosperity, Part II (video)
    http://mises.org/multimedia/video/Woods/Woods6.wmv

    Despotism Loves Company: The Story of Roosevelt and Stalin by Soviet defector Yuri Maltsev
    http://mises.org/mp3/Pres/Pres8b.mp3

    The Economics of the New Deal and World War II
    http://mises.org/multimedia/mp3/Woods2/12.mp3

    Roosevelt’s WWII Policies of Unconditional Surrender and the Morgenthau Plan
    http://mises.org/mp3/ss03/Denson.mp3

    Six Months that Changed the World
    http://mises.org/multimedia/mp3/bb05/Denson-07-20-2005.mp3

    Why did America get into World War I?
    http://www.mises.org/mp3/rothspeak/ww1Morgan.mp3

    Peace in the Middle East: Empire, Oil, and the Reshaping of the Middle East After World War I
    http://mises.org/multimedia/mp3/ASC2009/ASC09_Tooley.mp3

    A Century of War
    http://mises.org/MultiMedia/mp3/20thCentury/10_20th_Denson.mp3

    War and Inflation: The Monetary Process and Implications
    http://mises.org/multimedia/mp3/misescircle-ny06/Salerno.mp3

    The Song that Is Irresistible: How the State Leads People to Their Own Destruction
    http://mises.org/multimedia/mp3/25thNYC/03-Higgs.mp3

    Six Months that Changed the World
    http://mises.org/multimedia/mp3/bb05/Denson-07-20-2005.mp3

  3. As I remembeer the history of Germany and the collapse of the Mark( 3 timmes)
    the property owned by Krupp and other business were not confiscated. also private homes that had no leans, were not touched by the bankruptcy of the regime. So not everyone lost everything. Not good but factual.

  4. That is right, the rich would have nothing BUT a sense that making money off the poor by corrupting the government and then living off those corrupt government contracts is not going to be the path to wealth next time.

    Since we are broke anyway, it only makes sense to take the bastards down that made us broke and take the money back they stole.

    Rothschild, Rockafeller, Bush, Cheney, etc. wouldook good in a soup line of a gallows.

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