Walter Williams is a no-nonsense guy, unafraid to speak out. He regularly exposes hypocrisy in society and the fraud that is Washington. In a recent article, he provided several takeaway points but none is more telling than the suggestion that Republicans are not stupid… Read More »The Fraud That is Washington and The Republicans
The deterioration of this nation’s economy is truly mind-boggling. What we experience today is an outgrowth of several decades of misguided economic policies. Current economic policy is even more misguided than those that led us to this point. So, too… Read More »Living Beyond Your Means Ultimately Means Living Beneath Your Means
Another debt ceiling drama is upon us. Despite the political buzz and the media hype, the event is inconsequential to the country and its economic future. A heated debate between the two political parties will occur. Both will claim to… Read More »The Debt Ceiling Debate — Another Washington Farce
The US continues to decline economically relative to some parts of the world, most notably those in Asia. Yet we still lead in many areas. Unfortunately being number one is some categories is not a good thing. The level of… Read More »USA Dominates The Rest of World — In Debt
Recognize that ratings agencies are subject to political and other pressures. Their performance in the sub-prime debt crisis was criminal. With that in mind, imagine the political pressure to keep sovereign ratings overstated. Nevertheless, this chart looks dismal in spite… Read More »Sovereign Debt Looking Shaky
Most people don’t understand the unsolvable problem the US government has created for itself and its citizens. Sovereign default is beyond a likelihood; it is inevitable. When and which (possibly all) obligations are defaulted on are to be determined. Panicked political decisions, likely in the near future, will produce a complete financial and economic collapse. Hopefully that is the worst that will occur.
Official Government Debt
The official federal debt is $16 Trillion. This debt represents 100% of current GDP. Ken Rogoff and Carmen Reinhart studied countries with high levels of government debt. This Time Is Different: Eight Centuries of Financial Folly, their well-acclaimed book, contains their findings. The authors concluded:
In our study “Growth in a Time of Debt,” we found relatively little association between public liabilities and growth for debt levels of less than 90 percent of GDP. But burdens above 90 percent are associated with 1 percent lower median growth. Our results are based on a data set of public debt covering 44 countries for up to 200 years. The annual data set incorporates more than 3,700 observations spanning a wide range of political and historical circumstances, legal structures and monetary regimes.
Elsewhere, the authors state:
Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP.
The US has passed their danger point and recent US GDP experience conforms to their findings. The economy is growing at subnormal rates, despite unprecedented stimulus efforts. A recent Rasmussen survey found that only 27% believe the economy is improving.
Actual Government Liabilities
Debt problems in the US are worse than stated, much worse. Three areas shed light on the problem:
- The Glide Path
- Treasury Obligations
- Unfunded Liabilities
It is difficult to find fault with Jim Quinn’s conclusion to his recent piece: The politicians, bankers and corporate titans running this country are too corrupt and cowardly to reverse the course on our path to destruction. The debt will… Read More »There Will Be No Political Solution