Welfare-Warfare State

Fmr. Comptroller David Walker: To help end budget gimmicks, pass this bill

"This bill, also championed by the youth-led 'The Can Kicks Back' campaign, would make it more difficult for Washington politicians to kick the can down the road by providing information about the long-term impact of today’s unsustainable fiscal policy. Specifically, the INFORM Act would expose two important but often ignored realities. First, with an aging population, rising healthcare costs and mounting interest expense, federal spending is set to automatically and dramatically increase the 'mandatory' part of our budget. Second, young people and future generations will disproportionately shoulder the burden of our fiscal imbalance." Continue reading →

Continue ReadingFmr. Comptroller David Walker: To help end budget gimmicks, pass this bill

U. of California economist says real US debt $70 trillion, not $16 trillion

"James Hamilton believes the government leaving out certain unfunded liabilities that include government loan guarantees, deposit insurance, and actions taken by the Federal Reserve as well as the cost of other government trust funds, which bring the total amount the government owes to a staggering $70 trillion, he says. 'The biggest off-balance-sheet liabilities come from recognition of the fiscal stress that will come in the form of an aging population and rising medical expenditures,' Hamilton says, adding, 'There are many historical episodes in which off-balance sheet liabilities ended up having quite significant on-balance sheet implications.'" Continue reading →

Continue ReadingU. of California economist says real US debt $70 trillion, not $16 trillion

Larry Kotlikoff: Detroit Today, Washington Tomorrow

"The debt Uncle Sam publicly acknowledges is now $12 trillion. But the true measure of our debt -- the one suggested by economic theory -- is the fiscal gap, which totals $222 trillion. The fiscal gap is the present value of all future expenditures, including servicing outstanding official federal debt, minus the present value of all future receipts. Detroit's main means of hiding its true liabilities was discounting its future obligations at a rate far higher than appropriate, thus giving the appearance that less saving was needed to cover the shortfall. Washington's dirtier trick has been to keep virtually all of its future liabilities off the books." Continue reading →

Continue ReadingLarry Kotlikoff: Detroit Today, Washington Tomorrow

This amazing, animated chart shows the aging of America

"This is a mesmerizing little animation created by Bill McBride of Calculated Risk. It shows the distribution of the U.S. population by age over time, starting at 1900 and ending with Census Bureau forecasts between now and 2060. As McBride points out, you can see a big 'baby bust' before and during the Great Depression, right before prosperity returns and the Baby Boom strikes. (You can also see the bulge of Baby Boomers ripple through the charts in the latter half of the 20th century.)" Continue reading →

Continue ReadingThis amazing, animated chart shows the aging of America

U.S. 10 Year Bond Yields in Perspective (1790-Present)

"The move in the 10 year yields has led to all sorts of speculation as to the underlying cause. Since none of this is within our my control, all we can do is look at this from a longer term perspectives to put this into broader context. Three takeaways: 1) Bond Yields can be driven to extreme son the upside and on the downside. 2) It takes many years or decades to unwind a move like that 3) Rates could go appreciably higher if the 30 year bond bull market is over. Looking at yields from an historical perspective, there is still plenty of room for yields to rise if they simply 'normalize.'" Continue reading →

Continue ReadingU.S. 10 Year Bond Yields in Perspective (1790-Present)

The Myth of the Free-Market American Health Care System [2012]

"In 2009, according to these statistics, which come mostly from the OECD, U.S. government entities spent $3,795 per person on health care, compared to $3,100 per person in France. Note that these stats are for government expenditures; they exclude private-sector health spending. If anything, the U.S. figures understate government health spending, because they exclude the $300 billion a year we 'spend' through the tax code by making the purchase of employer-sponsored health insurance tax-exempt. So: if we measure by the dollar amount of government involvement in health spending, the French system is actually meaningfully freer." Continue reading →

Continue ReadingThe Myth of the Free-Market American Health Care System [2012]

The New, Improved 1984

"Have you noticed that every key metric of the economy is constantly being revised, rewriting history and installing a shiny new set of 'facts'? The 'headline number' is always positive, and its downward revision buried in an avalanche of new data. The revisions are so constant and so extreme that the recognition of this constant revision of history to suit the political needs of the current regime has been numbed; everyone knows the numbers are intended to paint a positive picture of a devolving, fragile economy and society, but we prefer this propaganda illusion to the harsh reality. Why? Because half of us are getting a direct check, benefit or payment from the state." Continue reading →

Continue ReadingThe New, Improved 1984

The Detroit (or New American) Yard Sale … Coming to a City Near You

"I can’t help but wonder what America’s auto barons like the Dodges, Firestones and especially Edsel and Eleanor Ford – whose donations and charitable support over the decades has created the cultural gem that is the Detroit Institute of Art – would think of their art being auctioned off to pay government debt. Will Disney one day own Yosemite National Park or Old Faithful? Will Six Flags own Mt. Rushmore? Will hedge funds buy up tracks of national forests and manage them like they would manage other timber assets? Those are legitimate questions, given a federal debt so large it cannot possibly ever be repaid." Continue reading →

Continue ReadingThe Detroit (or New American) Yard Sale … Coming to a City Near You

Japan’s Debt Exceeds 1 Quadrillion Yen as Abe Mulls Tax Rise

"The country’s outstanding public debt including borrowings reached a record 1,008.6 trillion yen as of June 30, the finance ministry said in Tokyo today. Larger than the economies of Germany, France and the U.K. combined, the amount includes 830.5 trillion yen in government bonds. The world’s heaviest debt burden will weigh on Abe when he decides next month whether to implement a two-step plan to double the tax on consumers in a nation with ballooning welfare costs. Moody’s Investors Service yesterday warned that a worsening of finances would erode confidence in government bonds." Continue reading →

Continue ReadingJapan’s Debt Exceeds 1 Quadrillion Yen as Abe Mulls Tax Rise

Bill Bonner: The Bottom Is Still Ahead for This Bear Market

"The last top in Treasury prices (and a bottom for yields) occurred in 1946. Yields rose for the next 34 years. Now the Treasury market appears to be topping out again… and is headed for a new high in yields… which may not arrive until 2047. It may be a long way off… or right around the corner. Either way, it will be hell getting there. The Detroit pension disaster is just the first of many. Wait until long-term interest rates hit 5%… or 10%. How many companies, cities and pension funds will still be solvent? We’ll see! But wait. You don’t think the Fed will sit on its hands and let the markets take over, do you? Taper off? Forget it." Continue reading →

Continue ReadingBill Bonner: The Bottom Is Still Ahead for This Bear Market