First, the parable, as cited by Denninger, from Charlie Munger, long-time business partner of Warren Buffett and Vice-Chairman of Berkshire Hathaway:Basically, It's Over
Next, the warning, as cited by Jim Sinclair from Zero Hedge:
FDIC Hits Record "Default" Level As Deposit Insurance Fund Plunges By $12.7 Billion To NEGATIVE 20.9 Billion
Finally, the fact check, from your friends at the Central Intelligence Agency, courtesy of Jr Deputy Accountant:
Per the CIA, the United States is the Brokest Nation in the World
Excerpt:
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The top five (based on "a country's net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments (such as pension funds and worker remittances) to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms."):
* 1 China $296,200,000,000
* 2 Japan $131,200,000,000
* 3 Germany $109,700,000,000
* 4 Switzerland $79,180,000,000
* 5 Norway $58,560,000,000
Those are positive account balances in case the coffee hasn't kicked and you're confused.
Putting this into perspective, Zimbabwe comes in #112 with an account balance of -$597,400,000. The United States?
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Read the rest for Uncle Sam's score.
Any questions why Zippy sez:
Not only are we last on the list, but we are TWICE as poor as the PIIGS (Portugal, Ireland, Italy, Greece and Spain) COMBINED. That's right, we're twice as bad off as the 5 poorest countries in Euroweenieland that everyone is so worried about right now.
ReplyDeleteWe are soooo screwed.
Our only saving grace is that our debt is denominated in our own currency, which just so happens to be the world's reserve currency...so maybe we pull a fast one by monetizing our debt. That works, very temporarily - until everyone else figures it out, at which point you can't borrow from anyone, and commodities you need from overseas become prohibitively expensive - how does oil at $250 or more per barrel strike you? That'll do wonders for the economy - we'll have gotten away with screwing the world for a few decades, at the cost of a very long and deep depression. Oh, and maybe those nations don't like getting screwed so much, and we get a war or two thrown into the bargain.
Hey thanks for the links!! Love what you're doing here, keep up the great work!
ReplyDeleteAG
Deleted in error during moderation from The Chef:
ReplyDeleteI'm gonna go out on a limb and suggest this is not the way to calculate who is the "brokest".
Not that the situation is good, it's not, but the best way to calculate this is GDP vs total debt for a given time period, which is still a bad outcome if you include the US national debt. Still ....
I used "brokest" loosely and am so far getting a lot of pushback on the argument that US corporations are cash-heavy and therefore the situation is not nearly as bleak as it seems. Though it isn't quite fair to put Zimbabwe up against the US, what happens when the dollar is pulled as the world's reserve and suddenly we're calculating our "debts" in whatever replaces it?
ReplyDeleteI have a difficult time accepting GDP numbers AND "total debt" (at least of the US) knowing that sovereign financial statements are not GAAP (if they were, the situation would REALLY be bad) so you're right but unfortunately that isn't a realistic picture of the problem either. :(
Various degrees of being screwed, I guess
For my money (pun), you don't need to go anywhere but back to David Walker's last presentation when he was still Comptroller General and the head of GAO, circa March, 2008:
ReplyDeletehttp://www.scribd.com/doc/27430139/d08604cg
for an easier link to the original located here:
http://gao.gov/cghome/cghomeformer.htm
Go to page 7 of the Walker presentation and look at the second column total for "major financial exposures" as of the 2007 Financial Report of the US Govt.
$52.7 effing trillion dollars (approximately 3x GDP at the time) in unfunded liabilities, and that was BEFORE TARP, Porkulus, et cetera ad nauseum, along with the collapse in tax receipts, plus the upcoming increase in interest expense on the $12.4T of acknowledged FedGov debt.
Do you understand yet?
I know that Chef and JDA do....
JDA,
ReplyDeleteCheck your e-mail listed on your blogger profile, econ question for ya.
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Yeah CA,
I'm not trying to downplay the pile of shit we find ourselves in. I just want something better to measure economic growth and contraction by than this CIA article.
Of course I default to: I blame the US Gov't. & The Fed.
People respond to incentives, when those incentives are corrupted/tampered/"perverse" (econ term). So when those above change the rules of the game they get pissed at the outcome and blame the players rather than the refs and the rules.
It will be interesting to see if the chickens come home to roost with the Chinese starting to dump bonds and refusing to subsidize debt. (not to mention funding the INTEREST on said debt with tax revenue that we don't have, talk about tax slavery for the unborn...)
Agree, Chef. And I also remember that the CIA missed the fall of the Soviets, etc..
ReplyDeleteBut for my two cents (pun again), once you get over 3x GDP, you're just arguing over what condition the corpse will be in once the barbarians are done with the raping.
Barbarians?
ReplyDeleteHeh ... reminds me of a set of rules found in a webcomic I read. One rule is: "Pillage ... then burn."
Honestly ... collapse will be messy in the extreme (if it ever actually comes it might just continue to get ignored) but ... Might be the best thing to happen to create a free society since the American Revolution.
Christ, that's a frightening thought: The failure of what was once the most free place in the world is the best hope for freedom.
I am no economist but here is a thought:
ReplyDeleteif the goal of shadow government is to institute a NWO, ie; world government,wouldnt a world currency be a convenient thing to push for when the dollar is shown to be worthless?
Nice way to grab power and leave the U.S. in shambles.