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Monday, December 17, 2012

The true government debt problem

I am constantly reading or hearing people saying the FED will just print the debt away.  This will cause the dollar to go down and inflation and the stock market to go up.  There are some pretty smart people that believe that will be true.  I have a hard time believing that.  I am pretty sure that most people do not understand the magnitude of the debt problem.  Here is a look at the unfunded liabilities of the social insurance programs from the 2011 balance sheet from the GAO.


This covers the next 75 years.  The circled  numbers are how much money we need above the estimated revenues to meet promised benefits.  We needed an extra $80 trillion dollars as of 2011.  Those numbers are not the actual  numbers needed, those are the Net Present Value of the dollars needed.  The problem isn't that we are $16 trillion in debt.  The problem is that we are essentially $96 trillion in debt.  Maybe I am crazy, but that seems like a lot of money to me.  To make matters worse the numbers went up $6 trillion just in the last year.  If economic growth continues to be slow, the problem will continue to get worse.  Lets put that problem into perspective even more.  From a recent report from the FED we can see what the household net worth is.


Household net worth—the difference between the value of households’ assets and liabilities—was
about $64.8 trillion at the end of the third quarter of 2012,$1.7 trillion more than at the end of the second

Hmm, that strikes me as a bit of a problem.  The government needs more money today then the entire net worth of all households in the U.S.A.  This is why Greenspan and Bernanke both have repeatedly told Congress the FED will not print the debt away.  It is simply too big not to cause hyperinflation.  Hyperinflation hurts everybody including the rich and powerful friends of those that serve on the FED.  There is already some grumblings that they are printing too much now from some FED people.  Imagine another $96 trillion, LOL.   The only solution is to default.  The only question is when not if.


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