Free Markets, Free People

US in worse shape than Greece

I’m not sure how many times we or our politicians have to hear this, but to this point, it hasn’t made the impression it should:

Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

Bill Gross runs Pimco, a based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world.  Gross went on to say:

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly."

[…]

"We’ve always wondered who will buy Treasuries" after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. "It’s certainly not Pimco and it’s probably not the bond funds of the world."

Now whether you realize it or not, that’s a good share of the bond market saying, "yeah, you know, not interested". That’s scary. And with China recently unloading some of its US debt notes, it’s not a happy picture for the US, fiscally. As Gross points out, in overall financial condition, we’re worse off than the basket case of Europe – Greece.

We have been getting these warning for literally decades.  We’ve done absolutely nothing substantial to mitigate them.  In fact, we added more to the pile (Medicare D and ObamaCare).   We’re going to crash.   It is time for a huge reality check, gut check or whatever you want to call it.  But like the shopping addicted, we have got to cut up the credit cards, cut spending to the bone, get government out of areas it has no business and take as much power of the purse away from the Fed as we can.  

This is beyond absurd.  And the time to address it is now (if it’s not already too late).

~McQ

Twitter: @McQandO

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7 Responses to US in worse shape than Greece

  • The cynical side of me goes with, “It is already too late.”   Look at the fuss over the paltry $35 billion in ‘cuts earlier this year.  Does anyone seriously think even trillion in cuts, which will still be too small, will pass?  Now how about one hundred times that?  Austerity needs to be done but it won’t be.  It will be forced on the country by means completely outside of our control.
    A bit of trivia:  when the British Pound stopped being the world reserve currency it lost about 90% of its value.  So take what you have now and times it by .1 and that is what you’ll have to get by on.  That is how bad the crash could be.

  • It was a true bipartisan effort that got us to this mess.  Our hope is that the current Republicans in office can and will push for even more cuts.
    But at this point Obama and the dems have no intention of cutting spending unless it’s the military.  They would then want to spend that money in other areas.
    We need a line item veto and a president willing to use it for the good of the country.  We need politicians who are willing and want to work for the good of the country as a whole and not just their interest back home.
     
    This shouldn’t surprise anyone.
    “NEW YORK (CNNMoney) — Larry Summers, formerly one of the top economic advisors to President Obama, is advocating more government stimulus to jumpstart the struggling U.S. economy.”
     
    http://money.cnn.com/2011/06/13/news/economy/summers_stimulus/?section=money_latest
    On a personal level 15 years ago I made the decision to get out of debt completely and not owe anyone anything.  Got rid of all but one credit card and only use it to travel, then pay it off immediately.  Bought used cars or trucks and paid cash for each.  Then made monthly payments to myself till I had money saved for the next.  I paid myself the interest that would have gone to the bank.
    Life is so much better.

    • The Democrats will make the cuts once the crisis hits. But until then they will simply do nothing and point at the GOP as being meanies.

    • I did the same thing.  And you and I are the suckers that are going to pay for this mess when the government decides we should bail out these other a-holes that ran three mortgages and $30k in credit card debt.
       
      The fall of the Athenian Republic, I suppose.

  • Is the United States “too big to fail”?

    I’m afraid that we’re going to find out.

    Neither side has the will or even the desire to fix the problem, because “fixing” the problem means telling a large number of people – including “the most vulnerable among us” – that the money’s gone, the check is NOT in the mail, and they are on their own.  Not exactly a vote-getting strategy for the politician who wants to keep eating wagyu, appearing on the Sunday morning shows, and sending pics of his junk to coeds.

    • Is the United States “too big to fail”?
      I’m afraid that we’re going to find out.

      Yes, I’m afraid the US is going to have to “learn the hard way”. Perhaps it’s for the better as America NEEDS Revolution II. (No, the “Reagan Revolution” was was a bump in the road.
      Problem is, what would a revolution change, what would it replace? Americans are still intent that they can. contra Bastiat, live out of other peoples wallets.
      The Republicans couldn’t change it if they wanted to and knew how: we’ve seen the polls of voters, including conservatives, that don’t want entitlements (except the next guy’s stuff) tampered with.
      Look for a dictator who offers to fix it if granted unlimited power. Look for the conservatives to blow their political capital on social issues and to play “Me, too”.