US Closes 2010 With $14,025,215,218,708 And 52 Cents In Debt

[nofuture]

http://www.zerohedge.com/article/us-closes-2010-14025215218708-and-52-cents-debt-154-billion-increase-overnight

US Closes 2010 With $14,025,215,218,708 And 52 Cents In Debt, A $154 Billion Increase Overnight
Submitted by Tyler Durden on 01/03/2011 15:49 -0500

Debt Ceiling Intrade

When we predicted a few weeks ago that the US would end 2010 with $13.8 trillion in debt we miscalculated the settlement dates on all the last round of bond auctions . As a result, we are happy to announce that as of December 31, 2010, the US now has $14,025,215,218,708 and 52 cents in debt (incidentally this is an increase of $154 billion in debt on the US balance sheet overnight). As a reminder the debt ceiling is 14,294,000,000,000. Which means at a run rate of $125 billion in net monthly issuance, the US may not even get to the end of March at the current burn rate. Which also means Congress better start the discussion on raising the debt ceiling as soon as February. Which means someone is about to [win/lose] some serious cash on the Feb 28 debt ceiling hike InTrade contracts.

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[fabianhjr]

WOW, 14 Trillions 0_o T%hat is amazing. Everyone start passing all your money to Bitcoins before dollars become worthless!

Also, what the plan to settle that debt? I just see the number increase day by day.

[MoonShadow]

Also, what the plan to settle that debt? I just see the number increase day by day.

Plan?

Get all those rich Europeans who are frightened to lose value because of a Euro breakup to invest in US Savings Bonds, then defaut.

If you can call that a plan.  I would call it a fraud, but I didn't do it.

[fabianhjr]

LOL, ok. Get all your money to Bitcoins then.

[RHorning]

WOW, 14 Trillions 0_o T%hat is amazing. Everyone start passing all your money to Bitcoins before dollars become worthless!

Also, what the plan to settle that debt? I just see the number increase day by day.

All of that debt is in the form of federal reserve notes.  BTW, that amount is trivial in comparison to non-federal debt such as personal debt (everybody who owes money to credit card companies and banks), corporate debt, and debt owed by state and local governments.  Of those the debt owed by California and a couple of other states (Illinois and Michigan come to mind as well) are the big issues as those government can't simply print up the money to inflate the currency away.

Of more concern, from an inflationary point of view, is the amount of money that the U.S. Federal Reserve has simply been "printing" to deal with the "fiscal crisis" of the past couple of years.

If there is an end-game that might happen, it may end up being something like how the Deutschesmark (Germany Mark) was first introduced into Germany following World War II.  It is worth looking up the history of that currency, particularly in the late 1940's and early 1950's to see how at least it may be hoped for an end-game if the Dollar or Euro completely collapses as a currency.  Essentially it turned into an hugely "progressive" one-time income tax, but it worked in terms of jump starting the Germany economy.  Essentially each German citizen was given 1000 marks flat out, plus convert their old money at an exchange rate of something like 40:1 up to a certain lifetime amount, and higher exchange rates for still larger amounts of money.  Something of that nature seems particularly appealing to the current political powers-that-be in Washington DC if dollars lost their value.

Yeah, Bitcoins would seem incredibly valuable as a way to "park" assets in such an economic upheaval.

[ShadowOfHarbringer]

LOL, ok. Get all your money to Bitcoins then.

Well, then You better check this out:

http://www.youtube.com/results?search_query=gerald+celente&aq=f
http://www.youtube.com/results?search_query=peter+schiff&aq=f

Ones of the very very few economists who have successfully forecasted the financial disaster.
Their current predictions are not very comforting either...

[nofuture]

LOL, ok. Get all your money to Bitcoins then.

Well, then You better check this out:

http://www.youtube.com/results?search_query=gerald+celente&aq=f
http://www.youtube.com/results?search_query=peter+schiff&aq=f

Ones of the very very few economists who have successfully forecasted the financial disaster.
Their current predictions are not very comforting either...

Ceiling has to be lifted.   $45k for every individual is not enough debt. 

[Sjalq]

All of that debt is in the form of federal reserve notes. BTW, that amount is trivial in comparison to non-federal debt such as personal debt (everybody who owes money to credit card companies and banks), corporate debt, and debt owed by state and local governments.  Of those the debt owed by California and a couple of other states (Illinois and Michigan come to mind as well) are the big issues as those government can't simply print up the money to inflate the currency away.
Yeah, Bitcoins would seem incredibly valuable as a way to "park" assets in such an economic upheaval.

According www.usdebtclock.org total personal debt (mortgage + consumer + credit card) is now 16.212 Trillion, that's only 2 Trillion more than Federal debt. State debt and municipal debt combined are only 3.2 Trillion. So the Federal government debt now constitutes 14 Trillion of 33.6 Trillion's worth of national, state, municipal and private debt.

The federal government is by implication responsible for the 3.2 trillion in state and muni debt, I can't imagine them ignoring it if the defaults begin. Even if they do attempt to ignore it the federal reserve will step in to "stabilize" the situation by beginning to buy up that debt too.

Through the FDIC the federal government is actually responsible for ALL debt since the FDIC is implicitly backed by the treasury.

So to summarize, the Fed will through QE2 support the treasury. The treasury will support the states and the munis. The FDIC will support the deposits (which is all backed by other debt and basically amounts to all the money and therefore all the debt in the system) and the FDIC is in turn supported by the Treasury. End game, the US defaults on ALL it's debts by converting it all into "sovereign" money and paying off the friends of the fed first with everybody else getting in line behind them. I guess only a very small proportion of people will get paid before the dollar crashes and the rest of the line is sent home holding bricks of useless cash.

Alternative is let the system fail. Either Ron Paul style by letting people opt out early into alternative currencies or by simply letting it crush itself under it's own weight. Result is actually quite similar, US needs to default and get a reset. Investors in US bonds need to take a knock since it wasn't such a prudent investment to kick off with.

If left unsupported the system would clean itself out very quickly and the US would have a real recovery within 12 to 18 months. It would however scare the life out of the populous. If the federal government keeps trying to "fix" it the system might take up to a decade to restructure, very bad outcome as this would greatly prolong the suffering.

[FreeMoney]

If left unsupported the system would clean itself out very quickly and the US would have a real recovery within 12 to 18 months. It would however scare the life out of the populous. If the federal government keeps trying to "fix" it the system might take up to a decade to restructure, very bad outcome as this would greatly prolong the suffering.

Or maybe it would scare some life back into the populace.

[ribuck]

State debt and municipal debt combined are only 3.2 Trillion.

I love the way you can describe a debt of $10,000 per person (including babies) as "only" 3.2 trillion.

[Sjalq]

State debt and municipal debt combined are only 3.2 Trillion.

I love the way you can describe a debt of $10,000 per person (including babies) as "only" 3.2 trillion.

I didn't mean to downplay it.

To further put it into perspective, the official obligations, both direct and indirect, no longer make it possible for the federal government to continue in its current form. Even if we only take the official debt of 14 Trillion and imagine interest rates rising to 10% (where they were for much of the late 70s and early 80s) then the US enters a position where only the interest portion of the debt rises so dramatically while at the same time causing such a steep decline in tax incomes that all federal taxes as they stand currently will go exclusively to interest payments. That is taking only one element of the situation into account. One could sketch about half a dozen of these and back most of them with historic data.

The situation is extremely dire and the babies you speak of will live in a world very unlike our own. I don't believe any political will exists anymore to stop this speeding locomotive. There is luckily a lot we as individuals can do to prepare ourselves and our immediate communities.

Check out www.ChrisMartenson.com

Or maybe it would scare some life back into the populace.

I agree, it would scare them in the most constructive way possible. It would be upsetting, yet not fatal and they would most likely be able to correctly assign it to certain of their own behaviors and that of their elected officials and appointed CEO's

[Binford 6100]

i think it relates somehow to this understanding of money, monopoly on money/us $ and that government must spend money first so that citizen and companies have some of them, to pay taxes. (simplified)

http://pragcap.com/resources/understanding-modern-monetary-system

the author even goes so far that he claims periods of budget surplus are causing economic depressions.

[Sjalq]

i think it relates somehow to this understanding of money, monopoly on money/us $ and that government must spend money first so that citizen and companies have some of them, to pay taxes. (simplified)

http://pragcap.com/resources/understanding-modern-monetary-system

the author even goes so far that he claims periods of budget surplus are causing economic depressions.

Bro that is really a horrible article, it incorrectly explains a simple topic in highly complicated terms.

Try these resources:
www.mises.org is a much better resource if you want to learn about economics.
Also pick up a copy of Michael Maloney's "Guide to investing in gold and silver"
And for a really fun introduction to the monetary history check out "Money as debt" on YouTube http://www.youtube.com/watch?v=vVkFb26u9g8
Also check out Renaissance 2.0 on YouTube by Damon Vrabel http://www.youtube.com/watch?v=l37RhdFGVsM

[Binford 6100]

...
http://pragcap.com/resources/understanding-modern-monetary-system
the author even goes so far that he claims periods of budget surplus are causing economic depressions.

Bro that is really a horrible article, it incorrectly explains a simple topic in highly complicated terms.

i know mises, austrian school, all your other links.
i just try to point out where goes the author wrong? the theory is incomplete (ignoring debt servicing, use of money as store of wealth by others, just to name the first two that i found)
no offense, i hoped for more feedback than 'watch those movies again'

[Sjalq]

...
http://pragcap.com/resources/understanding-modern-monetary-system
the author even goes so far that he claims periods of budget surplus are causing economic depressions.

Bro that is really a horrible article, it incorrectly explains a simple topic in highly complicated terms.

i know mises, austrian school, all your other links.
i just try to point out where goes the author wrong? the theory is incomplete (ignoring debt servicing, use of money as store of wealth by others, just to name the first two that i found)
no offense, i hoped for more feedback than 'watch those movies again'

Sorry then, I wasn't clear on why you posted it.
Did you want to point out that the government has a view similar to his?
Did you want comment on the article? I'll gladly comment but the article is so long and full of holes that we would need to narrow it down to some part of the article.

[Binford 6100]

...
http://pragcap.com/resources/understanding-modern-monetary-system
the author even goes so far that he claims periods of budget surplus are causing economic depressions.

Bro that is really a horrible article, it incorrectly explains a simple topic in highly complicated terms.

i know mises, austrian school, all your other links.
i just try to point out where goes the author wrong? the theory is incomplete (ignoring debt servicing, use of money as store of wealth by others, just to name the first two that i found)
no offense, i hoped for more feedback than 'watch those movies again'

Sorry then, I wasn't clear on why you posted it.
Did you want to point out that the government has a view similar to his?
Did you want comment on the article? I'll gladly comment but the article is so long and full of holes that we would need to narrow it down to some part of the article.

yep, pinpointing the holes in the article.
i fear that the article might well represent the government understanding of money. The part with compulsory deficit spending seems just wrong. that's why i brought it here.

as for narrowing down the source, i'm glad for any input. please, slice it as you wish

[Sjalq]

I'll let you pick something, I really don't know where to start.

Money is debt and is created by the banking system. The governments act as enforcement and collection agencies for the banking system. As such cooperating governments enjoy a cheap and nearly endless supply of credit. The further someone is removed from the banking system the more expensive credit becomes. (Know any chartered accountants? Ask them what they pay on mortgage interest vs what any other profession pays or what a blue collar worker pays)

The system is inherently unstable and market pressures continuously cause it to collapse under its own weight. Each time this happens the enforcement agency changes the rules of the game to ensure the game continues. The banking system has lost so much money on 3 different occasions over the last 3 decades that in each of these losses alone have been so expensive as to wipe out all profit since the beginning of western banking from the entire sector. Yet banks remain open for business. This is because it is in the best interest of the government to let the status-quo persist since it benefits by getting essentially free money. This is how it is possible for the government to run deficits for 190 out of 230 years. If they go broke the banking system cannot continue to exist so the banking system keeps bailing out the gov an the gov keeps bailing out the banking system.

Eventually (my feeling is the next 1000 days) the normal people who fit the bill for all this will reach their capacity to continue funding it and it will begin to drastically collapse in on itself. Then all these arguments about deficits being good or bad, all these crazy taxes being necessary or not, the idea of debt being a problem, will be put to rest, until people again forget how they got here and begin again...

[RHorning]

Eventually (my feeling is the next 1000 days) the normal people who fit the bill for all this will reach their capacity to continue funding it and it will begin to drastically collapse in on itself. Then all these arguments about deficits being good or bad, all these crazy taxes being necessary or not, the idea of debt being a problem, will be put to rest, until people again forget how they got here and begin again...

Sad thing is, based upon personal experience by living in countries other than America that had an economic melt-down by far worse than anything America is currently facing... that life will continue and go on as usual.

I lived through the late 1970's and remember the double-digit inflation coupled with high unemployment (aka the "stagflation" of the Ford/Carter years).  My family and my neighbors got along just fine in that situation, although they did complain about what was happening and put Ronald Reagan into the White House.  It wasn't just the good looks of that former President of the Screen Actors Guild that convinced people he was ready for higher office.

Please don't mistake this as saying there aren't problems, as there clearly are.  I am expecting something more like the Arab Oil Embargo of the mid 1970's or something of that nature to hit again with high inflation and higher unemployment.  Then again I said almost three years ago that an Obama Presidency would be nearly identical to the Carter administration in terms of policies and the end result with the economy.  So far he hasn't disappointed me with that assessment either.  Obamacare was an interesting wrinkle that isn't the same, but otherwise the economic policies are roughly similar.  Obama is also greying with his hair just as fast... proving to me that the guy can't delegate.

Still, what would be a horrible economy for America and people thinking it is the end of the world would be still the envy of the rest of the world for the most part.  Not unless the U.S. economy got as bad as what happened in Zimbabwe would anybody really start to panic with widespread unrest.  I think in that case the end-result of what happened with the Weimar Republic would be a better template to compare.  That didn't do to well for the rest of the world and it would be ugly to see what an American version of THAT would become.

What the breaking point for the U.S. Dollar would be, I can't say right now, but I do think there is some more room for playing around.  In terms of a world reserve currency, I don't see anybody stepping up to the plate offering anything better as both the Yuan, Euro, Pound, and Ruble are all equally weak in their own way and unfortunately also tied too closely to the Dollar to let the Dollar drop out of sight.