Friday, May 29, 2009

In 1 Year U.S. Taxpayers On Hook for $55,000 More per Household

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I know, I know - investment blogs should only be about how we can profit off others. We should only talk about the benefits and not the costs. I just wanted to let you know that in return for enriching our financial oligarchs despite their actions of bringing the Western financial world to its knees, and helping the stock market retreat from -55% off to only in the -30%s it only cost us a mere $55,000 per American household. Since the numbers are so big in aggregate they numb us, it is helpful to look at it this way (per household).

I remember back in the old days I used to just talk about the coming disaster that were our state budgets (soon to be resolved with more bailouts), commercial real estate (more bailouts), the banks (they are just fine thank you! Stress tested and passed with flying colors) and our entitlement programs especially Medicare. [Aug 7: I.O.U.S.A. Movie Trailer] But it's reached a point when this spring the annual Medicare / Social Security warnings came out (only to be fussed about for a day and then forgotten) I didn't even bother to blog about it. Why bother? I did it in 2008 [Mar 26, 2008: Annual Spring Entitlement Warning Falls on Deaf Ears] - helped me to fill some space on the blog at least. It creates a 1 day fuss every year and then we go back to our normal behavior [Nov 23, 2008: David Walker in Fortune Magazine] [May 23, 2008: David Walker on CNCB this Morning] Actually I am sort of laughing now because I was hand wringing over half a trillion annual deficits [Jul 28, 2008: US Budget Deficit to Half a Trillion] That's child play now readers. We're going to be doing $2 Trillion this year just as I predicted last winter. And many more years of $1 to $2 Trillion ahead.

Once more - read this article, and then quickly forget about it... because in this magic world of paper printing prosperity [May 19: Paper Printing Prosperity Defined] we can ring up our credit card forever and never have to actually pay the bill. We get all the benefits... and none of the costs. I want you to repeat: "There's no place like the Federal Reserve. There's no place like the Federal Reserve. There's no place like the Federal Reserve." as you think about each household in America now owing over half a million dollars... and then just imagine it going up $50K a year from here to... well forever! Why not? It's only paper money - much like toilet paper we can make more of it. Worst case scenario we'll do a partial default in 20 years, promise the world that was a 1x time thing and then keep doing it. Maybe this gig can go on another century.

Via USA Today
  • Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows. (you call it commitments, I call it newfound prosperity - it made the stock market go up, so it is just and good for all of us. Main Street = Wall Street... apparently USA Today does not watch enough CNBC)
  • The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.
Here is the fun number
  • The latest increase raises federal obligations to a record $546,668 per household in 2008.
Now quickly take the red pill and ignore that - it never happened.
  • That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.
Ah a David Walker appearance (for those who don't know, Mr. Walker was the comptroller of the US who warned us of our path for many years, but was ignored by politicians ... and he finally quit in disgust to try to spread the word via private sector. This is where I'm supposed to tell you representatives represent the people of America and such)
  • "We have a huge implicit mortgage on every household in America — except, unlike a real mortgage, it's not backed up by a house," says David Walker, former U.S. comptroller general, the government's top auditor.
Hey now! It's backed by the full faith and credit of the richest* nation on Earth

*richest as long as you exclude all debt

  • USA TODAY used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions. Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion. The numbers measure what's needed today — set aside in a lump sum, earning interest — to pay benefits that won't be covered by future taxes.
A trillion here, a trillion there. Pretty soon you are talking real money. But thankfully we never have to pay it back. It is just meaningless numbers in parchment. Now go forth and spend :)

** please note, in no way shape or form did I verify these USA Today numbers - they could be off by 10%, 20% positive or negative. All you need to know is every household in America owns 'somewhere" around half a million (and growing).

[Mar 31, 2009: Financial Rescue Pledges Now $12.8 Trillion]

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