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Politics : Stockman Scott's Political Debate Porch

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To: Jim Willie CB who wrote (10010)	12/5/2002 10:27:57 AM
From: stockman_scott	Read Replies (1) of 89467

The GDP of the US is about 10 trillion dollars. The Sovereign PUBLICLY TRADED debt of the US Treasury is about 7 trillion dollars. The Sovereign debt of the US in NON-PUBLICLY traded US Treasury bonds in the Social Security Trust fund is about 1 trillion dollars. The Sovereign OBLIGATION of the US in the Social Security Trust fund is about 10 trillion dollars. NOTE: The 10 trillion dollars in obligations that are not classified as debts are carried as off balance sheet obligations of the US. Which means no interest is accruing against them. The Sovereign OBLIGATION of the US in Medicare and Medicade is about 7 trillion dollars. The IMPLIED OBLIGATION of the US through the GSE's; i.e. Fannie Mae and Freddie Mac and the Federal Home Loan Banks and their derivative organizations is about 7 trillion dollars. If you combine all of these Sovereign debts and obligations together you get a number of 32 trillion dollars in debt with a GDP of 10 trillion dollars; about 300% of GDP. The largest debt to GDP ratio ever maintained by a sovereign country without a financial and economic collapse was in the US just after WW2 at 140%. This 300% number is being bantered about by many newsletters today as a signal of impending doom when compared to the 140% maximum level achieved post WW2. The problem is that the 300% can not be compared to the 140% number because most of the OBLIGATIONS and IMPLIED obligations that exist today did not after WW2. In other words it is comparing apples to oranges. That doesn't mean it is not a problem; anecdotally it is. BUT We do not have empirically supported evidence to compare the two events and draw the quantitative conclusion that a financial or economic collapse of the US systems is inevitable. Qualitatively we can say that the US is in a dangerous situation. Sovereign obligations and implied obligations have mushroomed since WW2 and have increased at a much faster rate than GDP growth. Sovereign debt has also grown but at a much slower pace than obligations. In essence the US government has been "co-signing" loans that will cause it problems in the future if those obligations are called upon. BEST OF ROGER ARNOLD > November 26, 2002 investmentrarities.com

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