Denninger corroboration of my previous post - at least the numbers:
Social Security: "Here It Comes".....
Because we continually call the debt-to-GDP ratio as $12.57 trillion to ~$14 trillion "right", or 89.8%, while ignoring the claimed amounts of the Social Security and Medicare promises. But unless you're going to tell Granny that she's not going to get her check (or her health care), along with the 80 million boomers (all of who will instantly vote out anyone who tries to tamper with those programs, whether the money exists or not!) those "promises" are real.
So what's the real debt-to-GDP ratio of the federal government? About 500%, if one assumes the forward liabilities are on the low end of CBO and private estimates, or $60 trillion. This makes the total "debt" $72 trillion dollars and the ratio 514%!
No nation has ever managed to pull that off past the point of recognition of these costs. The reason is simple - interest costs. Compute the damage that, say, 5% interest imposes on $72 trillion and you blanch immediately (that's $3.6 trillion by the way, or more than our entire federal budget!) We get away with not paying that by sleight-of-hand, effectively playing "Option ARM" and adding to the principal. But all Option ARMs have a recast point. We're just not sure where this one is.
and....
Good luck to the politician who reneges on that debt, said Barbara Kennelly, a former Democratic congresswoman from Connecticut who is now president of the National Committee to Preserve Social Security and Medicare.
''Those bonds are protected by the full faith and credit of the United States of America,'' Kennelly said. ''They're as solid as what we owe China and Japan.''
To which Denninger added: China and Japan aren't going to get paid either.
market-ticker.denninger.net
My sense is that Denninger is very smart. He is slightly rabid. I find him amusing. He has stooped to many a sexual parody (for example - not not have been exact) - Barney Frank blowing Lloyd Blankfein, or perhaps the other way around. I know I shouldn't approve of his derisiveness, but honesty precludes me from that stance. |
