Wednesday, August 12, 2009

We Broke The Bank!

The United States is functionally bankrupt.

"Our total national private net worth, according to the Federal Reserve Board, is about $51.5 trillion. That means our federal unfunded liabilities represent 2.3 times our collective net worth. That's pretty darn broke." - Mike Whalen Washington Times

The question is - Who is going to bail us out? are we not too big to fail?
Is another sub-prime crisis looming?
and even though their stock is rallying - Fannie Mae reported a $14.8 billion net loss last week and said it would need more Treasury funds. We have a rally being led by the weakest of financials... one can conclude that something is manipulating the market.

So do you think that a bank holiday is coming?

In happened in the U.S. before when President Roosevelt ordered banks to close in response to the market crash that led to the government's Great Depression. When the holiday ended, many banks never reopened, the currency was devalued and hard-working Americans were left in financial shambles. All thanks to the Federal Reserve.

Do you think it won't happen here?
The laws of economics cannot be broken.

Some are saying it's not a matter of IF but a matter of WHEN.

With over 70 bank failures in the US this year ... there is call for concern.
Will the U.S. Banksters shut their doors and ATMs to the public, just like in Russia and Argentina?

(H/T AJ Liberty)


Jennifer said...

While I do agree that our economy is a mess and our national debt a staggering problem, I'm not sure I agree with the way Whalen calculated the debt: comparing current net worth to future liabilities? I am employed, debt-free and have over two years' salary in the bank, but by Whalen's standard I too am functionally bankrupt because (assuming I live another 40 years) the amount of money I will have to spend on life's necessities -- to say nothing of pleasant extras -- over the course of the next four decades is certainly greater than my current net worth.

Accounting tricks got us into this mess, but there's no need to resort to accounting tricks to call attention to it.

David Aron said...

Jennifer, the difference here is that your future consumption and expenditures are not fixed. And, you will presumably continue to work over the next 40 years.

The liabilities Whalen is talking about are contractual. The US has agreed via legal document to pay benefits and pensions to people. In a way, those can be considered liabilities of the US. Now, while the government will continue to tax over the next few decades, those liabilities must be factored into any calculation of debt.

Jennifer said...

I think calling my future consumption "not fixed" is somewhat semantic, though. Yeah, I could move to a smaller, cheaper apartment if I really had to, but I'm always going to have to pay SOMETHING each month in exchange for housing (even if I trade my apartment for a paid-off house, there's still property taxes), pay SOMETHING in exchange for food ... and I've always been pretty frugal, so that even if I wanted to, I can't really cut my monthly expenses much lower than they are. I see little distinction between "a legal obligation to buy X calories worth of food this month" versus "a natural, biological need to buy (and consume) X calories worth of food this month." No, I'm not *legally* obligated to buy food or pay rent, but if I want to survive I have to do these things anyway.