I have said it before and I will say it again. America is done and so is probably the world.
I know many people will view this as nutter territory, but the U.S. economy is built entirely on lies and will implode resulting in complete economic collapse.
Brookings: In recent testimony before the Senate Budget Committee, Boston University Economics Professor Laurence Kotlikoff, in effect, told the Committee that all of these terms are pathetically inadequate to describe our true fiscal situation. In compelling testimony, Kotlikoff argues that the federal fiscal situation is much worse than the CBO estimates let on. The reason is that CBO's debt estimates do not take into account the full financial obligations the government is committed to honor, especially for future payments of Social Security, Medicare, and interest on the debt. He asserts that the federal government should help the public understand the nation's true fiscal situation by using what economists call "the infinite-horizon fiscal gap," defined as the value of all projected future expenditures minus the value of all projected future receipts using a reasonable discount rate.This is beyond unsustainable, in my mind it is irreversible. The damage is already done and there is no way out.
What difference does the fiscal gap approach make in our understanding of the true federal debt? CBO tells us that the national debt was a little less than $13 trillion in 2014. But the fiscal gap in that year as calculated by Kotlikoff was $210 trillion, more than 16 times larger than the debt estimated by CBO and already judged, by CBO and many others, to be unsustainable. If a $13 billion gap is unsustainable, what term should we apply to a $210 trillion gap?
I don't know what the trigger will be, but the trigger is coming. It may be even a modest rise in interest rates, which even a 1-3% rise on that much debt will begin an irreversible process of destruction with debt payments taking a huge amount of our economic output. Or perhaps an international move away from the dollar or even another major bank collapse. I don't know how and I don't know when exactly. But whatever and whenever it is, it is coming.
And that may just be the beginning of the troubles.
More to come...