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U.S. General Accounting Office sounds alarm on America’s insolvency

JayDubya

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U.S. General Accounting Office sounds alarm on America’s insolvency

http://business.financialpost.com/m...ng-office-sounds-alarm-on-americas-insolvency

An alarming report this month from the U.S. government accountability office to Congress says “action is needed to address the federal government’s fiscal failure.”

The 49 page report, entitled “The Nation’s Fiscal Health” says, among other things, that “Congress and the incoming administration face serious economic, security, and social challenges” and “an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending.”

The more alarmist aspects of the report highlight the continuing divergence between revenue and expenses, as well as the shortfalls in unfunded Social Security obligations.

It warns that without policy changes, the U.S. debt-to-GDP ratio will surpass its historical high of 106% within the next 25 years. The report stipulates that the new urgency implied in the document is a result of a more holistic picture of the nation’s finances that has emerged as a result of analyzing both the budget and the financial report of the United States government.

Eighty per cent of the operating costs of the federal government go to four agencies: The Department of Health and Human Services, the Social Security Administration, the Department of Veterans Affairs and the Department of Defence.

In the 2016 Financial Report, it was disclosed that the federal government holds roughly US$3.5 trillion in assets and total liabilities of US$22.8 trillion. That’s 6.5 times more debt than if the entire country was auctioned off.

According to Generally Accepted Accounting Practices, and according to International Financial Reporting Standards — the two most widely used accounting frameworks — the United States is facing bankruptcy, or at the very least, a restructuring. This report confirms that.

But that would be the case if the world’s largest economy had to play by those rules, which it does not.

Of the total liabilities, US$14.3 trillion is owed in the form of treasuries to bond holders invested directly into the government of the United States. The United States Federal Reserve has about US$4.7 trillion of that on its own balance sheet, the result of persistent cheque-kiting monetary stimulus programs congressionally authorized and carried out by the United States Treasury.

This document’s publication comes at a moment when the trepidation surrounding the policies of the incoming president-elect grows among skeptics, while supporters dismiss the criticism as partisan sour grapes.

But in terms of a mea culpa confession, it’s akin to the drunken shiftless husband appearing after a months-long bender and confessing to having capitalized the spree with the entirety of the family’s assets.

Making the whole situation potentially more volatile is the fact of Trump’s open hostility toward China, which holds around 10 per cent of the publicly held debt paper of the United States. The extent to which geopolitical detente is upheld by the mutual retention of debt on the respective balance sheets of both nations’ central banks is perceived to be under threat by Trump’s rise to the White House.

Statista.com reports that the current debt-to-GDP ratio of the United States is over 108 per cent, which is consistent with other data compiled by such sites not affiliated with the U.S. government.

The broad question here is: What is the risk of a U.S. default on its debt? The answer is none, because the U.S. Federal Reserve Bank can always create enough new debt to pay maturing debt. And since the Fed is exempt from rules or even the mathematics associated with reasonable expectations, the current fantasy-land that characterizes the global economy can continue well after Trump has come and gone.

For investors, the trick will be to seize opportunities that exploit the unrealistic policy of government (such as suddenly soaring commodities prices), while avoiding the “traps” created by such policy — U.S. denominated debt foremost among them.

James Westis an investor and the author of the Midas Letter, an investing research report focused on Canadian markets. The views expressed are his own and are presented for general informational purposes only. They should not be construed as advice to invest in any securities mentioned.

James West and/or associated funds do not own shares in any securities mentioned in this article. For the full Midas Letter disclosure policy, click here. Postmedia and Midas Letter have a revenue sharing arrangement.
 

brosil

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So Trump gets elected and suddenly they figure this out? Interesting.
 

edsl48

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They paid a bunch of bureaucrats for an opinion and warning that they could have gotten from reading this forum for free? My gawd they should all be fired!
 

arminius

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It was coming one way or another. Perhaps now they're pushing it with vengeance...
 

Treasure Searcher

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In my state, the issue of bringing in all the refugees has struck a nerve. We have people in this country that need help and we are bringing all these refugees and adding them to the welfare rolls. You have people (where I live anyway), that worked their entire lives and suddenly need public housing, but refused because refugees occupy public housing.

About two years ago, Habitat for Humanity built a house in my area. Refugee family was given the house to live??? We have enough people in this country, that are deserving of that house. Habitat for Humanity better not ever ask me for a donation. They will be told where to go...

Anyway, Trumps campaign "America First" has yet to get off the ground. I see a lot of people excited about it. Let's do our part to make it succeed. The last President was a Communist and we need to turn things around. Our ship is sinking, we need to steer it and bail it out. It is worth saving.
 

arminius

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In my state, the issue of bringing in all the refugees has struck a nerve. We have people in this country that need help and we are bringing all these refugees and adding them to the welfare rolls.


And nothing like this happens unless someone is making big money from it. And that is the case, as the guv makes lots of extra dough with each new PERSON it admits to the fiction, but in ways most folks wouldn't even conceive of.
 

Treasure Searcher

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And nothing like this happens unless someone is making big money from it. And that is the case, as the guv makes lots of extra dough with each new PERSON it admits to the fiction, but in ways most folks wouldn't even conceive of.

The "charitable" agency, that brings in these refugees is under fire for making a lot of cash for the resettlement process. Taxpayers in the local school districts that end up with these refugees, end up paying for interpreters for refugee children. When the news comes on and a picture shows a suspect that committed rape, armed robbery, etc., its an immigrant.

Taxpayers are fed up.
 

Scorpio

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the kenyan is the only president in history to never have a approved budget,

he has only submitted 3 of the 8 required budgets to congress,

he has doubled the debt from 9-10T to 20T in 10 yrs, and yet nothing from anyone

everything has been kick the can and completely ignoring budgetary authority and laws,

and as stated, now they want to make an issue of it???

kinda shows where they are going with this..............
 

just n case

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So Trump gets elected and suddenly they figure this out? Interesting.

The General Accounting office has been saying this for a long time. Here is David M. Walker, Comptroller General of the US and Head of the G.A.O. (1998-2008)





here he presents a more recent look at the debt problem

 

nickndfl

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BHO DOUBLED the national debt in the equivalent of spending more than all previous presidents combined. Nobody cared. All of the sudden it's Trump's fault!
 

Mujahideen

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BHO DOUBLED the national debt in the equivalent of spending more than all previous presidents combined. Nobody cared. All of the sudden it's Trump's fault!

Congress.

The president is the scapegoat.
 

Scorpio

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not true,

that is how it is supposed to work, but hasn't
 

Mujahideen

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Scorpio

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And that would also be congress' fault.

you could say that,

but congress did trying shutting down .gov over it, and got their asses handed to them by the kenyan

so no, your argument still fails
 

the_shootist

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o b juan

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"Eighty per cent of the operating costs of the federal government go to four agencies: The Department of Health and Human Services, the Social Security Administration, the Department of Veterans Affairs and the Department of Defence.'

iF THEY DROP
 

o b juan

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"Eighty per cent of the operating costs of the federal government go to four agencies: The Department of Health and Human Services, the Social Security Administration, the Department of Veterans Affairs and the Department of Defence.
If the Trump /congress/ would drop out the Dept of (gimme) Human Services and stop paying Companys 300% percent more that what a product or service is worth were where we should be!
Social Security, VA and Defense all Paid their dues. A good Business man does not over pay,or pay for something not necessary> GO TRUMP ADMINISTRATION.