Posted on 04/07/2015 10:02:03 PM PDT by concernedcitizen76
Renowned economist Laurence Kotlikoff recently testified at the U.S. Senate about the runaway U.S. budget. How bad is it?
Kotlikoff says, “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year. Almost all the liabilities of the government are being kept off the books by bogus accounting. The government is 58% underfinanced. Social Security is 33% underfinanced. So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.”
So, how much is America on the hook for in the future?
Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything, and take all those expenditures into the future and compare that to all the taxes that are projected to come in, and the difference is $210 trillion. That’s the fiscal gap. That’s our true debt.”
Professor Kotlikoff goes on to say, “It will collapse. It is just a matter of when. I can’t say when, but all I can say it’s going to be too late. We are seeing signs of this in the economy, but we are not picking it up that clearly. The macro economy is not doing all that well.”
Kotlikoff goes on to say, “I think our financial system is really built to fail because it combines two things which really haven’t been addressed. It combines leverage, borrowing by the financial middlemen and then investing in things that they don’t tell you they are investing in. So, there is opacity and leverage. These are the two major problems for the banking system. What we need to do is get rid of the leverage and get rid of the opacity. We need full disclosure of the investments of our financial institutions.”
Where can you get a safe investment?
Kotlikoff says forget U.S. Treasury bonds. “I think they are one of the riskiest securities in the world because interest rates are likely to go up. I think the Fed is going to have to keep printing money because Congress isn’t paying our bills, and that’s going to lead to inflation eventually. So, I think long term Treasuries are extremely risky, and they can drop 5%, 10% or 20% overnight. That could put my bank that was viewed as perfectly safe today out of business. So we could have inflation take off and interest rates go up. We could have banks fail, and that could lead to runs on other banks.
That’s the scenario,” says Professor Kotlikoff.
Pay off all debt.
Buy real estate that you can control, use and defend, such as a rental property near your main home.
Supplies for several months.
Well I have thought for some time that the reason the govt is stockpiling ammo and doing martial law er urban drills is because they know the economic collapse is coming and they cannot stop it.
for later reference
Spot on.
If anyone is considering staying in a large city, NOW would be the time to re-think that.
“If anyone is considering staying in a large city, NOW would be the time to re-think that.”
Totally agree. Our next door neighbor is selling and moving up to 150 acres NE of Atlanta. Everybody we know is hoping to get out soon. We plan to be permanently at the mountain place soon. Taking Mom with us. The cities are going to be bad news.
The answer:
“In places where you had positive control over the investment the capital is placed in, and the means by which profits were paid out.”
If the currency collapses, then the answer is as the former - Beans, bullets, bandaids, bullion (silver, copper, etc.)
Real estate about 1.5 to 2 hours drive away from big cities might be a good bet right now because self-driving cars are going to make it practical for middle class families to live that far away from their jobs. Many cities have huge Democrat retiree costs and will go bankrupt as big earners move away. A question is does it make sense right now to finance a real estate investment with a fixed rate loan, or stick to cash only buys?
“A question is does it make sense right now to finance a real estate investment with a fixed rate loan, or stick to cash only buys?”
To me, taking out a loan would make sense only for an income generating property, but you also wouldn’t want to spend ALL of your cash on ANY property, no matter what. Still need to remain liquid, as well as not over-leveraged.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.