Skip to comments.Let's Put to Bed the 'America Is Bankrupt' Myth
Posted on 04/26/2011 5:27:18 AM PDT by SeekAndFind
To read economic and political commentary with any kind of frequency is to be bombarded daily - and hourly for that matter - with breathy articles about a United States groaning under deficits that surely signal bankruptcy, Social Security checks that eventually won't clear, and of course a looming financial crisis. A recent New York Times column by noted deficit scold David Stockman naturally referenced America's "desperate" financial situation.
Much of this commentary is well written, it's certainly popular, but it's also total nonsense.
To understand why we must first consider the marketplace for U.S. Treasuries, which is the deepest in the world. As sentient beings all, no doubt most of us can remember similarly scary commentary about the U.S.'s bankruptcy going back at least to the early 80s, but anyone who acted on all the scaremongering through short sales of U.S. debt was wiped out, and in a substantial way.
And that's the first problem with the bankrupt narrative; specifically that the deepest, most informed markets in the world disagree. If U.S. finances were really as bad as the commentariat suggest, and have been suggesting for decades, Treasuries would be in freefall.
Indeed, be it an individual, a company or a country, truly bankrupt entities can't borrow at low rates of interest. By virtue of being insolvent and unable to pay back debts, bankruptcy causes borrowing rates to rise, and in a very big way. That U.S. Treasury continues (sadly) to borrow large amounts of money, and that investors line up for the privilege to purchase the debt, tells us that those who regularly dine out on the bankruptcy concept should temper their rhetoric.
(Excerpt) Read more at realclearmarkets.com ...
Apparently, IdiotTamny is one of those delusional idiots who are stuck on “this can not happen in or to America” stupid....=.=
We’re starting our third War, so things can’t be that bad.
Is this true? I thought much of the debt was being purchased by the Fed which is just printing money to do so.
Way to ignore the elephant in the living room. Treasuries would and will spike if the fed stops buying most of them.
I'm pretty sure the author means treasury prices will tank if the Fed stops buying, which makes a lot of sense, especially with China signalling that it is heading out of the market and Japan probably going to sell some off.
Anybody who buys US bonds should take another look at what the Obama regime did to bondholders in the GM bankruptcy and takeover.
They should be aware that just because they own “guaranteed” bonds, that means nothing to this regime.
The only guarantee is that the regime will pay off its own cronies and screw everyone else.
What's wrong with that? I thought that taking out multiple mortgages and cash advances on my credit cards was perfectly sound fiscal policy?
Too big to fail?
John at home:
“Of course I can afford it, I still have checks in my checkbook”
First, in the late 1970s the U.S. had to issue bonds denominated in German marks and Swiss francs. I haven't found out how much of the debt had to be issued that way. Second, if you sold bonds short before the Carter era run up in inflation and interest you would have made a killing. You would have lost money that way when the adults got back in charge in the 1980s.
If U.S. finances were really as bad as the commentariat suggest, and have been suggesting for decades, Treasuries would be in freefall.
If you owe the banker a million dollars he can decide to stop lending you money and you will be at risk of decalring bankruptcy. If you owe the banker trillions of dollars, then the moment he refuses to lend you more you will take the bank down - either intentionally through malice or just by forcing him to write down all the other loans he already made you to their true value which would make it clear he is therefore bankrupt too. His only options are to keep lending you money and pray that it works out in the end or to quietly dump your bonds and hope no one notices starting a stampede before he can divest entirely.
Misleading at best, lying at worst. US Treasury notes before Obama were auctioned a couple of times a year, maybe quarterly. Now they are nearly sold weekly. Why? Because they can't find enough of these "real investors" looking for the privilege to buy up a bunch of toilet paper at vastly inflated prices.
So what has the government done to prop up the image? Why they've done what every red blooded credit card user in over his head does when they use a new card to pay off an old one- they have the Fed print up a buttload of toilet paper dollars AND BUY THEIR OWN DAMNED T-BILLS! This is priceless!!!!! It would be funny if it weren't the future of our children.
Recently in the news was China is preparing to reduce its holdings of the dollare (likely including T-Bills, too) by at least ONE THIRD! They are doing this because the world realizes we are printing toilet paper and calling it money. The decline for the dollar (the result of Weimar printing) is what's driving up gas, food, etc. And, Obama keeps giving his Unions more and more and more.
John, Mr. Senior Economist whatever.....are you ready to quit lying to protect your cush job yet?
More like simple denial of the inevitable if the idiots in D.C. do not rein in their idiotic spending habits.