Study Shows That The National Debt Is Really $70 Trillion

Bob Adelmann
thenewamerican.com
August 12, 2013

caomoneyJames Hamilton, an economics professor at the University of California, San Diego, just published his best estimate of the federal government’s “off-balance-sheet” liabilities, in which he concludes that the real national debt, popularly estimated to be $16.9 trillion, is in fact more than four times larger: $70.086 trillion. This is because of decisions to leave out certain unfunded liabilities when the national debt is counted. He explains:

This paper examines the growth of federal liabilities that are not included in the officially reported numbers. These take the form of implicit or explicit government guarantees and commitments … housing, other loan guarantees, deposit insurance, actions taken by the Federal Reserve, and government trust funds….

The biggest items in this category come from Social Security and Medicare which, if current policy is maintained, will require enormous sacrifices from future taxpayers.

He includes the implicit mortgage guarantees of Fannie Mae and Freddie Mac: ”With the federal government today being the sole owner of Fannie and Freddie, it seems appropriate to consider both the direct debt obligations … as well as their outstanding mortgage guarantees [which are now treated] as an off-balance sheet liability.” Added together, housing guarantees ($7.5 trillion), FDIC guarantees ($7.4 trillion), Social Security ($26.5 trillion), Medicare ($27.6 trillion), and other government trust fund liabilities ($1.8 trillion) come to $70 trillion. That’s an increase of $13.5 trillion just since 2006, and is growing by more than $2 trillion a year.

When the Government Accounting Office (GAO) issued its own report on the government’s finances back in January, it was 270 pages long and was filled with disclaimers about its estimates:

Certain material weaknesses in internal control over financial reporting and other limitations … prevented GAO from expressing an opinion on the fiscal years 2011 and 2012….

Because of significant uncertainties … GAO was unable to express opinions on [those years’] statements on Social insurance.

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New Financial Crisis – Economic Collapse

WALTER ZIMMERMAN: Every Indicator I Follow Shows The Market Is Going To Tank, And There Will Be A New Financial Crisis

 
scary cloudy red sky

Frenkieb / Flickr

SOURCE

The stock market is within points of hitting an all-time high. 

However, there is no shortage experts who are waving red flags.  Earnings expectations have been falling, profit margins appear to be unsustainably high, and sentiment is so high that it seems investors are being complacent about the risks.

“Every reliable technical tool is warning of major peaking action,” said Walter Zimmerman, the senior technical analyst at United-ICAP. “This includes sentiment, momentum, classical chart patterns, and Elliott wave analysis.

“Most of the rally in the stock market since 2009 can be chalked up to the Federal Reserve’s attempt to create a ‘wealth effect’ through higher stock market prices. This only exacerbates the downside risk. Why? The stock market no is longer a lead indicator for the economy. It is instead reflecting  Fed manipulation. Pushing the stock market higher while the real economy languishes has resulted in another bubble.

“The next leg down will not be a partial correction of the advance since the 2009 lows. It will be another major financial crisis. The worst is yet to come.”

Zimmerman sent us a brief presentation laying out his thesis.

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I Hope You’re Ready: “The Sell-Off Today Is The Start. Not the End.”

They’d have us believe that happy days are here again.

SOURCE

And, if your only source of information for economic news is the mainstream media and their talking heads, then in all likelihood you’ve bought into the hype about an economy on the rebound, consumers being more confident, housing prices in recovery and a government that’s soon to resolve America’s fiscal woes.

Nothing could be further from the truth. We are very rapidly approaching a situation that could be much, much worse than what we experienced in 2008.

Remember, in 2008 then Secretary of the Treasury Hank Paulson warned that we were literally on the brink of collapse and Congressional representatives were told that the situation was so serious that should the economy, financial markets and the US dollar crash, it would lead to riots and the need for martial law.

We’re not making this up – see for yourself:

One non-mainstream economist who has been warning of the coming disaster since the last disaster is Market Ticker’s Karl Denninger. He uses something called basic mathematics (with a healthy mix of advanced analysis) to come to his conclusions, and prior to the massive collapse of October/November 2008, Denninger sounded the alarm when he spotted numerous data points, including central bank manipulation in credit markets, suggesting that a massive crash was coming.

Two weeks later markets around the world fell apart.

Over the last several years Denninger has continued to warn Americans about the fiscal crisis, unsustainable debt levels and wealth destruction.

The prescient analyst and commentator is once again sounding the alarm:

Bernanke’s machinations and other games “gave” the Congress four years to do the right thing.  They didn’t, because that same “gift” also destroyed all market signals of urgency.

As such you have people like Krugman and others claiming that it’s all ok and that we can spend with wild abandon, taking our fiscal medicine never.

They were wrong.  Congress was wrong.  The Republicans were wrong, the Democrats were wrong, and the Administration was wrong.

Congress is out of time; as I noted the deficit spending must stop now, irrespective of the fact that it will cause significant economic damage.

We will survive it if we do it now.

Time’s up; we either have serious people who will take serious actions right now or we’re going to find out what a real ”discontinuity” looks like.

I promise that you won’t like it.

The sell-off today is the start.  Not the end.

And it’s also the end of the rope for our Congress, if they don’t get off their butts, which I do not expect them to do.

Therefore, I hope you’re ready.

I bet you’re not.

If we were on the brink in 2008, and we spent the last five years injecting TRILLIONS of dollars into the system, why are we once again at the cusp of another crash?

Because they fixed nothing.

In fact, they made it worse.

Back in 1930 Americans thought they were out of the woods and that the economy and financial markets had recovered.

They were dancing, drinking and spending like nothing was wrong; as if the crash had been nothing more than a short-term blip.

Congress was being warned about the possibility of tanks in the streets in 2008. All of  the economic, financial and monetary policy measures implemented by the government and the Federal Reserve since then have failed.

Should we be worried?

The short answer is ‘Yes’.

This is going to happen. And this time people should be terrified of the consequences.

Most don’t even have a clue what’s coming.

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