If you visit the Debt Clock at http://www.usdebtclock.org/ and watch the many dials as they update at dizzing speed, ask yourself which of the ticking counters represents the most critical reading? An airplane for example, has many gauges, some representing airspeed, others altitude and direction of flight, etc. But despite the fact that they all monitor critical systems there is usually one among them that the pilot in a given situation worries about the most.
In the case of the US economy, which is the one to watch? Is it the total national debt, the estimated credit and currency derivatives, or the jobless numbers? Furthermore which number or set of numbers drive the rest? A screen capture of the debt clock is after the “Read More”.
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Wretchard, it’s quite a cool graphic, but it’s missing some things. For example. it’s implicitly making a comparison between debt and GDP, but that’s a false comparison: debt is a liability while GDP is like revenue. Similarly, the unfunded liabilities section is treating future obligations like present debt — sort of like claiming that your “real” mortgage debt is the total of all future payments and interest, instead of the current payoff value of the loan.
The point, wonkish and nerdy as it might be, is that the figures here offer lots of data, but they’re presented in a way that limits the information value.
Ok, that’s the scariest thing on the Internet ever.
Great way to start a Monday morning.
It’s hard to tell which is worse – I’d say the National Debt is the number that will finally do us in, but there are many other items on the list that will provide us with the push over the edge. Take your pick.
Which is the one to watch?
Easy: the US Unfunded Liabilities. So, the average person owes $3,000 on their credit cards, and maybe $20,000 on their mortgage. But they owe $189,000 for Social Security and Medicare.
At least this explains why the Federal Government took over GM. The business model is one that they understand, and have extensive experience with:
Rob Peter to pay Pa.
L3
Charlie,
Similarly, the unfunded liabilities section is treating future obligations like present debt — sort of like claiming that your “real” mortgage debt is the total of all future payments and interest, instead of the current payoff value of the loan.
I don’t think your statement is correct. I’m fairly certain that the amount shown is the present value of all future payments based upon an actuarial model. In other words, it is the payoff value of the “loan.”
FWIW, Richard Fisher of the Dallas Fed believes the number is actually much bigger: $86T+. Here is a speech he gave on the subject:
http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm
I believe this is what Jim Collins refers to as a “brutal fact.”
Cheers,
L3
L3
It’s hard to argue with you there. I think the unfunded liabilities will be one of the things that pushes us over – or probably THE thing.
I said Nat’l debt because I believe that this number illustrates that we have no “wiggle room”. Nothing to fall back on. No way to temporarily borrow massive sums of money while we devise a plan to reduce these liabilities, to grow our way out of them, or at least make them more manageable, if either is even possible.
Even if you assume that we will have some sort of economic recovery in the next year or so, the unfunded liabilities are out there, and will cause havoc when the time arrives. There’s not a whole lot we can do about it. The “system” will have to collapse first. No one will give this up willingly, or not enough voters to make this anything other than political poison for anyone who suggests it. As has been said many times, if a debt can’t be paid it won’t be. The only real question is when that will happen.
Maybe we should contact Al Gore and ask him to tell us the location of that Social Security “lockbox” he was so fond of during the 2000 election. We could use it now. I wonder what’s in there, anyway?
dtmack:
You should have listened and acted while there was still time!
Alas, the rising seas swallowed it, and it was lost.
—
» Doctor in the White House
In Gore lock box
he say Fort Knox
we see road blocks
manned by ham hocks
Burma Shave!
in a way, the unfunded liabilities are the least of our problems –amenable to solution by the stroke of a pen, really.
Burma Shave? Buddy! Behave!
I’ll tell Algore. He’ll make mushroar.
You will get no Obamacare, praise the Lord,
And will die of something you can’t afford!
(Yes. I cribbed the above from Nipsy Russell, if it seems familar.)
typo, Dave; mit der Gore, you means ‘praise the Lard’.
“in a way, the unfunded liabilities are the least of our problems –amenable to solution by the stroke of a pen, really.”
—
Unlike 10% (17% effective) unemployment rates.
Praise the Tard.
We have to put up with RINOS,
Healthcare Utopia will be DOA.
Obama will escape with
HINO
…comprehensive Healthcare reform In Name Only.
Yeah, looks like he lost the Battle Of
His Bulge. Perhaps General Put On will
come to his ass-is-hence, even though
he is Nuts.
BTW: Did you hear what he did one time during the Clinton years? There was a commotion in the White House Break Room. Everybody rushed in and found that Al Gore had lifted Bill Clinton off the ground and was ramming his head against a vending machine.
Well, the Secret Service wrestled him to the ground and said “Mr Vice-President, explain yourself!”
He replied: “I was just following instructions. It says right here to ‘insert Bill, face up’”.
Free Our Healthcare Now!
National Debt is an incomprehensible concept. You get the idea that too much of it is a bad thing but how much is too much? Andrew Jackson is the only POTUS to ever pay the deficit off to zero but I don’t recall ever reading anything about the Golden Age that followed. How many people do you know that reference everything that is pure, holy and complete from the Jacksonian era?
A trillion dollar deficit doesn’t seem to be preventing everybody at Goldman Sachs from making gazillions. Maybe there’s a connection there.
Show me the correlation between deficits, taxation, and business growth. I suspect it’s there but nobody is making it clear. Where’s Thomas Sowell when you need him?
Which America California or Texas
Five Tom Sowell Interviews
The Relationship between Unemployment and Housing Prices
—
The Elusive California Housing Bottom:
The Relationship between Unemployment and Housing Prices. Market Conditions point to a 2013 Market Bottom.
Toilet’s overflowing in the space station –do NOT go outside!
Peter writes: “. . . how much is too much?”
I’ve always like micro more than macro economics because the models are usually direct and clear. On the personal or household level, a person can go to any number of sites to find a debt ratio calculator. Here’s a blurb from MSN, for example:
“Your debt ratio is an important number to be acquainted with. It tells you how your monthly debt payments compare to your monthly income. A high debt ratio might indicate that your monthly expenses are becoming unmanageable. It also might discourage lenders from loaning you any more money. Use the Debt Evaluation calculator to determine whether your debt ratio is acceptable or too high.”
In my dreams, Congress meets to enter its financial data into a version of the MSN Debt Evaluation Calculator and gets the bad news that it’s debt ratio is too high.
Best idea so far? Getting into Al Gore’s lockbox! But maybe, to bring it up to date, we could securitize the lockbox assets?
PB nothing wrong with debt financing so long as the spread is positive on both sides of the transaction. This is a fine relative-value relationship in which psychology plays a huge role. Out at the edge of the known world, where we are now, currencies and political alliances and human optimism all start vibrating and wobbling and the financing of the future falls out of consensus ranges. people and politics get unpredictable and extreme. Fear & trepidation & wars come. Dunno if there’s a magic number, as in a physics formula, but history itself is an empirical experiment of indisputable import. Also, to see how confidence-dependent an economy is, just observe how the market acts with virtually the same info, but in the one case, trend-up and the other, trend-down. Zoom up, whoosh down! With hardly any change in the actual info set in play.
Maybe we can get Geraldo Rivera to open the Social Security Lockbox on national television.
It’s not necessarily Altitude you need to worry about the most in an airplane. Often it is Attitude.
If you are in a spin and your altitude is decaying rapidly it is hard to accept that you have to stop pulling back and actually do what seems like the wrong thing – push the nose Down. But Down is not where I want to go!
Even worse, while the altimeter is prominently presented in most aircraft instrument panels and sometimes is backed up with aural warnings and radar, most aircraft don’t have a reliable indicator of any kind for Attitude, especially when you need it most. Attitude has to be inferred through the reasoned, experienced analysis of a variety of datapoints.
Even worse, some aircraft display a phenomena called “post stall gyration” in which application of normal spin recovery techniques will eventually result in the ground rising up and smiting thee.
So, are we in a spin, a post stall gyration, or just need to add power and gain altitude. No one knows, and they can’t be bothered with thinking about it because they are so fixated on Altitude. And it is Politically Incorrect to even suggest that Attitude might be the real problem.
Airplanes are only dangerous close to the ground. If you’re stalled at 3000 feet you nose down, get off the backside of the power curve and fly out of it. Altitude and attitude are your friends. If you’re at 300 feet, you probably shouldn’t expect to nose down and get enough flight speed to fly out of the stall before you meet the ground. Altitude and attitude are your enemies.
We’ve got an administration, yoke pushed forward, determined to drill us into the ground.
begorrah, you’re right –being a foot off the ground is different if you’re doing jumping jacks vs free-falling from a mile up.
Spending Per Net-Tax-Payer (including debt interest payments).
That reveals whether we’re growing or sinking with respect to the people who are actually paying for government services. It does not include pensioners, civil servants or the poor (all net receivers). A downward trend in this number is really bad, since they can always pack it in an “Go Galt” or go to another jurisdiction. When that number falls to zero, game over – no more Peters to rob and “spreading the wealth around” comes to a grinding halt.
A fun little game is to add in the NPV of unfunded liabilities as if we were actually funding them and to see how many net-taxpayers are left. The answer I suspect is “Zero.” The jig is already up, and the safe assumption is that we’re simply not going to pay that money. It’s a slow motion Ponzi scheme that can’t possibly work as promised.
#23
I see your point but stopping the dosage when the patient’s pulse hits zero doesn’t seem like the wisest course. When international capital flows stop and reverse the economy is already dead meat.
looks like CIT is gonna pay 10.5% on it’s private bondholder rescue. Jeeeez. Big Corporate gets free money, joe’s corner biz’s factor has to pay 10.5%. Something is SO wrong here.
WRT the debt bomb, what happens when the inevitable inflation kicks in and interest rates go to 15%? (Jimmah Carter call your office)
THE driving factor of the Federal Budget will be interest rates. If the debt is $11T, the vigorish will be $1.7T which is greater than the income tax take of 1.4T.
Debt is a bet on the future, that income will continue or grow so that the debt can be satisfied. If you make $100K and owe $100K you can get clear sooner or later. If you owe $1M, you’d best be young, highly skilled, and have a hell of a work ethic.
This economy is a miracle of productivity. It can do almost anything. But it can not create enough revenue or grow quickly enough to deal with that burden.
A day comes soon when retired Congress A-holes will a-hole up in compounds counting their worthless shekels while outside the rabble formerly known as the working class will devise clever methods of cooking shoe leather. Tramps like us, baby we were born to run. Unfortunately there will be nowhere to run to.Brother can you share some top ramen noodles.
I would suggest the loss of household wealth. This will cause a reaction [in a free society] for hope and change in the next election.
Lucy:
If you are at 300 ft and in a spin, or simply stalled out, you have no choice but to put the nose down and try to gain some airspeed.
At worst you will land straight ahead, the recommended procedure in any case. At best you pick up some airspeed and stay in the air. But hitting the ground in spin, with the airplane out of control and quite possibly sideways is the absolute worst scenario for any situation other than, say, whacking into the World Trade Center at full throttle, to use a purely hypothetical example.
I don’t think they have yoke pushed forward; I think they have hauled back on it all the way in a desperate attempt to gain Altitude without changing Attitude. None of the stuff that caused the mortgage meltdown has been fixed, NONE of it. Indeed, we have the Admin bitching about the banks not giving even more money away to neerdowells and reprobates.
Echoing George C. Scott as General “Buck” Turgidson in the War Room in Dr. Strangelove:
“Damn! How does my state (California) get one o’ them Debt Clocks!?”
Jamie Irons
This graphic is a fraud from the first line. The debt per citizen is crap. It should read DEBT PER TAXPAYER. If it did and you saw the real number, then you might be “concerned”.
JackWayne:
Yours seems to be a good point; how many tax-payers are there, anyway? What would the proper denominator be?
Jamie Irons
Ralph off the Rails:
—
» Fox News Guest Ralph Peters Suggests Taliban Should Kill U.S. Soldier If He Deserted
30. buddy larsen:
“looks like CIT is gonna pay 10.5% on it’s private bondholder rescue.
Jeeeez.
Big Corporate gets free money, joe’s corner biz’s factor has to pay 10.5%.
Something is SO wrong here.”
—
Big is Bootyfull.
Michelle “appreciates” her 22 attendants.
(knows she is entitled)
A dog was for sale for a million
No offers came in and so that’s
Why the owner gave up and called Lillian
And traded for two of her cats
One cat was named Miles ‘tother Standish
Five hundred thou each was the price
A half a mil each seemed outlandish
But Miles was especially nice
The notion soon gained wide acceptance
That selling one’s pets for huge sums
Was the way to get out of the debt stance
And see that economy hums
And so Spot and Fido were sold off
For sums that astonished them all
And pretty soon all debt was told off
And kitties were now put and call
The market chimed in and the Dow Jones
Climbed fast and soon saw record heights
As doggies who only could chew bones
Were sold for their barks not their bites
The collapse when it came came most quickly
As shaggy dogs found their way home
And owners, some pleased and some prickly
Got out the dog brushes and comb
It all ended up in our favor
It ended up nice as you please
With an ending one really could savor
With the bag being held by Chinese
Herb @ #31: you should restate that our economy WAS a miracle of productivity. Under Obama, not so much. it will be strangled by regulation, high taxes and corporatism. How can an economy be efficient and productive when privatise the profit and socialize the risk rules the day?
Walt @ #40: I got 4 brand new kitties for sale. Million bucks each. Probably could double your money on ‘em. Any takers?
“”"”"Andrew Jackson is the only POTUS to ever pay the deficit off to zero but I don’t recall ever reading anything about the Golden Age that followed.”"”"”
#17, Peter Boston:
What followed was the Panic of 1837, a financial meltdown that left Martin Van Buren — the chief architect of the Jackson election victories — holding the bag.
Stupid question: how are unfunded liabilities different from unfunded mandates?
National Debt + Private Debt + Unfunded Liabilities.
That is the size of the hole.
Divide by population or GDP to get a sense of scale.
elby @41
A million purr?
#37- More than double the debt. Half the eligible taxpayers actually pay income taxes. Then there’s all the ineligible (your kids, my kids, etc)
Gotta be an answer on Google somewhere
Walt, yep a million purr. Billions of purrs guaranteed for the investor over the lifetime of the investment!
If it should turn out that I got in at the top of the kitten market, then I want a bailout! The kitties are too cute to fail!
You’ve sold me, elby! Ship ‘em post haste. Or maybe UPS. This investment does have an UPSide.
Holy mackeral! Me thinks the bottle cap Col. is waaay above his paygrade. Unless he has some inside poop that is on the hold pattern. But then again even if that is so. HE should KEEP HIS YAP SHUT! And let the boots on the ground make the news not his flapper!
The last thing that should be operated by deficits of any kind is government. Except in cases of war and or maybe a comet/asteroid strike… It is one thing for a family or a single business to go under for running up uncontrollable debt. IT is completely immoral to saddle our progeny with our lack of control.
Remember, All of those dollars represent some grandkid or great great grandkid’s actual labor.
RWE: Good analogy. The last Great Depression
was because the powers that were kept jerking back on the stick for over a decade.
WE are seeing a repeat performance today.
Excess debt is driving things. So the idjits keep piling on more debt.
At this rate, we have another decade of trouble ahead.
“Your debt ratio is an important number to be acquainted with. It tells you how your monthly debt payments compare to your monthly income. A high debt ratio might indicate that your monthly expenses are becoming unmanageable. It also might discourage lenders from loaning you any more money. Use the Debt Evaluation calculator to determine whether your debt ratio is acceptable or too high.”
Mark, you’re making pretty much the same point I was. If you want to make a fair comparison, you have to compare the cost of the money against revenue. When you do that, you have the interest costs at about 11 percent of the total tax revenue. Or, you can compare debt, liabilities, against assets. When I looked at that last year in PJM, it was about 2-1 assets vs debt — there was an “owners equity” of about $60K per person over the debt.
Now, that doesn’t mean there’s nothing to worry about — when you have, as we do right now, a “burn rate” of nearly 2-1, $2 trillion going out but only $1 trillion coming in, that’s not sustainable in the long term. But you need to look at these numbers critically, instead of following along like ungulates.
But in assessing household net equity, one assumes a liquidity-creating market for same.