Wednesday, June 10, 2009

GM = The future of the US?

Bill Gross: GM Failure a Preview of Our Future Economy

Monday, June 8, 2009 1:25 PM

By: Julie Crawshaw Article Font Size

The General Motors failure is a harbinger of things to come for the United States as a whole, says bond guru Bill Gross.

"I think it is important to recognize that General Motors is a canary in this country's economic coal mine; a forerunner for what's to come for the broader economy, the Pimco co-CEO writes in a note to investors.

"Their mistakes have resembled this nation's mistakes; their problems will be our future problems."

The most significant comparison between GM and the U.S. economy is the enormous unfunded healthcare and pension liabilities they share, Gross says.

“Reportedly, $1,500 of every GM car sold in the dealer showrooms goes to pay for current and future health benefits of existing and retired workers,” Gross points out, making the car manufacturer liable for nearly $60 billion in healthcare costs.

“The total future healthcare liability for all U.S. citizens can be measured in the tens of trillions,” Gross notes.

A study to be published in the August American Journal of Medicine — the first-ever to be based on a national random-sample survey of bankruptcy filers — shows that illnesses and medical bills contribute to a large and increasing share of consumer bankruptcies.

"The U.S. healthcare financing system is broken, and not only for the poor and uninsured,” writes study author David U. Himmelstein, M.D.

“Middle-class families frequently collapse under the strain of a healthcare system that treats physical wounds, but often inflicts fiscal ones."

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