U.S. funding for future promises lags by trillions

The numbers are even worse than this already bad number.  Over the counter derivatives, if marked to market, would increase the nation's liability by trillions, due to a depression in real estate prices.  But hey, who's counting?  Thanks to Kitty for finding this article.

http://www.usatoday.com/news/washington/2011-06-06-us-owes-62-trillion-in-debt_n.htm?loc=interstitialskip

The federal government's financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows.

The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.

Tossing the Consumer Under the Bus

http://www.financialsensebeta.com/contributors/d-sherman-okst/tossing-the-consumer-under-the-bus

While our public debt is about 14 trillion our unfunded liabilities are much larger.
Unfunded (read: looted) Liabilities
Social Security 14.6 trillion
Prescription Drugs 19.2 trillion
Medicare 76 trillion
Total 109,800,000,000,000.00
109.8 trillion + 18 trillion (18 trillion includes GSE off balance sheet debt) = 127.8 trillion dollars.

Enron accounting has bankrupted America

http://finance.yahoo.com/tech-ticker/%22enron-accounting%22-has-bankrupted-america-u.s.-deficit-really-202-trillion-kotlikoff-says-535354.html?tickers=udn,tlt,tbt,uup,TIP,%5Egspc,GLD&sec=topStories&pos=9&asset=&ccode=

“Forget the official debt,” he tells Aaron in this clip. The “real” deficit - including non-budgetary items like unfunded liabilities of Medicare, Medicaid, Social Security and the defense budget - is actually $202 trillion, the professor and author calculates; or 15 times the “official" numbers.

“Congress has engaged in Enron accounting,” says Kotlikoff, who recently penned an op-ed for Bloomberg entitled: The U.S. Is Bankrupt and We Don't Even Know It.

Bullion is outperforming mining stocks

http://bmgbullion.com/doc_bin/WhyBullionisOutperformingMiningStock.pdf

Gold is the anti-currency

In an era of fast money and currency destruction, bullion is real money. Central banks are buying bullion, hedge funds and other institutional investors are buying bullion. And the world’s largest creditor – China – is diversifying out of dollars and buying bullion.

“When the price of gold moves, gold's price isn't moving; rather it is the value of the currencies in which it's priced that is changing.”

– John Tamny, economist, H.C. Wainwright Economics

Most investors’ portfolios are heavily weighted in currency-denominated financial assets (stocks and bonds), but few comprehend the extent of their purchasing power loss. The numbers in Figure 5 may help put things in perspective: in the past ten years, the US and Canadian dollars, the UK pound and the euro have, collectively, fallen more than 70 percent in value if measured in that universal unit of money, gold. In effect, investor portfolios have lost 70 percent of their purchasing power. Currency destruction, while it is accelerating, is by no means a recent event, however. Since 1913 (not coincidentally the year the US Federal Reserve was formed) the US and Canadian dollars have lost a staggering 96 percent of their value. Is this trend likely to come to an end? Not in the foreseeable future.

At the end of 2009, America’s total debt was approaching 100 percent of GDP, but most investors are unaware of another, far bigger burden: trillions of dollars in unfunded liabilities for Social Security, Medicare and Medicaid. Money the government promised to taxpayers for Social Security has instead been borrowed for its own use. Money the government promised to fund future Medicare and Medicaid benefits and military/government pensions has not been set aside at all. Richard Fisher, a member of the Federal Open Market Committee, believes total US debt – including Medicare and Social Security – is over $122 trillion (Figure 6). This is more than $390,000 for every man, woman and child in the US, and the number keeps rising.

“Fiscally, we are in uncharted territory. Because of this gigantic deficit, our country’s ‘net debt’ is mushrooming… no one can know the precise level of net debt to GDP at which the United States will lose its reputation for financial integrity.”

- Warren Buffett, Chairman, Berkshire Hathaway

Bernanke: "Things will come apart..."

Wow, Ben Bernanke speaks the truth (finally):

http://www.cnsnews.com/news/article/67461

Federal Reserve Chairman Ben Bernanke delivered a frank assessment to Congress on the fate of the economy if entitlement programs are not restructured. On Wednesday, Bernanke warned that “things will come apart” if Congress allows the federal entitlement programs and the deficit spending they cause to continue on their unsustainable path.

Speaking at a hearing of the House Budget Committee, Bernanke offered his dire prediction after being asked what would happen if Congress did not take action to head off the impending crisis brought on by unsustainable entitlement spending, led primarily by Medicare.

“The entitlement programs are not self-funded,” Bernanke said, “they are unfunded liabilities. They are the single biggest component of spending going forward.”

“There are various ways you could address this – you can restructure entitlement programs [or] you can cut other things – but at some point you need to address the overall budgetary situation. If you don’t, you’ll get a picture like this one [pointing to a graph showing a steep rise in interest rates and debt] where interest rates are rising and debt outstanding is growing exponentially.

“At that point, things will come apart,” he said. “This [rise in debt] will stop, but it might stop in a very unpleasant way in terms of sharp cuts, a financial crisis, high interest rates that stop growth, [or] continued borrowing from abroad.”

John Williams from shadowstats.com

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=103698&sn=Detail

If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you'll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can't raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit. With no political will to contain the spending, eventually the government meets its obligations by revving up the currency printing press.

California is sinking

California is sinking...but it's not into the Pacific Ocean. It is collapsing due to the collective weight of unfunded liabilities from public employee pension costs. Even the most liberal California politicians agree on this.

http://online.wsj.com/article/SB10001424052748703699204575017182296077118.html

Former Assembly Speaker Willie Brown, a well-known liberal voice, recently wrote this in the San Francisco Chronicle: "The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life. But we politicians—pushed by our friends in labor—gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages. . . . [A]t some point, someone is going to have to get honest about the fact."

State Treasurer Bill Lockyer, another prominent liberal Democrat, told a legislative hearing in October that public employee pensions would "bankrupt" the state. And the chief actuary for the California Public Employees Retirement System has called the current pension situation "unsustainable."

Unfunded US government liabilities

This is an old theme, but needs repeating: the US government is bankrupt, so our financial leaders feel compelled to keep printing US Dollars like confetti.

http://www.sprott.com/Docs/MarketsataGlance/MAAG_10_2009.pdf

The countermeasure to protect your purchasing power when currency debasement occurs is not well-traveled, but is becoming increasingly transparent: buy real assets.

Countertrends will reappear occasionally, but the trajectory of the dollar is well-established.