US ( gov't ) Funding of Future Promises Lags By TRILLIONS ...
from
(snip)"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.
This gap between spending commitments and revenue last year equals more than one-third of the nation's gross domestic product.
Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.
Social Security added $1.4 trillion in obligations, partly reflecting longer life expectancies. Federal and military retirement programs added more to the financial hole, too.
Corporations would be required to count these new liabilities when they are taken on — and report a big loss to shareholders. Unlike businesses, however, Congress postpones recording spending commitments until it writes a check.
The $61.6 trillion in unfunded obligations amounts to $534,000 per household. That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises.
"The (federal) debt only tells us what the government owes to the public. It doesn't take into account what's owed to seniors, veterans and retired employees," says accountant Sheila Weinberg, founder of the Institute for Truth in Accounting, a Chicago-based group that advocates better financial reporting. "Without accurate accounting, we can't make good decisions."(snip)
... which leads to a very predictable reaction ... from
(snip)"The dollar fell to a one-month low against a basket of currencies on Tuesday and a record low against the Swiss franc after a Chinese official said the greenback would continue to weaken versus other major currencies.
The head of the international payment department at the Chinese forex regulator also warned about the risks of excessive holdings of U.S. dollars.
The dollar index [.DXY 73.54 -0.41 (-0.55%) ] fell to a low of 73.601, the lowest since May 5, while the greenback fell to 0.8328 Swiss francs on trading platform EBS a record low.
"China had been growing its share of U.S. securities quite aggressively in the past, and the threat that they will be selling these holdings has always been there," said Adam Myers, senior forex strategist at Credit Agricole.
"But this is not a credible threat as a sell-off will lead to a steepening of the U.S. yield curve which will hurt the U.S. and the Chinese, who are dependent on the U.S. economy. But I do agree that the dollar is headed lower in the long term."(snip)
Stated another way, Americans are now so far in debt that China and other creditors are recognizing that they will never be paid back at full 'value' for the money that they have already lent the US gov't and businesses via bond purchases. China and other creditors are concerned that holding US dollars and/or US dollar denominated bonds and other investments will result in major losses as the US dollar's international exchange rate value continues to decline. This also implies that the USA is not going to be able to find buyers for future new issues of US gov't and business bonds unless interest rates are increased significantly ( to cover the risk of exchange rate loss ).
Higher interest rates, higher US dollar denominated prices for food, energy, and everything else imported, more restricted access to credit etc. are all formulas for a double dip recession at best and a permanent US standard of living paradigm shift at worst.
Re: US ( gov't ) Funding of Future Promises Lags By TRILLIONS ...
Here's the other shoe : States and cities are doing even worse. Meredith Whitney was on "Squawk Box" on CNBC this morning and her research says that states, cities and counties have TRILLIONS in unfunded pension and health care costs AND that total debt service is NOT 3% of their current budgets but is actually 37% when you add up ALL off-budget items, public authorities, municipal corporations and the like. From Washington on down to the village level, everyone has increased spending by as much as 30% over the last two years. The American consumer has increased his or her spending by less than 5% during the same time period.