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Thread: If the US gov't had to perform its accounting like corporations ...

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    Default If the US gov't had to perform its accounting like corporations ...

    again, it's necessary to go to the foreign financial press for the economic 'truth' ...


    (snip)"Let’s pretend the US is a company.

    For starters, this company has a massive debt problem. The official number is $12 trillion and counting, which is roughly the equivalent of one year’s annual production. On the surface, that’s not TOO bad.

    However, if you treat the US’s balance sheet according to Generally Accepted Accounting Principles (GAAP) you have to also consider future liabilities in the form of Social Security and Medicare, which puts total debt at $65 trillion: an amount equal to 5 years’ worth of production: a REAL issue.

    A debt load of this size requires massive sales and cash flow to service it. However, the problem is that the company’s primary sales segment (tax receipts) is plummeting. Indeed, individual income tax receipts are down nearly 30% from last year (a year that the economy was already falling off a cliff). Similarly, corporate tax receipts are negative.

    Now, the company has just gotten a new CEO (the old one left after racking up this massive debt load). However, rather than trimming the fat from the company, he’s decided to INCREASE its operating costs/ annual spend. So the company is now having to issue MORE debt (roughly $150 billion a month) at the same time that it is trying to roll some of its OLD debt over.

    This MIGHT work if the company’s current debt holders (foreign governments, especially China and Japan), weren’t already beginning to doubt that they’d ever get their money back.

    Indeed, a few weeks ago, the Treasury Department released its Treasury International Capital Data for October: the numbers showing foreign interest in new debt issuance. The following is a BIG deal:

    Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $8.3 billion (Graham’s note: we’ve issued nearly $2 TRILLION in debt this year).

    Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $43.9 billion. Foreign holdings of Treasury bills decreased $38.3 billion.

    In plain terms, this means that foreign governments are no longer willing to buy long-term US debt. In fact, they’ve become SELLERS. To return to our corporate metaphor, the former biggest buyers of debt are no longer willing to pony up the cash to buy new long-term debt from Uncle Sam Inc. Instead, they, along with everyone else, are piling into short-term debt.

    Thus, our corporation has got itself a REAL problem. Sales are down, spending/ costs are up, and fewer and fewer investors are willing to lend to it for any lengthy period of time. In fact, Uncle Sam Inc is entering something of a debt spiral where it needs to issue $150 billion of new debt per month WHILE rolling over TRILLIONS in existing debt at a time when investors are willing to lend to it for shorter and shorter periods of time.

    Indeed, according to the Treasury, in the next 5 years the US will have 73 days in which it needs to roll over $20+ billion in debt and 46 days in which it needs to roll over $30+ billion.

    How will this end?

    Badly or VERY badly. Indeed, the long-term bond market is already showing serious signs of deterioration. If bond prices collapse we will see a spike in interest rates, which will give a MAJOR reality check to whatever imaginary economic recovery the pundits believe is currently underway.

    Keep your eyes on the US debt markets. There is smoke there. And bonds, NOT stocks, may prove to be the big story of 2010."(snip)


    from

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    Banned Eric Stoner's Avatar
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    Default Re: If the US gov't had to perform its accounting like corporations ...

    I've been tracking the bellweather 10 Yr. Treasury. Interest has climbed from 2.89 % as late as March to almost 4 % recently. Today it is 3.8 %. Look for Treasury yields to climb further next year. That increases the costs of servicing all the debt Bush and Obama have rung up.

    Even eternal optimists like Larry Kudlow and Suze Orman have been forced to admit that we cannot "grow" our way out of this mess.

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    Default Re: If the US gov't had to perform its accounting like corporations ...

    If the US Govt had accounting, it would have had a left hand column called 'Assets', which would far exceed $100 Trillion Dollars and make the Debt like chump change & easily 'servicable'.

    That would also shut up the Financial Terrorists running shady web-sites putting out garbage knowledge and pimping gold. Of course, these 'Financial Terrorists' would always find something -ve about the world and try to scare people.

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    Default Re: If the US gov't had to perform its accounting like corporations ...

    Quote Originally Posted by xanfiles1 View Post
    If the US Govt had accounting, it would have had a left hand column called 'Assets', which would far exceed $100 Trillion Dollars and make the Debt like chump change & easily 'servicable'.

    That would also shut up the Financial Terrorists running shady web-sites putting out garbage knowledge and pimping gold. Of course, these 'Financial Terrorists' would always find something -ve about the world and try to scare people.
    Name some assets for us Xan?

    Because how I understand the accounting equation is that no assets come to be without liabilities and stock holder equity. Now if we say stock holder equity is that which the american people put in as taxes and fees, and liabilities is that which the government borrows from the rest of the world - we are already obviously in big trouble. Because liabilities far exceed stock holder equity right now - otherwise we wouldn't be borrowing trillions and trillions of dollars.

    Or, are you confusing assets of the people with assets of the government? If you want to say Farmer Brown's wheat field is an asset of the government, then I guess we know where your socio-economic theory stands.

    (I agree about the gold bugs. I think anyone who can dig something out of the ground for money instead of the effort of creating culture, art, and tools for money is a flawed system.)

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    Default Re: If the US gov't had to perform its accounting like corporations ...

    if the gov was looked at like a company lets say coke, then it would have to change its methods of doing things. for one the gov allows people to use its services without paying ( paying taxes), you can enjoy the satisfaction of a coke without paying them for it. better yet no matter how you would like to try, coke will always make more money on then it needs.

    as odd as it might seem, if gov was viewed as a company then the socialist type of countries are getting the most out of their customers and providing enough of a service to keep the vast majority happy. sort of like a good company.

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    Default Re: If the US gov't had to perform its accounting like corporations ...

    Quote Originally Posted by Deogol View Post
    Name some assets for us Xan?
    That can be answered in two ways.

    1) Mark-To-Market

    Assume the following,
    US is a corporation and the citizens it's employees (with free will to leave & join the company any time)

    * If you were China or India or a Martian with enough money, how much would you pay for USA Inc?
    * If USA charges for your citizenship (perfectly free market. If you don't like it, you can leave the country) How much would you pay for it? (even if you have to borrow that money). Multiply that number by 400 Million and an addition of 5 Million citizens every year. What # do you come up with? (This is apart from the Tax revenues USA can collect every year)

    2) Book Value
    a) USA Inc has an option on every piece of the land. (Again free market). What is it worth? (You need some option pricing model)
    b) USA Inc has military assets & capabilities (How much would someone like Russia or China pay for just this asset)
    c) USA Inc has vast natural resources. What is it's value
    d) USA Inc has incredibly smart people who have increased the productivity every year (yes even in 2008 & 2009). If your productivity goes up, your working assets naturally grows. So, even if you don't increase taxes, but reign in spending, the tax revenues will increase. How much would you value USA Inc Productivity machine
    e) USA Inc has a 230 Year old constitution which is best in the world. How much would you value that


    Add up (a) to (e) and see if it is anything less $100 Trillion

    Anyway, that's far more real knowledge than the combined information that the shady web-sites have put all these years which are written mostly by the Idiots and for the Gullible Idiots to instill Financial Terror

    Yes, Shady Web-sites perpetuating Financial Terror decreasing USA Inc's productivity is a huge liability. You can put a value to that and put it in the right-hand column

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