I posted an article on my Tea Party Economist site on the increase in the real debt of the US government over the last year. The increase was $11 trillion.
Impossible? Not at all. The annual increase — the deficit — will be even larger next year, and larger still the year after.
This refers to the unfunded liabilities of the government. These are the price tags of political promises that politicians have made over the years for which there is no money available to fulfill. The expert here is Professor Lawrence Kotlikoff of Boston University. His most recent report says that total unfunded liabilities went from $211 trillion a year ago to $222 trillion this year.
The biggest source of future red ink will be Medicare. In second place is Social Security.
How can the government pay off these obligations? It can’t. The possibility does not exist. The government needs a spare $222 trillion to invest in private companies. This investment must make a return of at least 5 percent to provide the money needed to pay meet the government’s obligations. There is no $222 trillion available, and no capital markets large enough to absorb $222 trillion.
Conclusion: the US government will default.
“No, no!” you may be thinking. “This cannot be true. Why, the full faith and credit of the government lies behind these obligations.” This is the correct verb: lies. It is also the correct noun.
It is all a pile of lies. These lies are IOUs.
Your check will not be in the mail. The Postal Service by then will be long gone.
What about automatic deposits into your bank?