Tim Geithner Says The United States Is Insolvent
Scroll down for a huge video collection...
---
Michael S. Rozeff
Geithner Says U.S. Insolvent
The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury. Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt.
In his words:
- "Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States."
He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.
After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.
Suppose that you had a debt of $10,000 that required a payment of $500 in order to stave off your creditors’ seizing your assets. Suppose that you didn’t have the $500. One way out would be to borrow $500 from a new lender and use that $500 to pay off the old lenders. That buys you time. However, now you have debts of $10,500. You have to find ways of lowering this or else you will again be faced with an even worse situation.
You are approaching insolvency when you begin to run out of new lenders who are willing to add to your debt. The willing lenders dry up because they know that they have to get in line to get their promised payments while you continually seek out new borrowers, all the while making your situation worse and worse.
Knowing their precarious position, the new lenders are likely to demand rising default risk premiums.
That means they demand higher interest rates.
That means your cash payment obligations go up. That hastens your approach to insolvency.
Insolvency occurs when you cannot find enough cash from any source, even new lenders, in order to make required payments.
The U.S. is approaching insolvency, according to its Treasury Secretary. He didn’t put the matter in precisely that way, but he put it in words that are as close as you can get to it. He said that the U.S. would default, and its only way out at this moment is to issue more debt.
The increases in the debt limit have necessarily accompanied the increase in the government’s overall debt. Those increases have been especially astonishing in the last 10 years. The ceiling is now $14.29 trillion. The ceiling was $5.73 trillion in September of 2001. That’s a growth rate of over 10 percent a year.
A few months back, Laurence Kotlikoff wrote that "The U.S. is bankrupt." Using the government’s numbers properly labeled, he found that the U.S. fiscal gap, which is the difference between the present value of projected spending and revenues, is $202 trillion. An IMF study of the U.S. finances found that it would have to double taxes to close its fiscal gap. This is an impossibility. It would destroy the struggling economy.
Geithner’s statement confirms those of other analysts outside of the U.S. government.
According to Kotlikoff, the government’s sixty-year "massive Ponzi scheme" will end when there are not enough revenues to pay for Social Security, Medicare, and Medicaid. He sees large benefit cuts, large tax increases, and high inflation ahead when the government seeks to survive.
How will the U.S. extricate itself from this situation? That’s a matter of speculation because there are many interacting variables involved. There are lots of ifs, ands, and buts.
When a state cannot meet its promised obligations, there is no bankruptcy code to guide a reorganization, as there is with a company. There is no court to oversee a restructuring. There is no judge or panel that decides on the priority of claims. Instead, the government itself decides how to handle its inability to pay cash to fulfill its promises.
In the immediate future, the U.S. government will not default on its bonds. They will have priority of payment. The reason the government will do that is to maintain its capacity to borrow at reasonable rates of interest so that it can maintain its size and programs. If the government defaulted on its bonds as a way of solving its financial problem, it would have immediately to cut back its spending severely. The government would shrink radically all at once. The government would take a big bath. Congress doesn’t want to do that. It would rather stretch out the default process and inflict the pain over time and among more groups than bondholders. Congressmen prefer to maintain themselves in power while managing a large government. Other branches and bureaucracies also prefer to keep their pet programs and activities afloat.
Therefore, as usual, Congress will raise the debt limit again. That doesn’t end the financial problem. It adds to it even as it postpones and enhances possible insolvency.
The new lenders that the government seeks out to lend it new cash are likely to demand higher interest rates, except for one major lender, which is the Federal Reserve System.
Bond yields are subject to numerous worldwide influences. They include the default risk premiums demanded by foreign lenders, including Asian central banks. Those risk premiums are likely to rise.
In contrast, the Federal Reserve has committed itself to buying $600 billion of new government debt in the next few months. Its purchases tend to support bond prices and keep interest rates down, other things equal.
As the Federal Reserve keeps buying more and more government debt, with no prospect of reducing its holdings unless and until the government gets its house in order, bond yields are likely to rise, despite Fed buying, because yields also reflect inflation premiums. The prospect of inflation will rise as the Fed monetizes the debt. We would then see yields rising accompanied by firm prices of commodities and metals.
The inflationary participation by the Fed, which postpones the inevitable fiscal decisions of the government, harms all holders of fixed-dollar assets and all those whose receipts of dollars are fixed and lag behind the Fed’s production of new dollars. In addition and more importantly, the inflation sets in motion another boom-bust cycle.
Continued debt monetization by the Fed is quite likely for many reasons.
---
Geithner and Paul Ryan argue over the deficit...
I brought up page 146 in your budget which is your S-1 budget totals...
http://www.whitehouse.gov/omb/budget/fy2011/assets/budget.pdf
When you take a look at this, I just find this amazing. You've got budget totals here, which by your own admission, from your own Budget Director, and youre a smart guy, youve got smart economists over there, all of them say, that for the medium and long-run budget deficits have to get below 3% of GDP, yet this budget plan that youre bringing to us doesn't even get close to it.
Treasury Secretary Tim Geithner: Youre exactly right.
Ryan: Since I have three minutes, you have this warning under here. Its like a warning on a cigarette pack. You have this little magic box underneath your budget totals that says: were going to have a commission do it. Were going to have this partisan commission, with a 2 to 1 ratio of Democrats and Republicans, that will give us a report after the election.
Geithner: Its not a 2 to 1 ratio, thats not fair. And let me say it slightly differently, were going to solve our part of the mess we inherited. We inherited a structural deficit and to bring that down, were going to have to work together.
Ryan: Why dont you solve this problem in your Budget? You run the government, if you are going to solve our fiscal situation, why dont you do that? Why dont you give us a budget that actually gets our deficits to sustainable levels?
Let me read a quote from OMB Director Peter Orszag in the Wall Street Journal: The unusual situation that the government finds itself in with other countries willing to finance U.S. debt at low rates wont last. He added, when it flips, the question is: how do you get ahead of that to avoid the downward spiral of rising interest rates, plunging dollar, a sinking economy.
Geithner: I think its a good quote, too. I agree with that.
Ryan: The vigilantes in the bond market are going to get us and the American people are going to get hurt. And so, why arent you giving us a budget - not punting to a commission - why arent you giving us a budget that using your own standards and definitions actually is sustainable?
Geithner: Congressman, we are proposing a budget that takes the huge mess we inherited and cuts that deficit dramatically.
Ryan: You can blame Bush only so long. You obviously inherited a tough situation, but you are making it worse by your own admission.
---
Video - Geithner on the deficit - Meet the Press
---
Geithner says the U.S. will never lose its AAA rating...
Famous last words...
---
Even Obama admits that we're broke...
Video - Obama on C-Span discussing health care & GM - May 23, 2009
The pink elephant gets some love as Obama admits:
- "Well, we're out of money now..."
---
Ron Paul says he'll vote against raising the debt ceiling...
Excellent clip.
Video - Jan. 8, 2011 - Ron Paul discusses how raising the national debt limit is inevitable due to the culture of spending in Washington...
Related stories...
Apr 17, 2011 at 9:49 AM
Reader Comments (36)
« IT'S OFFICIAL: Deficit Obama Signs Law To Raise Public Debt Limit To $14.3 Trillion »
http://dailybail.com/home/its-official-deficit-obama-signs-law-to-raise-public-debt-li.html
http://dailybail.com/home/geithner-tells-abc-news-that-us-will-never-lose-aaa-debt-rat.html
http://dailybail.com/home/chinese-think-tank-warns-geithner-over-trade-war-threatens-t.html
http://dailybail.com/home/deficit-obama-tells-charlie-gibson-if-we-dont-pass-health-ca.html
http://www.reuters.com/article/idUSTRE70B0BX20110112
and
China nudges U.S. on assets ahead of Hu trip
http://www.reuters.com/article/idUSTRE70B16J20110112
http://stopforeclosurefraud.com/2011/01/12/wa-state-keller-rohrback-l-l-p-announces-class-action-complaint-filed-against-emc-mortgage-corp-and-the-bear-stearns-companies-llc/
[snip]
PACHECO v. EMC Mortgage Corp & The Bear Stearns Companies LLC [Read Complaint Below]
SEATTLE, January 10, 2011 (GlobeNewswire) – Attorney Advertising. Keller Rohrback L.L.P. (www.krclassaction.com) announces that a class action has been filed in the United States District Court for the Eastern District of Washington on behalf of all mortgagors in the State of Washington whose home mortgage loans are serviced by EMC Mortgage Corporation and who (a) have attempted to obtain modifications of their loan terms from EMC; and (b) have made payments pursuant to a “Repayment Agreement,” a Home Affordable Modification Program (“HAMP”) trial modification plan, or any other temporary modification plan.
Vedlo pronto porque lo retirarán del youtube
In Spain banks have the money and people demonstrate with flamenco to complain for this unfair situation
Hola a tod@s, debajo ... un enlace para ver un video de la “juerga flamenca” reivindicativa que se montó en el Santander de la avenida de la Constitución de Sevilla. Algun@s ya lo habréis visto. Dados los tiempos que corren de pasividad y resignación,es un estímulo para la gente. Los últimos algunos maestros, que se plantean que ya es hora hacer algo, lo que sea, un algo. Vedlo pronto porque estos del youtube no van a tardar en quitarlo.
El segurata seguro que os es conocido.
Firmado: Un accionista del BSCH.
http://www.youtube.com/watch?v=Wv5dh8v7mDs&feature=player_embedded
Vamos a seguir con este tipo de acciones... amojjjjsayáaaa
Controlled media still very quiet.
Sera
equiring 48,000 cellphones to be turned in by June 1 will save the state about $20 million a year.
“It is difficult for me to believe that 40% of all state employees must be equipped with taxpayer-funded cellphones,” Brown said. “Some state employees, including department and agency executives who are required to be in touch 24 hours a day and seven days a week, may need cellphones, but the current number of phones out there is astounding.”
Jan 12, 2011 at 5:40 PM | mark mchugh
Right, every time they play the song & dance for the people and pass it. They have every time so far. Nothing will change till the rinos are gone.
Either way,were putting a loaded shotgun in our mouths................................! & were damed either way.
I have an idea; how about we put the military on 'all volunteer' status. That means, they can still come to work if they want to and they feel patriotic enough to guard the opium poppies and newly discovered rare earth metals in Afghanistan, and the missile silos in Nebraska, and the oil in Iran that was going to pay for the war, anyway. But they won't get paid. Ditto the other part of the government, our illustrious 'leaders' and I use the term with much disdain. No more money for elected officials. They've all already made enough to last them several lifetimes, no more pensions, no more Secret Service protection, either. That way, it would be far easier for the citizens to arrest Cheney and Bush and try them for crimes against humanity. Why should THEY get protected from US? Are we not their employers? Or are they royalty?
"Those that make peaceful revolution impossible make violent revolution inevitable" JFK, killed by Bush Senior and his friends
http://scienceandpublicpolicy.org/monthly_report/sppi_monthly_co2_report_july.html
http://www.ncdc.noaa.gov/paleo/ctl/clisci100k.html
There must be a link between ice ages and the economy!
http://www.ncdc.noaa.gov/paleo/ctl/clisci100k.html
http://stopforeclosurefraud.com/2011/01/12/fl-saxena-white-p-a-files-securities-fraud-class-action-against-lender-processing-services-inc/
[snip]
In connection with the Florida Attorney General’s investigation into the Company, former Florida AG Bill McCollum has indicated that LPS and other similar companies have produced “numerous documents in foreclosure cases that appear to be fabricated.” As a result of the rampant use of these and other unscrupulous business practices, investors have suffered millions of dollars in losses.
It must be by peaceful means, with the intent of a peaceful resolution, and for peace and prosperity to eventually be found over-abundantly in this land, as was always the intent and purpose for this country, regardless of how it has acted since its inception.
violence will lead to massive bloodshed and civil war from the greed of a minority of men in positions of high power who care not about the people who would die, in their last dying gasp and final grasp to maintain their status quo and positions of control, as wealthy, racketeering, puppeteer slave-masters.
so brother will kill brother in senseless acts of stupidity from a brainwashed delusional false patriotic mindset instilled in them to protect the 'homeland' from the 'civilian' uprising, all the while not giving a thought on the oath the military and police took to protect and uphold the constitution from enemies foreign and domestic, falsely believing the 'civilians' are the enemy and not those in power from whom they are given and do take orders from, resultant from a basic lack of critical thinking and individualism which is highly frowned upon and where conformity and collectivism are the core doctrines.
the military has been built to take orders.
the problem not only lies within this, but even more so with the people who issue those orders.
the problem of the current state of america is that while the problem was being built, it wasn't yet a realized, perceived or even potential problem, so the people did nothing as their wealth, lives and potential was degraded, compromised and enslaved over time.
All that is necessary for evil to triumph is for good men to do nothing...
and now the those few men that exist are just mere candles in the overwhelming darkness giving 'light' to those who would 'see' from it, if they so chose...
and to send that light unto others who would see, if they could, and eventually, inevitably, hopefully... LIGHT UP the darkness...
http://whatreallyhappened.com/WRHARTICLES/dearrachelmaddow.php
voting doesnt work anymore(if it ever did, once upon a time in a vacuum...voting is a tenant of democracy, which is MOB RULE, which is why this country WAS a republic and texas is no longer), its an illusion fed by your delusion that your vote counts, the numbers arent manipulated, and both parties have separate policies and something to offer(however lacking of principles), fueling your cognitive dissonance and inducing comatose like complacence so you can get up and go do your slave labor in the morning.
when in fact both parties policies are the same in practice (casting aside diarrhea of the mouth syndrome these people spew), people cannot count anymore, much less ballots, which are being computerized(which means NO ONE counts them), they all steal your labor calling it taxes, and you let them...
you cant fix a problem, much less a state or country, by putting an frickin X in a box, thats called noting REALIZATION.
at this rate your better off not voting and someday getting illegitimate elections, but the problem is the system is built to cater or rather, control - the majority, leaving the minority without power enough to contest anything, as usual.
WAKE UP
in 2010 the federal reserve obtained 5 trillion dollars of US treasuries. In 2009 the federal reserve loaned an unknown amount of zero interest loans to banks with the understand the banks would purchase US Treasuries with the money. One has to wonder how risky the deal was when the banks were getter 3 percent free money but for some reason they would not play that game in 2010. One has to wonder if they matched the 5 trillion of 2010. One can only wonder because the federal reserve refuses to be allow an audit with the claim they need to be independent. I can fully understand why they would not want the public to know that they have a possible 10 trillion dollars used to support the out of control spending. Most of the crisis was the massive borrowing was caused by the bank's bad mortgage policies. Much of the trillions was used to save banks in foreign countries and one very offensive amount went to AIG who was providing funding for the illegal settlements on the west bank. We are spending so much on our defense and our federal reserve is basically in bed with the Illegal construction on the west bank when it refunded the bad debt on thousand of those mortgages hurting any peace process.
I do not believe we need an audit of the federal reserve. I believe we need a criminal investigation and long jail terms for the entire federal reserve employees.
read this one on geithner and the debt ceiling...it's outstanding...
Hybrid Car May Have Sparked Garage Blaze
http://www.wfsb.com/news/27541598/detail.html
Next step the thieves in our government who stole the money you paid into social security don't want to pay you back that's why they say social security is broke they spent all the money you paid in it's not really broke BTW but watch the set up here lol put it in the stock market and we all know how well that performed for 401k's/Pension Funds, etc...(they'll be back to finish looting what's left of those too wait and see)
Social Security Isn't Broke, But We Still Ought to Fix It
See full article from DailyFinance: http://srph.it/hODMlS
video
http://abcnews.go.com/ThisWeek/video/interview-timothy-geithner-13394050
transcript
http://abcnews.go.com/ThisWeek/week-transcript-timothy-geithner/story?id=13393966
http://thehill.com/blogs/on-the-money/budget/227393-geithner-warns-boehner-not-to-play-with-debt-ceiling-again
[snip]
Treasury Secretary Timothy Geithner on Tuesday warned Speaker John Boehner (R-Ohio) against playing with the U.S. debt ceiling.
“This commitment to meet the obligations of the nation, this commitment to protect the creditworthiness of the country, is a fundamental commitment that you can never call into question or violate,” Geithner said Tuesday in an address to the Peterson Foundation.
http://www.imackgroup.com/mathematics/845422-trading-report-2011-budget-deficit-5-trillion-dollars/
[snip]
Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.
A U.S. household’s median income is $49,445, the Census reports.
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules....
http://stopforeclosurefraud.com/2012/12/26/happy-new-year-secretary-geithner-sends-extraordinary-measures-debt-limit-letter-to-congress/