Proof That America Is Bankrupt…

Proof That America Is Bankrupt…

Now I know that sounds like a crazy statement.  Believe me, I was wary when I read it as well.  How could the greatest nation…the greatest power on earth possibly be bankrupt??  Not possible, just couldn’t be…all thoughts that went through my head.  But, Porter Stansberry has an extensive reputation in the forensic financial arena, and his penetrating insight for future debacles has been well written about and discussed in many affluent boardrooms.  He was the first person to say that GM was going bankrupt.  The stock was in the 30’s when he first published his views a few years ago.

Below is Porter’s most recent (and his best) update on why America is bankrupt.  Yes, it’s true that America is paying their bills right now, but so was GM before they officially filed for bankruptcy.

This guy doesn’t hold back punches, shoots straight from the hip, and tells it like he sees it!!  Take it for what it’s worth.  Choose to believe it or not.  For in America and other democratic societies, we have that option…to think what we want and to say what we want.  I’m of the belief that we should all take the time to grow personally by learning and reading what others opinions are and then discussing them further.  So, on that note, please enjoy this article and let me know your thoughts afterwards!

What OBAMA!’s Budget Doesn’t Mention

By Porter Stansberry

Nobody likes bad news.

A few years ago, I got in hot water by insisting General Motors was bankrupt. Supporters of the company (whether investors or unionized employees) got mad at me and said I was exaggerating. They rightly pointed out GM was still servicing its debts and was still owned by its equity holders. Thus, technically at least, GM wasn’t bankrupt.

In order to avoid any unnecessary litigiousness, I began to write in parody, pretending to be the chairman of General Motors and warning of the company’s impending bankruptcy. One of the few ways you can still speak unpleasant truths in America is by using – or pretending to use – humor. That’s why, for example, Chris Rock and Bill Cosby are our most poignant commentators on race relations and why John Stewart is perhaps our most insightful news commentator.

Meanwhile, the bankruptcy of General Motors was far from a laughing matter.

GM had no conceivable way to repay its debts. It was even borrowing money to pay for the interest expense on its existing debts.

Monitoring the company closely between 2006 and 2009 taught me quite a bit about willful self-deception. Here are the three key traits I look for now in companies facing major financial stress…

No. 1. There’s never any real tally of the total amount owed. GM used byzantine accounting to hide the truth of its deteriorating fiscal condition for nearly 20 years. It was impossible for any outside analyst to get an accurate, consolidated account of GM’s total debt.

No. 2. None of the company’s “turnaround” plans include any efforts to actually repay principal amounts owed.

No. 3. The company’s spending is out of control. In GM’s case, it was also rife with fraud and absurdity – like, for example, its jobs bank where people were paid not to work.

If you don’t know how much you owe, if you make no attempt to ever repay your debts, and if your spending is out of control, there’s no way to avoid bankruptcy. In retrospect, these facts seem so plain and obvious. But who else was warning about GM? No one.

I bring this up to you today because the exact same things are now true about the United States of America.

We don’t know how much we owe. We don’t have any plan to repay our debt. And our spending is still completely out of control…

OBAMA! has sent a new budget to Congress. It contains several provisions that will make people unhappy. Taxes are going up on the rich. They’re going up on private-equity firms and hedge funds. They’re going up on oil and gas companies. And they’re going up on multinational companies.

These new taxes are what you’ll see people arguing about. They are what the politicians will complain and campaign about. Nobody wants to pay the costs of government, so that’s the easy sell. But the taxes aren’t the real problem with OBAMA!’s budget…

The real problem is that government spending is literally out of control.

The government is going to reduce its so-called “discretionary” spending by a grand total of $200 billion. Only about $1.4 trillion of the government’s $3.8 trillion budget is discretionary. The rest is legally required, thanks to unfunded entitlement programs, like Medicare. So right now, far less than half of the government’s annual budget can legally be restrained.

Meanwhile, there’s no accurate tally of the government’s debt. Supposedly, we owe around $12 trillion. This number is so large that it is meaningless. What does it really mean? According to the IRS, almost 143 million people filed tax returns in 2007 (the most recently reported year).

Of these people, roughly 96 million paid something in taxes – even one penny. Thus, technically, you could say there are basically 100 million taxpayers in the United States. Dividing the total debt ($12 trillion) by the number of taxpayers, you can see our total debt is actually $120,000 per taxpayer. How many people do you know can afford an additional $120,000 in debt?

And the truth is, the $12 trillion figure is only a down payment on our actual debts.

For example, nobody really knows how much more money Fannie and Freddie will require. (My bet is $500 billion each – or $1 trillion.) On Christmas Eve, when no one was looking, Congress approved unlimited funding for the two national mortgage banks.

And that’s far from the only “off-budget” item. We have committed to fighting two civil wars – in Iraq and Afghanistan. The costs are likely to be $50 billion or so next year alone. How much over the next 10 years? Maybe $1 trillion? Or maybe more. And there’s a new “jobs package” that’s estimated to cost $76 billion next year with another $25 billion to bail out cash-strapped state governments.

Even if you only looked at the dollar amounts that have been budgeted today and you ignored all of the rest of the growth of future entitlement spending, you’ll discover that we actually owe something around $20 trillion right now.

And if $20 trillion is the real number, then the amount owed by taxpayers is actually $200,000 each. Of course, that’s if you’re counting all of the taxpayers. Most people, though, pay almost nothing in taxes. Unless you’re earning more than $50,000 per year, you’re not really contributing to the tax receipts. Roughly 50 million folks are in this category. These people pay less than 10% of all income tax receipts. So you shouldn’t count on them to repay much, if any, of these debts – they can’t.

What’s the real per-capita number? My best estimate – just on the money we actually owe today – is $400,000 per taxpayer. At a reasonable (6%) rate of interest that’s $24,000 each – just to pay the interest on these debts each year. How many people do you know that could afford $24,000 a year in higher taxes? How many people can afford additional debts of $400,000?

My point? Our government is bankrupt – right now, today. Sure, it might still have access to the credit markets. And yes, since it owes dollars, it can always simply print more. I realize the government can’t go bankrupt they way GM did. Our bondholders won’t end up getting title to our national parks and the strategic petroleum reserve. No, that’s not going to happen.

What will happen?

I can’t say for certain. But here’s what I know: It’s not a good idea for the world’s largest debtor and the world’s strongest military power to go broke. Bad things happen in democracies when the government goes broke. At the very least, our creditors will demand much higher interest rates and abandon the use of our currency. That’s going to devastate our standard of living.

These facts and figures should cause you to wake up and think about what you’re doing with your savings. Here’s a hint: Don’t save dollars. And don’t count on whatever the government has promised to you, whether it is a retirement or medical care. The government is bankrupt. It won’t be able to deliver.

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If we are to believe what Mr. Stansberry has told us, then we can see that inflation…not deflation, is a considerable concern in our future.  It also explains why interest rates will go much higher, the middle class will become non-existant, and the US dollar will continue to fall.

Don’t forget to leave a comment.  I value your feedback!

Your friends may get some value from this article as well, so please share it with them by using the Facebook and Twitter buttons at the top right of this post and thanks again for reading!

Yours in knowledge,

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27 Responses to “Proof That America Is Bankrupt…”

  1. Dennis Marsch Says:

    Hi Nicole, the writting has been on the wall for a long time, the problem has been all have been in denial. It is the same as 911, people just cannot accept the facts and the media lulls them to sleep at night.There is a revolution coming and it is not going to be pretty.The wake up call is starting to go out and now the people believe it.

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    How do we begin to predict what the housing market will do? No offense, but everybody was wrong about it just a fewyears ago, so why do we think it will be better in the future? Just because housing is cheaper and rates are lower? Unemployment is still a serious problem. And, the debt our country seems to accumulate every day. I personally think waiting is the best option right now.

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    • Nicole Says:

      Yes, Soraya, you’re right… housing is cheaper and rates are lower right now, but that most likely will change very soon. As you mentioned, unemployment is increasing with every month that goes by and it seems the US government has a bad habit of turning on the printing presses as often as we turn on the water faucet. Due to these reasons alone, it would be wise to not dive into large purchases of real estate in which you would be burdening yourself and your family down with debt. Ron Paul predicted the housing crash years before it happened and he is now predicting the crash of the US dollar. It is inevitable that interests rates will skyrocket when this happens. For now, real estate is not the safest investment anymore. Instead, invest in gold and silver, things of REAL value.

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Trackbacks/Pingbacks

  1. […] This post was mentioned on Twitter by Sean Moffitt, Nicole Peterson. Nicole Peterson said: RT @nikki_peterson Proof That America Is Bankrupt… http://bit.ly/f0nmI8 #america #bankrupt #economic #crisis #porter […]

  2. […] has always been an excellent hedge against inflation, as well as from America going bankrupt. From everything I’ve researched and learned over the past 3 years, I believe gold and silver […]

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