On Medicare/Medicaid:
http://www.creditwritedowns.com/2009/06/means-of-deficit-reduction-medicare-and-social-security.html

State local pensions:
http://www.creditwritedowns.com/2010/01/pension-disaster-makes-states-and-cities-into-financial-basket-cases.html

State budgets:
http://www.creditwritedowns.com/2009/01/will-federal-largesse-be-countered-by-state-and-local-cutbacks.html

MA – I guess we’ll just have to wait and see.

My prediction on Japan:

Japanese debt is largely self-financed – yet there will be limits to that
and we will see a change in internal demand and many buyers will become net
sellers. Japan will look abroad for demand and yields will have to rise.

Trade between nations with asymmetric wage/labor/environmental laws
destroys jobs for the more regulated nation. These jobs will not come back. GDP
will be impacted. This is not a red herring.

The only Job Guarantee Program that worked under Roosevelt was a World
War. I’m no fan of that.

I agree that we need to continue deficit spending – but only because we
have a debt based monetary system that requires it. The system is flawed –
the deficit spending is a mere symptom of the underlying, flawed system. I
prefer a new monetary and financial regime – but that won’t happen until
the current one fails. Gov’ts prefer to give the status quo the benefit of
the doubt and write checks willy-nilly until it’s too late, however obvious
the problem is.

Well, I think you’re wrong about FDR’s New Deal. I’ve written about this
before, but see

_http://www.ritholtz.com/blog/2009/02/time-for-a-new-%E2%80%9Cnew-deal%E2%80
%9D/_ (http://www.ritholtz.com/blog/2009/02/time-for-a-new-“new-deal”/)

If you measure the statistical data correctly (incorporating the Workfare
schemes), you see that unemployment dropped from 25% to 9.6% by 1936. You
think Obama’s Presidency might be considered a success if he reduced
unemployment by two-thirds during his first term in office.

On Japan, that it’s “self-financing” represents a flawed view of bonds.
They don’t “fund” anything. Whether the owner is Japanese or a Chinese
person holding a US Treasury, the causality you imply is backwards. See the
following:

_http://cas.umkc.edu/econ/economics/faculty/Forstater/papers/Forstater2003/F
orstater2003_AE_Bondsales.pdf_ (http://cas.umkc.edu/econ/economics/faculty/
Forstater/papers/Forstater2003/Forstater2003_AE_Bondsales.pdf)

My prediction on Japan:

Japanese debt is largely self-financed – yet there will be limits to that and we will see a change in internal demand and many buyers will become net sellers. Japan will look abroad for demand and yields will have to rise.

Trade between nations with asymmetric wage/labor/environmental laws destroys jobs for the more regulated nation. These jobs will not come back. GDP will be impacted. This is not a red herring.

The only Job Guarantee Program that worked under Roosevelt was a World War. I’m no fan of that.

I agree that we need to continue deficit spending – but only because we have a debt based monetary system that requires it. The system is flawed – the deficit spending is a mere symptom of the underlying, flawed system. I prefer a new monetary and financial regime – but that won’t happen until the current one fails. Gov’ts prefer to give the status quo the benefit of the doubt and write checks willy-nilly until it’s too late, however obvious the problem is.

I guess I’m as much a doomer as Faber is after all.

Nonetheless, ours is a system where currency creation is done thru debt, and with debt, comes the payment of interest. Will this debt servicing always be manageable? Will the cost of debt servicing continually increase as a percentage of tax revenues? How will the bond market react in coming years?

Will the US gov’t bail out states, state unemployment funds, state pension funds, and any future banks or corporations?

As for future GDP growth covering these expenses – I have doubts here. Our economy has increasingly become dependent on debt-driven asset valuations – a system that has obviously reached its limits – and continues to survive due to gov’t intervention. Global wage arbitrage thru the inclusion of Asian countries in GATT – now the WTO, will continue to wreak havoc on wages in the Western world, and thus tax revenues – just at a time when entitlements are expected to grow. Energy costs too – have an impact on our economy. I don’t mean to create a litany of issues to be adressed, I am just pointing out that there are a convergence of processes that all impact the ability of the US economy to grow.

A sovereign that controls its currency may not experience bankruptcy – but loosely speaking – its own currency can.

It’s easy to dismiss him as merely entertaining. But really, let’s look
at the challenges the US faces… the unfunded liabilities in Social Sec
and Medicare/aid, the state pension fund shortfalls, the looming federal
budget deficits of the next ten years, the rising and accumulating interest
costs of that very same deficit, the likely gov’t reaction to deflationary
forces, the global soveriegn bond market… I could go on and on.

“Unfunded liabilities” in social security and the like is based on a
misunderstand of public reserve accounting. I don’t believe there is an
operational constraint on the Government’s ability to meet all Social Security
payments in a timely manner.

It doesn’t matter what the numbers are in the Social Security Trust Fund
account.

The trust fund is nothing more than record keeping, as are all accounts at
the Fed.

So I don’t buy the “intergenerational debt” story.
50 years from now when there is one person left working and 300 million
retired people (I exaggerate to make the point), that guy is going to pretty
busy since he’ll have to grow all the food, build and maintain all the
buildings, do the laundry, take care of all medical needs, produce the TV
shows, etc., etc., etc.

So what we need to do is make sure those 300 million retired people have
the funds to pay him??? I don’t think so! This problem obviously isn’t
about money. The ultimate irony is that in order to somehow ‘save’ public
funds for the future, what we do is cut back on expenditures today, which
does nothing but set our economy back and cause the growth of output and
employment to decline.

And, for the final ‘worse yet,’ the great irony is that the first thing
they cut back on is education- the one thing the mainstream agrees should be
done that actually helps our children 50 years down the road.

Should our policy makers ever actually get a handle on how the monetary
system functions, they would realize the issue is social equity, and possibly
inflation, but never government solvency.

They would realize that if they want seniors to have more income at any
time, it’s a simple matter of raising benefits, and that the real question
is, what level of real resource consumption do we want to provide for our
seniors? How much food do we want to allocate to them? How much housing?
Clothing? Electricity? Gasoline? Medical services? Those are the real
issues, and yes, giving seniors more of those goods and services means less
for us. But that’s the real issue here. =

It’s easy to dismiss him as merely entertaining. But really, let’s look at the challenges the US faces… the unfunded liabilities in Social Sec and Medicare/aid, the state pension fund shortfalls, the looming federal budget deficits of the next ten years, the rising and accumulating interest costs of that very same deficit, the likely gov’t reaction to deflationary forces, the global soveriegn bond market… I could go on and on.

That said – is it “entertaining” to publicly discuss those challenges and arrive at a “unpalatable” conclusion?

What’s your take? I enjoy your blog – but I also want to see you go out on a limb and honestly address how those challenges play out in toto over the next decade.

Would your conclusion be “entertaining?”