“No Way Out” of Debt Trap, Gross Says: U.S. Living Standards Doomed to Fall

Yahoo finance ^ | March 8 2011 | Stacy Curtin

[Michel12]

Debt, debt and more mounting debt is plaguing countries around the globe. In this U.S., states across the country face a collective $125 billion shortfall for fiscal 2012, while Congress is facing a budget gap nearly 10 times that size. PIMCO founder and co-CIO Bill Gross has previously said that if the United States were a corporation, no one in their right mind would lend us money. For the last decade, we’ve been “relying on the kindness of strangers” to help cover our debts, he tells Aaron in the accompanying clip. By “strangers” he is referring to our foreign counterparts, like China for example. Basically, for years Americans have spent their hard-earned dollars on less-expensive Chinese made goods. With great gratitude, China turned around and used all those dollars to buy up U.S. Treasuries and other dollar-denominated assets. But now after years of reckless spending, America’s debt level is nearing a breaking point and can no longer rely on foreign capital as a last resort. “When a country reaches a certain debt level, confidence in that country’s ability to repay that debt becomes jeopardized,” says Gross, citing the work of Ken Rogoff and Carmen Reinhart in This Time Is Different.

[liberty_lvr]

"In any event, if life is really toxic, and I’m shot (say) gnawing on Alec Baldwin’s shin bone, then I’ll come back as a zombie. So I’ve got that going on too."

Priceless! I've got a mental picture of Bill Murray with a pitchfork making that very statement.

Thanks for making my day.

[liberty_lvr]

"In any event, if life is really toxic, and I’m shot (say) gnawing on Alec Baldwin’s shin bone, then I’ll come back as a zombie. So I’ve got that going on too."

Priceless! I've got a mental picture of Bill Murray with a pitchfork making that very statement.

Thanks for making my day.

[reaganbooster]

Let’s coin a new term for Micheal Moore. Deficit denier.

[Yet_Again]

Remember, outsourcing is good because it gets rid of jobs that we don’t really want or need. Remember, trade deficits aren’t bad, either.

[Bernard Marx]

I agree the powers of incumbency and compliant liberal media are huge problems. But in a democratic republic it's the the people's responsibility to inform themselves and demand needed reforms at the ballot box.

Government schools run by self-interested unions have dumbed the electorate down. Yet there has never been a time in the history of mankind that so much information has been available to voters, literally at the touch of a button. But people are mentally lazy and politicians use that fact to their own advantage. Huge numbers of Americans don't even bother to vote. And thus we get the government we deserve.

[skeeter]

We get the government we deserve

Well I can't argue with that.

Its just that, given how the system has been rigged and human nature being what it is, I don't see how it can be any different.

[RC2]

I understand what you are saying but..........how many of those projects can be entered into at one time? One project with a pay out of 20 years is understandable. 5-10-20-30 projects is unsustainable without massive tax increases. They still have to be payed for, sooner or later. I’m not an economist but even I can see where we are going down a very slippery slope with our politicians.

[Bernard Marx]

given how the system has been rigged and human nature being what it is, I don't see how it can be any different.

If you read history you'll find that democratic republics have never fared well in the long run. Ben Franklin warned that the Founders had given us a republic "if we could keep it." He knew republics had been easily vulnerable to corruption, selfishness and citizen complacency because they depend on the concept of civic virtue. Look up the Boy Scout oath as an expression of civic virtue and compare its ideals with the current state of American culture. Most in our now-cynical country laugh at them. Sad.

[skeeter]

Not so coincidentally the Boy Scouts are no longer welcome in many public use buildings.

Oh well, 200 plus years was a pretty good run, I guess.

[Richard Kimball]

If the country cannot come to grips and cut back on entitlement programs, U.S. debt will continue to grow and governments around the world will loose faith in the U.S. dollar.

You have to love these professional writers. I don't rag on people for poor usage here, but a professional writer should know the difference between 'loose' and 'lose.' That said, the content of the article is true, and has been for the last four years. It can't all be blamed on Obama, either. The first bailout under Bush sent us over the edge. Obama doubled down, but right now we've gone over the cliff and are just pushing the accelerator when the wheels are spinning in air.

[henkster]

Local municipalities have the enforcement tool of the Moody’s bond ratings; the more they bond, the less perceived ability is there to satisfy the bond obligations. At some point, Moody’s downgrades the municipality and the borrowing costs increase to the point that the municipality can’t sell any more. If the elected leaders of the municipality have any fiscal sense, they are sensitive to where their “bond caps” are.

The problem with the feds is that they can print money to cover the bonds, and so far Moody’s is letting them get away with it and keeping the bond rating artificially high. If Moody’s rated the federal government by the same guidelines they measured a corporation or municipality, federal treasuries would be junk.