RESEARCH FROM CREDIT SUISSE: AMERICA IS NOT BROKE (NOT EVEN CLOSE)

It’s nice to see some mainstream economists making logical arguments with regards to America’s financial position. In a recent research piece Credit Suisse shows that America is far from being broke. Of course, anyone who understands MMT and the actual workings of a modern fiat monetary system knows this is a preposterous notion to begin with, but CS is using a traditional framework and their evidence counters much of what we so often hear from fear mongerers and politicians:

“Some of our senior politicians and market pundits say it every day: “America is broke.”
We wonder if this is meant to be a joke. America is not even close to being broke. Household net worth is $57T. Public government debt – including the state and local sector – is about $12T. If we consolidate balance sheets to reflect the fact that the household sector is ultimately responsible for repaying this debt we arrive at a household net worth of $45T or 303% of GDP. This is at the high-end of the historical norm of 250- to 300% since the data began in 1952. The current level was surpassed only in the recent tech stock and housing bubbles.
No doubt policymakers have a lot of work to do in terms of agreeing on a politically palatable way to adjust current laws to reduce the unprecedented intergenerational transfer of wealth associated with old entitlement programs and a wave of new retirees. But, ultimately, the resources are there and as we are increasingly finding out, so too is the political will.”

Source: Credit Suisse

Under the current income tax, pay as you go system, the government is actuarially broke. Under the endgame of Obama's desired spread the wealth around, with wealth confiscation, we could pay our obligations, both actual and actuarial (i.e., medicare/Social Security/medicaid) by seizing most of the privately owned wealth in the country.

I don't want that!

RE: Sweet. Now all we have to do is confiscate 12 trillion of the stored wealth of Americans and we’re home free.

Yes, according to this article : Household net worth is $57T. Public government debt – including the state and local sector – is about $12T.

12 Trillion is just 20% of the private net worth of America.

Obama’s reasoning would then go like this -— BE A PATRIOTIC AMERICAN AND GIVE UP JUST 20% OF WHAT YOU OWN TO MAKE THIS COUNTRY DEBT FREE !!

I guess that’s what the Pelosi’s and the Reed’s have in mind -— America hold a garage sale and can liquidate just 20% or so of their assets for a decent price, then turn over the proceeds to the government, viola’, the crisis is no more!

Why don’t they campaign on this??

So let me get this straight. Their claim is that because our collective net worth can cover our collective debt that we’re not broke?

I assume this isn’t satire and wasn’t intended to be a joke. The only response I can post without getting censored by the moderators is: WTF?!

(I am not an economist. I did not major in economics. And I most certainly did not sleep at a Holiday Inn Express last night.)

***** In a recent research piece Credit Suisse shows that America is far from being broke. ****

As my little niece said thirty five years ago when she was 5 years old, she wanted a toy.

Her mom said “we don’t have any money for it!”

My neice said...”Well write a check for it!”

But if we cash in everybody’s estate and sell everybody’s house, who will the buyers be?

The problem with this circular line of thinking is that the wealth that is in American’s hands can mostly only be sold to Americans. If that is the case, if confiscated, there will be no buyers and therefore no value.

Public government debt – including the state and local sector – is about $12T.

I'm mystified. If total government debt including obligations of the states is $12T why does the debt ceiling have to be raised above $14.3T for the Federal Government alone ?

Also there's the small matter of the Net Present Value of the future obligations of the Federal Government Social programs (Social Security, Medicare, Medicaid, Federal pensions etc etc ) currently estimated at anything between $48T and $78T. ( Future Pension obligations of the States and Municipalities of course are not included). The Federal Government is a bit like Enron, the nasty bits are kept off the balance sheet.

re: ““Some of our senior politicians and market pundits say it every day: “America is broke.””

This is the essential lie. No one is saying that America as a people are broke - IT IS THE U.S. GOVERNMENT THAT IS BROKE!!

It is the government that is committing us to debt that it cannot pay - because it is the government that is over spending!

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