Thursday, August 12, 2010

U.S. Total Debt Now Stands at $200 Trillion!

U.S. Total Debt Now Stands at $200 Trillion!

Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

It adds up to $200 Trillion in total debt and this spells a disaster scenario says Laurence Kotlikoff, an economics professor at Boston University. I recommend watching this special Bloomberg Video ...

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