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America's Debts $1,225,000 Per Non-retired, Able To Pay Household

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someone else gets it

protect yourselves muhahahahahahahah as someone once said


Bailout & Stimulus Cost

Now you might think spending a million dollars per US household in one short article would cover it all, but we’re still not done here, we’ve got a bailout and stimulus to pay for. How much is that going to cost?

The best answer is that no one knows for sure. Because the true cost of the bailout is so tightly interwoven with what is going on with the overall economy, as well as with the extremely complex and volatile market of over $400 trillion (still outstanding) in derivative securities contracts that have been entered into by banks around the world. Since the governments are guaranteeing the banks, that means they are guaranteeing the hundreds of trillions of dollars in derivatives, and we don't know what that’s going to end up costing.

Some people are saying no problem, we’ll get out of this for $1 or $2 trillion max, and by and large those are the same financial pundits who would have quite confidently assured you two years ago that a crisis like this was categorically impossible, something only a delusional paranoid would believe could happen.

Speaking not as a financial pundit, but as someone who actually structured derivative securities as an investment banker, who wrote a McGraw-Hill book on the subject in 1995, and who later forecast the steps in which the current crisis would unfold with uncommon precision - we’ve been lucky so far. We’re holding a tenuous line against a wider derivatives disaster that could make 2008 look like a cakewalk, and that line could crumble at any time.

So the cost will likely be somewhere between $1 trillion and global financial collapse, but we do need a guess to work with, and maybe a place to start are the official actions of the United States government. According to the New York Times the total cost of the bailout including commitments for spending, loans and guarantees is $12.2 trillion, mostly in the form of Federal Reserve commitments. To that total we need to add in the cost of the stimulus package of approximately 8/10 of $1 trillion so far.

Add bailout and stimulus, and we get a total for official commitments at this time of approximately 13 trillion dollars.

Take the $13 trillion, and divide it by the 79 million households, and we come up with a total of about $165,000 per non-retired, able to pay household. That is a fantastic sum of money and there are good reasons why you never see the government present it in that way, and rarely see the mainstream media do so. That’s almost enough money to buy a house in many states!

In fact, according to the National Association of Realtors, the median sale price of an existing home in the first quarter of 2009 was $169,000. So if we look at the cost to the average household of the bailout package, we could have quite literally bought an average American home with each of our shares of the cost.

When we add the cost of each of our non-existent new houses to the trouble we were already in, we come up with the sum of $1,225,000 per non-retired, able to pay household.

Your Personal Reality Check

Now here’s my question for you. This is an important question, because the answer could change your standard of living for decades.

At what point did you stop believing that you and your family could pay your share? Was this final $165,000 the straw that broke the camel’s back? The $60,000? The $217,000? Or was it that first half million, the very well accepted half million, that passed your personal ability to pay?

Your answer is vital because once we accept that the average household can’t pay, with not even a remote chance of doing so, then we have to accept that tax increases can’t pay. Meaning these newspaper headlines about taxpayers paying for the bailout are an insult to your intelligence.

So, does this mean the US is bankrupt? No. Long story short, nations that can borrow in their own currency don’t go bankrupt. Not when they can create trillions of dollars out of thin air at will, Shazaam!, much like the Federal Reserve has been doing ever since the crisis hit.

Covering The Gap

So taxes can’t pay, it’s ludicrous to think they can, and the US doesn’t declare bankruptcy, just how do we cover the gap?

Again, very short version. Pay in full, but make the dollar worth five cents. Drops the per household cost for everything from $1.2 million down to about $60,000. Painful, but manageable over a period of 20-30 years.

The problem is that this solution also drops your savings to a value of 5 cents on the dollar. Meaning that the $100,000 in savings you have just became effectively worth $5,000. To cover your entire retirement.

History & Solutions

Historically, a collapse in the value of a currency necessarily forces a major redistribution of wealth, and the segment of the population that is most devastated by this seems to always be the same. It’s the retirees, and the people close to retirement. When we look to Germany, when we look to Argentina, when we look to Russia – it is the pensioners who are impoverished more than any other group.

Unfortunately, history is repeatingitself again. When we look at the headlines about the destruction of retiree investment values, pension assets and so forth, we're really just seeing the beginning. Because the crisis "solution" that is being chosen, which is creating dollars without the ability to pay for those dollars, essentially represents the annihilation of most of the retirement dreams of the baby boom generation, even if that is not yet recognized. There is not an even cost that is being born by society as a whole, rather some segments are bearing much more of the burden than others. If your peer group (particularly Boomers and older) is headed for disproportionate financial devastation, then happenstance is unlikely to offer a personal way out. Instead, you must instead take quite deliberate actions to change your personal financial position so that wealth is redistributed to you, rather than away from you.

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someone else gets it

protect yourselves muhahahahahahahah as someone once said


How on earth did they get $1,225,000 out of $169,000?

Would have been nice to have some hint as to what the missing $1,056,000 per household actually represented.

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