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Gold and Energy Advisor's Real Wealth

Real Wealth #274  09/23/2010

Some Estimates Put Total Federal Debts at $200 Trillion

Dear Subscribers,

I may be way too conservative in the recent past in my assertion that the Federal Government may add up to a total debt of $41 Trillion.

Frankly, there are so much debt on “budget” and “off budget” and such tremendous Federal financial guarantees that it’s hard to find a hard number that’s completely reliable.

There are a great many very credible analysts and economists who are insisting the total debt add up to much more -- between $60 Trillion and $200 Trillion. Case in point...

Laurence Kotlikoff, an economist at Boston University and co-author of The Coming Generational Storm: What You Need to Know about America's Economic Future insists "The Government is lying about the amount of debt. It is engaging in Enron accounting."

"The problem is we're seeing an explosion in spending," added Andrew Moylan, director of government affairs for the National Taxpayers Union.

In 1980, the debt - the accumulated red ink incurred by the Federal Government - was $909 billion. This represented some 33 per cent of gross domestic product, according to the Congressional Budget Office (CBO).

Thirty years later, based on this year's second-quarter numbers, the CBO said the debt was $13.4 trillion, or 92 per cent of GDP. The CBO estimates the debt will be at $16.5 trillion in two years, or 100.6 per cent of GDP.

But these numbers are incomplete as I keep pointing out. These numbers do not count off-budget obligations such as required spending commitments for Social Security and Medicare, whose programs represent a balloon payment for the Government as more Americans retire and collect benefits.

In the case of Social Security, beginning in 2016, the US Government will be paying out more than it is collecting in taxes. Without basic measures - such as payment cuts or higher payroll taxes - the system could be on the road to bankruptcy, according to officials.

"Without changes," wrote Social Security Commissioner Michael Astrue, "by 2037 the Social Security Trust Fund will be exhausted. There will be enough money only to pay about $0.76 for each dollar of benefits."

Mr Kotlikoff and Mr Moylan agree US national debt is much more than the official $13.4 trillion number, but they disagree over how to add up the exact number.

Mr Kotlikoff says the debt is actually $200 trillion.

Mr Moylan says the number is likely about $60 trillion.

That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008. He launched a campaign to convince Americans that the federal spending and debt is a greater threat than terrorism.

But whichever figure is accurate; all three agree that the problem has worsened in the last few years. They say and I have been saying all along the danger is growing because Congress and the Administration, whether Republican or Democrat, consistently overspend.

Now we find ourselves in a situation were the Federal Reserve is literally throwing Kerosene on fiscal fire stating they stand by to do what’s needed. All of this is the underpinning why the price of gold has been up 10 straight years.

If we sold all the gold in Fort Knox we would the Federal Government would raise only $300 billion. That was a lot of money in 1980 about on third of the national debt. Now it amounts to tiny fraction of the total debt.

Yesterday I appeared on the CNBC mid day show discussing why $1300 gold is likely only the beginning. Had I more time I would have cited all of this. I would have also have brought up the fact that we are approaching peak gold production as I have in recent monthly issues of the Gold & Energy Advisor. To see the video click the link below:

Best Wishes,

James DiGeorgia


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