Debt Levels Rapidly Mounting

Here are some excerpts from a couple of recent In Session threads:

I thought that the disconnect between how you and I might see the economic world and how central banks see it was perfectly captured by an audience's reaction to statements made by Timothy Geithner on his recent trip to China:


BEIJING, June 1 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

A major goal of Geithner's maiden visit to China as Treasury chief is to allay concerns that Washington's bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China's total U.S. dollar-denominated investments could be twice as high.

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.


Laughter is, of course, the perfectly rational response to Timothy's banalities about the safety of Chinese assets when parked in the currency of the country most responsible for the current crisis and leading the way in terms of fiscal and monetary recklessness.

I find it telling that regular people find hisstatements ludicrous and laughable, yet the policy folks seem to have no clue as to how far off the reservation their actions and words appear to the average person.

Maybe some Chinese students have tipped Timmy off in this regard?


One of the few journalists out there that "gets it" is Dennis Cauchon of USA Today.  I have cited and referenced his work numerous times in the past.  It escapes me why he alone seems able to comprehend the obvious issues that face a long-term strategy of failing to live within our current means.  It's not like this is a hard concept.

At any rate, he's done it again and spilled the beans on the latest US deficit spending.

Leap in U.S. debt hits taxpayers with 12% more red ink

By Dennis Cauchon, USA TODAY

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

"We have a huge implicit mortgage on every household in America — except, unlike a real mortgage, it's not backed up by a house," says David Walker, former U.S. comptroller general, the government's top auditor.

USA TODAY used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions.

Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.

Imagine that.  $6.8 trillion in new obligations were taken on, and yet, somehow, only $0.1 trillion of that was dedicated towards rebuilding the nation's vital energy infrastructure.

When we add it all up, it turns out that the only way that government debt can ever be paid off is through the actions of households.  People have to work and pay their taxes.  Even corporations make their money by the actions of those same people, so it can be said that it is the households that are "on the hook," for not only their own borrowing, but that of the entire government as well.

By that measure, you can get a sense of how this might all turn out by asking yourself, "What's the chance that every family could have their debt load multiplied by a factor of 4 and still pay it all off?"

If you are like me, you quickly come up with the answer of "zero," meaning that the debt cannot and will not be repaid.

Once that's out of the way, we are free to try and figure out who will be left holding that bag.  I think the Chinese students have already figured that one out. 

This is a companion discussion topic for the original entry at

"the debt cannot and will not be repaid."
EXACTLY.  I came to the exact same conclusion months ago after having watched the CC six times.  No one will be left holding the bag, however, it’s way too heavy.  One day, at a bamk near you, all debts will be cancelled…


I know this has been your dream for lo these many months.

However, I find it hard to believe that all the banks will cancel all mortgage debt and credit card debt. If that were even a remote possibility, I would expect that millions of folks would be running around charging their credit cards to the hilt and mortgaging themselves to a fare-thee-well.

Have you been going round-and-round on that mower again?

Good read, I can only wonder if our students would "get" this…
The last Goveners School advance placement kid that my daughter had over thought that our dollar was backed by gold. In fact he was insistent on this. Advanced Placement history.

It’s one thing to be hit in the head with the bag that gets dropped and at least know what hit you.

Is this the same AP history class that teaches the Earth is the center of the universe?  [smile]

Viva – Sager

Hi Sam…  it’s no dream, merely reality.  I ask you, what other way out can you see in your crystal ball?  Jubilees are not new, and I know you know that.
The millions of folk you mention don’t even realise this crapola is happening, let alone know they should max out their (already maxed out…?) credit cards in preparation for the fiscal rapture…  BTW, I know some people doing exactly that here in Australia, where banks are handing over cards to people on pensions unable to ever repay the debts…  it truly is extraordinary.

The mower’s clutch is stuffed, and I have no money to fix it for the time being…  I live within my means, but am thankful it’s winter and the grass is not growing much!  Hoping for a frost to kill it all right now…


Hi Mike,

I hope you know I was putting you on a wee bit there.

In all seriousness, I would be amazed if there were a Jubilee. I would love to see my mortgage forgiven in one fell swoop. However, I doubt my bank would be so forgiving since I pay my mortgage on time every month without fail. I suspect they’ll only forgive the deadbeats.

If I really thought all debts would be forgiven, I’d be out there buying everything in sight to the point that my credit card would be almost too hot to touch! I’d also be taking out a huge HELOC.

Just curious - if you really believe this will happen, why aren’t you out there maximizing your debt?

Mike, I sure hope that after all your impassioned posts on the topic, that mower doesn’t run on fossil fuels. Maybe the clutch is on your bicycle?

 Hey Mike,
Whats your take (opinion) on the H1N1 flu this winter in Australia. I’m trying to get a feel for what awaits us in the States this coming winter. Thanks in advanced.


I think a lot more debt will end up being cancelled just because of default by the debtor, but debt will likely endure where the debtor maintains an income stream to the creditor, until perhaps the defaults are such an overwhelming majority a jubilee happens in effect. 
I think we’ll never end up actually borrowing the trillions to cover the future SS/medicare obligations etc. because 1. no one will loan us that much and 2. the government will simply change the rules to reduce the benifits.   But the ponzi scheme of borrowing will still continue until it can’t anymore.


Soon there will be 2 groups of people. Those in line for their government goodies, and those employed by the government to hand out the goodies. Hmm…I think there might be something missing from this equation, but I’m sure the Fed will make it work somehow.

I have heard the concept of debtors’ prison brought up too many times in too many areas over the last 6 months to feel comfortable in running out to buy a new plasma TV on plastic that I don’t intend to pay for.
Unlike many areas in the rest of the world, folks in the US are not fearful of jail for not paying back what is borrowed. We also used to be shamed by foreclosure and bankruptcy, but now people don’t even seem to mind that, blaming it on circumstance and comforted by the fact that everyone is in the same boat.

If, as many have said on this site, the banksters are the real owners of this country, they will reach a point where a new order must be reached to reverse this growing mindset. Look at the changes to the bankruptcy laws over the past few years. For those not in the US, let’s just say they are not in the borrower’s favor.

I still believe getting out of debt and not expecting those in debt to be relieved makes for the best plan at this point.

Mike, think from a banker’s perspective and you see the "other way out."
Servitude has been the common hierarchical relationship to order human society throughout history. Only the last 200 years has tried to create something else, though it has failed.  So our current mindset is very distorted and causes us to think "you’re crazy to say servitude…we’re free!"  I suggest we haven’t been free for a long time given a govt that keeps us tame on the farm while the treasury and monetary/banking system farms our productivity up the chain to the banking centers so they can profit from the core money while recycling electronic digits out giving people worthless money that tends toward zero during normal inflation. Then assets devalue and get sucked back up the chain in deflation leaving people with negative net worth. Which leaves us with a situation where banks have a legal claim over those people’s future productivity.  The bigger the debt, the stronger the grip over the person’s life.  The question is whether our government is now part of that banking system or if it is of by for the people.  If the latter, you’re right, we’ll see jubilee.  If the former, we’ll see work programs, debt prisons (won’t be actual brick/mortar prisons…in some ways an oversized mortgage makes the home itself a debt prison), etc.  I think the evidence is clear which one we have given the government’s ruthless desire to steal trillions from us and hand it to the banking system.  


As of yesterday we had just over 3000 confirmed cases of H1N1, 120 or so had been hospitalised and 3 have died… all of those three had other complicating factors, e.g one was a late stage Cancer patient, not sure on the other 2 but they did have other major health issues.

We recently had a spate of sports players getting sick, and they were discussing cancelling some games, however they didn’t and it all seemed to pass over without too many issues.


I wonder if you have considered, that if you are found to be creating debt with intention not to pay it off, you may actually end up in more trouble if they decide not to wipe the debts, but instead turn it into community service or something similar.

In regard to the initial post. Here in Australia, people are just as blind as in the US. I have trie to discuss what’s going on and have encouraged so many friend to watch the CC, but they all just laugh it off as a CT and say that the government will do what is right for us. I used to think I was a bit nuts, now I realise that it’s the other 90% of the poulation that are crazy.


Well Rog, we’ve bought some drums, and soon I hope to be making methane and then working out a way to run the mower on it.  I know it’s been done before.  In the meantime, I am reducing the amount of grass that needs cutting, and hopefully before 2012 when AUS oil situation will be dire I won’t have to mow at all…!

Sam said:

"However, I find it hard to believe that all the banks will cancel all mortgage debt and credit card debt. If that were even a remote possibility, I would expect that millions of folks would be running around charging their credit cards to the hilt and mortgaging themselves to a fare-thee-well."
You've probably seen this Sam; it speaks to your if-then:

At least one guy is apparently thinking that those cards will never need to be repaid.


Edit: If that wasn’t entertaining enough:


 Thanks for the update on H1N1 Jon.

Swine flu is merely a distraction from the REAL issues IMO.  We’ve had 3 deaths here, but they were all compromised patients with cancer or respiratory problems or obesity/diabetes…  they were standing dead, for want of a better expression.
Unless it mutates, it’s just another flu…


I totally agree with Mike. More people are worried about getting sick from swine flu than they are about pending peak oil or economic disaster. Just shows the government spin works on the Sheeple

"Mike, think from a banker’s perspective and you see the "other way out."".  My brain hurts just trying…!  :slight_smile:
I’m not advocating getting into debt with no intention to repay, let’s get this straight.  That goes against all my anti-consumption principles to start with.  I totally agree with you re freedom.

A debt is only worth anything to the creditor if the debtor pays.  Putting people in jail for not paying, costs more than the debt, and you can’t put a few dozen million people in jail without going even more broke I’m afraid.

Ever heard of revolution?  That’s what it’ll take.  The next 20 years will be unlike the last 20…