US Faces One of the Biggest Budget Crunches

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gs Home Finance Broadcasting and media Edmund Conway

dmund Conway

m Economics Editor of The Telegraph newspapers and website. Come join in as I try to get myad, and hopefully yours, round what on earth is happening in the financial crisis. I also blogcasionally on music, literature and anything else that takes my fancy. I have written a guide toonomics - 50 Economics Ideas You Really Need to Know - which you can buy here.

S faces one of biggest budget crunches in world IMF

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Edmund ConwayBusiness Last updated: May 14th, 2010

0 CommentsComment on this article

lier this week, the Bank of England Governor, Mervyn King, irked US authorities by pointing out that even the worldsnomic superpowerhas a major fiscal problem -even the United States, the worlds largest economy, has a very largeal deficit were his words. They were rather vague, but by happy coincidence the International Monetary Fund hassen to flesh out the issue today. Unfortunately this is a rather long post with a few chunky tables, but it is worthnding a bit of time with the IMF analysis is fascinating.

cross-country Fiscal Monitoris not easy reading and is a VERY big pdf (17mb), so Ive collected a few of the keynts. The idea behind the document is to set out how much different countries around the world need to cut their deficitsin the next few years, and the bottom line is its going to be big and hard (ie 8.7pc of GDP in deficit cuts around therld, which works out at, gulp, about $4 trillion).

the really interesting stuff is the detail, and what leaps out again and again is how much of a hill the US has to climb.hibit a is the fact that under the Obama administrations current fiscal plans, the national debt in the US (on a grossis) will climb to above 100pc of GDP by 2015 a far steeper increase than almost any other country.

mpare it with the UK, which is often pinpointed as a Greece in the making. As you can see, gross debt increases sharply,not by anything like the same degree.

other issue is that, according to the IMF, the cost of extra healthcare and pensions will increase by a further 5.8pc over

gross debt as a percentage of GDP

K gross debt as a percentage of GDP


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next 20 years. This is the biggest increase of any other country in the G20 apart from Russia, and comes despitemerica having far more favourable demographics. It is significantly more than the UKs 4.2pc.

t level of debt isnt the only problem. Then theres the fact that the US has a far shorter maturity of government debtn most other countries, meaning that even if it werent borrowing any extra cash it would have to issue a large chunk of

w stuff each year as things are. The killer table to show you that is this one, which shows a countrys gross financingds in other words how much debt it has to issue in the coming years to keep itself functioning.

tain, as you can see from the second column on the left, has one of the biggest deficits in the world. However, because ito has the longest maturity of average debt in the world (far right column), and so doesnt have to issue as much new debth year just to keep rolling that stuff over, its gross financing needs are at 32.2pc of GDP, way bigger than Britains, at

pc. Come to think of it, its actually worse than Greece on this measure.

hat does this mean? Basically with a large financing need, you are particularly vulnerable if the market suddenly decides

oesnt want your debt, since those extra interest rates they charge you mount much more quickly. Japan, by the way, isone with a real problem on this front. It could hardly be any more vulnerable to a sudden drop in investor demand, and

ny over there fear that the moment domestic savers stop buying JGBs, the country is doomed to Greek-style collapseough it doesnt share Greeces current account deficit and, crucially, has its own currency, so I dont know about that).

the flip side, unlike Japan or Britain, the US does not have a central bank with quite such a large stock of governmentt. Both the Bank of England and Bank of Japan have done so much quantitative easing (buying bonds with printedney) over the past few years that they have the power to cause a fiscal shock if they decided they wanted to sell off their

nds at once. This table shows you that America, while not entirely guiltless on this front, has less of a shadow hangingr it.

t all of the above is what explains why the US, according to the IMFs projections, has more to do than any otherntry in the developed world (apart from Japan) when it comes to bringing its debt back towards sustainable levels.

res the killer table. The column to look at is on the far right: note how the US needs a 12pc of GDP chunk chopped outts structural deficit (ie adjusted for the economic cycle). Thats $1.7 trillion. Wow thats not far off Britains totalual economic output.

ck to enlarge

ck to enlarge


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does all of this mean the US is Greece? The answer, you might be surprised to hear, is no. Now, it is true that the USsome similar issues to Greece the high debt, the need to roll over quite a lot of debt each year, the rising healthcare

ts and so on. But it has two secret (or not so secret) weapons. The first is that unlike Greece it is not trapped in anetary union. The US, like Britain and Japan, can independently control its monetary policy; it can devalue its currency.

ese are hardly solutions in and of themselves, but they do help make the adjustment a lot easier and more gradual.ond, the US has growth. It remains one of, if not the, worlds most dynamic economies. It is growing at a snappy paceyear (in comparison to other countries). And a few percentage points of GDP make an immense difference, since they

ke those debts much easier to repay.

ally, some might be tempted at this point to cite the fact that the US has the worlds reserve currency in the dollar asther bonus. I am less sure. There is no doubt that this has made the US a safe haven destination (people buy US bondsen freaked out about more or less anything), and has meant that America has been able to keep borrowing at low levelsoughout the crisis. However, the flip side of this is that because it has yet to feel the market strain, the US also has yet toe up properly to the public finance disaster that could befall it if it does not do anything about the problem. America isGreece, but if it does not start making efforts to cut the deficit within a few years, it will head in that direction. The

hot wouldnt be an IMF bail-out, but a collapse in the dollar and possible hyperinflation in the US, but it would berific all the same. America has time, but not forever.

gs:Barack Obama, deficit, financial crisis, greece, International Monetary Fund, Mervyn King, Sovereign debt, us

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COMMENTS

YOu can see from that chart that in 1950 the US debt was 80% of GDP. At that time it was experiencing the biggestindustrial consumer boom economy in the history of the world.

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The difference now is that the US has off shored practically its entire civilian manufacturing base to china. it is thatfact, rather than the national debt it is carrying, that will be its undoing.

debunker on May 14th, 2010 at 7:25 pmReport comment

[...] 1 votes vote US faces one of biggest budget crunches in world IMF Earlier this week, the Bank of EnglandGovernor, Mervyn King, irked US authorities by pointing [...]

US faces one of biggest budget crunches in world IMF on May 14th, 2010 at 8:11 pmReport comment

@debunker

Well that rather depends on political will. The thing I note from these tables is the fact that in most cases the situationis no worse than at the end of WW2, and most countries then knuckled down through the 1950s and 60s to rebuildtheir economies.

Providing and it is a huge proviso that the message can be got across and accepted by the electorate that thesituation is as serious as it was after WW2, then there is hope that countries like USA and UK can rebuild theirmanufacturing economies and chop off funding of the idle, the fraudulent and the wasteful.

If it means erecting some limited forms of protectionism and remember that currency manipulation as practiced bythe Japanese and Chinese* in recent times amounts to that anyway then so be it. Above all, the coalitiongovernment has to recognise the situation for what it is and get out and convince the people.

(* Allegedly)

Mrs t on May 14th, 2010 at 8:26 pmReport comment

It is also worth reading the BIS report which looked at long term national-debt, a rather scary prospect given the

conclusion that on Britains current trajectory we are headed for a national debt of 400% of GDP by 2040.

http://blogs.telegraph.co.uk/finance/edmundconway/100005702/us-faces-one-of-biggest-budget-crunches-in-western-world-imf/

jethromg on May 14th, 2010 at 9:36 pmReport comment

So.every country in the world is in debt??

Who are the Lucky Lenders???

They will be rolling in it, will they not..???

Crouchback on May 14th, 2010 at 9:45 pmReport comment

The problem for the US and every other industrialised nation around the world aiming to grow its way out itsdebt hole will be, er, the small matter of the end of mankinds era of cheap energy.

The situation were in today is wholly unprecedented. We are at the leading edge of the long descent from the giddyheights of the cheap, fossil-fuelled industrial age to some new era of a world made by hand.

Few economists and commentators seem to factor in this huge issue when they talk glibly about a return to growthand all things consumerism. That era is dead; deceased; no more.


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It beats me just how the industrialised nations of the world, now carrying almost unimaginable debt burdens, aregoing to get out of this unholy mess without absolutely savage reductions in living standards over the comingdecade. Without cheap energy, there will be no aggressive economic growth; its as simple as that. Cheap energy and(apparently) sustainable economic growth are synonymous.

We really aint seen nothing yet. Soon were going to see nations looking like the guy in the Great Depression who,when asked how he went broke, replied, Slowly. Then all at once.

Moraymint on May 14th, 2010 at 9:56 pmReport comment

Edmund well done on extracting the data. America is the Mother of all Tsunamis, waiting to be triggered. I feel thatthe only way the Fed will be able to stop crazy inflation will be to issue a new dollar at say 70% internally and toChina and around 40% to everyone else. I would very much like to be entirely wrong.

Moraymint you have hit that nail. The new Government just has to get going with Nuclear. The lights will be goingoff in 2017, as we get held to ransom by Russia and Algeria. Swampy will be holding forth in the appeal to outline

planning permission as we listen by candlelight, unless something dramatically changes. I was terrified to seeNuclear as the final item on the Agreement and what was recorded. However, I took heart from the fact that it wasthere and given the opposite positions prior to the coalition, it was as good as it was going to get. Harsh reality of anaudit of our generating capacity and energy sources should move positions substantially. One of the Nuclear plants is

currently still on line, 13 years beyond its 30 year original planned lifespan. Testament to the design but not part of asensible strategy. Milliband and Wicks were whistling in the wind, with their Energy Review and Response (1stApril. So apt.)

fredone on May 14th, 2010 at 10:30 pmReport comment

Peter Schiff, who is running for the US Senate and who has been extraordinarily accurate about the US economy forthe past ten years writes:

Dont let Washington insiders fool you. The economic growth weve seen this year is phony its based onconsumption and debt financing. If we do not put an end to Congress spending spree, there will be an economiccatastrophe that dwarfs the 2009 recession.Mark my words The bond market will collapse. The value of the dollar will plunge. Interest rates will rise. Therewill be runaway inflation and unemployment. And the only way to prevent this is to get government spending undercontrol.

mandeville95 on May 14th, 2010 at 10:40 pmReport comment

One of the Nuclear plants is currently still on line, 13 years beyond its 30 year original planned lifespan.

And that is what will happen if there is a shortage of power. Do you think these stations will just shut down becausethe EU says so ? I think not. A coal fired station can continue to generate just about forever and will probably haveto if we continue to build useless windmills.

PaulW on May 14th, 2010 at 10:58 pmReport comment

What I find more interesting than anything is the basics here. Except for Japan and Singapore the table of countries

in trouble is all about Western capitalist nations with free market models who were until recently the images ofsuccess we were all expected to follow.

Singapore and Japan of course are historically bound into Western economies tightly and so they may be expected tobe part of the economic collapse that Western media is always trying to paint as worldwide but in fact it isnt.

I love the way correspondents in the West talk about issuing debt rather than borrowing money, which is what they


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are really talking about. The West is massively indebted to the manufacturing world from which they need to buystuff in order to consume and they are desperate to consume because their economies rely on consumption. Theyare going downhill in relation to how much manufacturing capacity they have to feed a domestic market. Those witha better manufacturing sector are going down slowly and if they rebuild that sector they may even reverse the trend(typically the USA and Germany, say). Those (like Britain) with virtually no manufacturing are going down fast.

These graphs and the article are good but if they are used to try and mask the underlying basic truths they will be justone more bit of economic blether as the problem gets worse.Duckham.tkJohn Duckham

Duckham on May 14th, 2010 at 11:20 pmReport comment

Crouchback on May 14th, 2010 at 9:45 pm

That isnt every country in the world. A typically West centric viewpoint! The countries who are rolling in it are theproducer countries and if you dont know who they are I suggest you start looking on products you buy where thereused to be Made in Britain and Made in USA labels and see what is there now.Duckham.tkJohn Duckham

Duckham on May 14th, 2010 at 11:24 pmReport comment

It depends on more than political will Mrs T. It depends on specific policy changes implemented with immediateeffect. None will be forthcoming. The powers that be are fully committed and pregnant with expectation of aresumption of business as usual. Wrapping up assets in phony black box bonds, real estate, hedge funds etc.

That model is now broken and like humpty dumpty it wont ever be fixed again. Only bringing quality high wage jobsback through manufacturing will solve the various crises affecting the western democracies.


Edmund, your scales on the first two charts arent the same. It looks like the US figures are going from about 60 to110, the UK figures from just under 50 to just under 100. Both give about a 50 increase so actually we are aboutthe same as the US!

fredarnolds on May 15th, 2010 at 12:41 amReport comment

sorry, should have said im looking at the period 2007-2015

fredarnolds on May 15th, 2010 at 12:43 amReport comment

Crouchbackon May 14th, 2010 at 9:45 pm So.every country in the world is in debt??



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Post war economies were supported by baby booms that increased populations and therefore consumption across theboard. Now the baby boomers are approaching retirement and the number of workers as a percentage is falling. Theabsurd economic systems that we have constructed, built on debt, require constant increases in consumption tomaintain them so that the interest repayments on the ever increasing debts can be met.

In crowded Europe this will definitely not be possible. The whole monetary and economic system is a great big ponzischeme that is in the process of collapsing. In the UK pension schemes are built mainly on stock market gains. InGermany they are mostly invested in bonds. Everywhere you look there is debt. Government debt, consumer debtand corporate debt.

The numbers are often frightening. Is there a way out? Yes, but not under the current system and not with the MoneyPower firmly in control of politicians. They can manipulate markets and popular opinion only for so long before thegame is up. The people are revolting in Greece and public opinion in Germany is totally against any bailout. Merkelis finished and is making a last gasp attempt at getting popular backing for more political unification, the opposite ofwhat we need. In Germany she will not get it. She should resign now.

G

ytl83 on May 15th, 2010 at 1:39 amReport comment

Duckham on May 14th, 2010 at 11:24 pm..

Yes, Ducks I agree it is a Western point of view, as I ve never been any where but the West Hold onthere, though, Ducks!!! are you trying to tell me, that poor, child slaves in Third World countries are going to reaphandsome rewards from the economic travails of Western Nations.???? Is that graph showing American debt,actually showing a vast lake of Honeyed Milk flowing through its tributaries to the East.???? Shurely not.!!!!

Might there not be one or two greedy Western rapscallions, who would much rather see all that largess flowingdirectly in to their wallets.????

Much as Id dearly like to see all labourers rewarded with a just and honourable wage.me thinks that the wageslave will be with us for a while yet!!!!!

Me also thinks that poor child wage slaves are not exactly the first priority of many Third World Governments, orFirst World Governments either..Broons odd M100, here and there, was more of a Smashie &

Nicey..Charidee.exercise than any real concern for suffering humanityelse he would have gothis hands dirty and told the truth about the state of the Country, rather than playng, to is left every day.?????

Crouchback on May 15th, 2010 at 2:15 amReport comment

Useful blogs amd pieces these linked here Edmund. Thanks. Im clearer in my mind now about the variouscomplexities of the debt crisis.

rinpoche on May 15th, 2010 at 3:19 amReport comment

@ jethromg

That 400% of GDP isnt that scary, mate. Its bandied about in somewhat of a disingenuous context.

Im pretty sure its a gross figure that includes public, private and corporate debt. And the assets far outweigh debt.For example, the BIS report lists the assets of the UK financial sector alone at over 700% of GDP, whats that $18trillion/ish? (could be argued that that is far more scary ;)

But yeah, it begins to read differently when looked at like that.


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John Talbot on May 15th, 2010 at 3:30 amReport comment

[...] the Telegraph, Edmund Conway summarizes a lengthy report by the International Monetary Fund on sovereigndebt that [...]

Capitalism V3.0 Roundtable Blog Archive The Looming Obama Debt Disasteron May 15th, 2010 at 4:39 amReport comment

People correctly reference Britains dismal manufacturing base as central to her financial problem. Contrary to whatsome believe, the US will be suffer from the reduction of manufacturing as well.

Theyve already ceded consumer goods manufacture to the 3rd World, and are following it with other sectors. Theautomotive industry is on life support and has only survived by government intervention. The steel industry isdisappearing along with the things they build with it. The midwest manufacturing belt is closing up shop and isaccurately known as the rust belt now. Cities like Detroit and Cleveland are now resembling the very worst of any

post-industrial Midlands cities. The case for growing their way out of the mess is overstated in my opinion.

The last factor is natural resources. Those countries rich in them (Canada, Australia, Russia, etc) will have the meansto move quickly away from and trade account imbalances. The USs ruinous flirtation with Ethanol production at theexpense of the Agricultural industry is nothing short of scandalous. Its a Catch 22 for Britain (and to a lesser extentBritain), she doesnt manufacture and has few resources, therefore limited protectionism is not a solution either. Its

a losing hand in anybodys poker game.

As someone who left for Canada I believe the decision was wise beyond any intent. Depending on your ages, manyBrits should be planning the same. Sentimentality or national pride doesnt alter the facts or the inevitable outcome. Ifear Britain will have to go closer to Europe simply to survive. God bless you Gordon McRuin..

hctroubador on May 15th, 2010 at 5:01 amReport comment

Most of these figures are meaningless. Do the US figures include unfunded liabilities, excess interest payments or the

multi-trillion Fannie and Freddie liabilities?

No. They are all off balance sheet. The stats you quote are based on Enron accounting values. The true state of affairsis vastly worse.

And the official figures are lies in themselves. In 2009 purchasers of US debt was divided between the Fed (QE),overseas lenders and the household sector. 700 billion in the household sector. This was a 35 times increase inhousehold sector purchases from the year before. Household sector is just a catch-all term. Mom and pop did notincrease their treasury purchases 3500% from 2008 to 2009. Household sector is a way of diffusing and concealingthe true magnitude of QE.

InstantSaveron May 15th, 2010 at 6:20 amReport comment

For PaulW:

A coal fired station can continue to generate just about forever and will probably have to if we continue to builduseless windmills.

In the December freeze-up all the windfarms of Britain contributed virtually NOTHING to our energy needs.There was very little wind.

In pre-Industrial times, if we had a choice of a watermill or a windmill we INVARIABLY chose a watermill.NASA long-range forecasts of solar activity the primary determinant of global temperature (and certainly notmankinds activities) are that by the 2020s there will be protracted, minimal solar activity.It will be Icebox Earth in that decade.We need to be building lots of reliable nuclear, gas and coal-fired power stations RIGHT NOW to make sure that our

people are kept alive.The con-men of the Manmade Global Warming Hoax (and of the Green movement) have done the people of Britain


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a criminal disservice with their cynical nonsense.

bedfordfalls on May 15th, 2010 at 8:27 amReport comment

the US will never repay it.. why would they pay the chinese.. they will just print more! and yes, inflation will becaused, but that is the intention of QE, and the inflation game is not yet over.

andrewx on May 15th, 2010 at 8:29 amReport comment

The most probable long-term prediction for the USA is default on its colossal debt mountain.This would represent the best of all possible strategies, guaranteeing the economic rebirth of America, and re-establishing it as the pre-eminent global super-power for the rest if the century.The main sufferers would be the oil states,Russia, China, Japan and Britain.I have little sympathy for the first four.We would have to hope for special treatment.China would, of course, have to suck it up. If they refused to supply the USA and accept the New Dollar there would

be catastrophic economic collapse in that country and riots on the streets.



The Looming Obama Debt Disaster | No Bull. news service. on May 15th, 2010 at 8:46 amReport comment


The Looming Obama Debt Disaster | No Bull. news service. on May 15th, 2010 at 8:46 amReport comment

[...] The great interest rate rip off US faces one of biggest budget crunches in world IMF Telegraph Blogs [...]

The great interest rate rip off - Page 761 - The Consumer Forums on May 15th, 2010 at 8:59 amReport comment

Some good comments here I have to say, mandeville95 I believe Peter Schiff is correct, not because of his trackrecord which is very good but because of the fundamentals.

I dont understand how people can invest based on promises from the state. I dont see an alternative to QE, because

politicians will take the least line of resistance.

Reaction to the trillion Dollar money creation (or just promises?) in Europe triggered a big fall in the Euro, simplisticI know it is similar to lots of money leaving Greece.

Energy, clean water, land, ammunition, a barn full of grain and maybe precious metals are the way forward if orwhen the bond markets fail. BUT how would one hold on to these things? No doubt many will argue it is not fair thisman has these things and as for the hungry mob well..

forsaken2 on May 15th, 2010 at 9:06 amReport comment

Energy, clean water, land, ammunition, a barn full of grain and maybe precious metals are the way forward if orwhen the bond markets fail. BUT how would one hold on to these things? No doubt many will argue it is not fair thisman has these things and as for the hungry mob well

There will be no Mad Max scenarios, Forsaken2.


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This is the safest of all predictions.


Cosmos needs no explanation, Kosmos is the Greek word used to describe the end of mans system. Judeo Christiantradition teaches not to concern ones self with economics that the Lord will provide. I prefer God helps those whohelp themselves. If persons and entire nations indulge in brainless borrowing and consumption bury their heads inthe sand and ignore the warnings I am not sure what He can or will do.

I have reason to believe to an extent we have been left to our own devices, for a while.

forsaken2 on May 15th, 2010 at 9:16 amReport comment

Of course America is screwed. But this has been known for years, even decades. The Austrian school of economicshas predicted everything that has been happening (and will happen) and is being lead by great people like TexasCongressman Ron Paul and economist Peter Schiff.

Jamika on May 15th, 2010 at 9:40 amReport comment

Pointing out that the US has growth as somehow the answer to its debt problems is like saying an alcholic is OK,because he has a bottle of whisky to take his mind of his drink problems.

Surely the reason the US *has* growth is all the horrendous borrowing it is doing to finance it? What would the USsdynamic economy be doing if they hadnt been borrowing like crazy to buy all that stuff? And you have onlytalked about government debt here the USs problem is also that on top of state debt there is massive personal

borrowing to content with as well.

Whilst some of Europes governments have been spending other peoples money like its going out of fashion, itscitizens (on the whole) havent.

NickinFrance on May 15th, 2010 at 9:49 amReport comment

Not convinced the maturity of debt is that important, unless the country in question be in the habit of significantlyvarying the average length of her bonds. The amount to be rolled over at any time is what matters ; what makes itimportant is what the market thinks of the countrys performance and prospects at the time of roll-over.

The US, like Britain and Japan, can independently control its monetary policy; it can devalue its currency. These arehardly solutions in and of themselves,

Important about a sovereign currency is that, in the mind of the market, the country in question couldadjustmonetary aspects of her economy. I return to my old saw : everything depends upon sentiment ; a belief thatmarkets are entirely logical is unrealistic.

Cracking good summary of the I.M.F.s publication and much more easily digested. Thank you.

Pericles on May 15th, 2010 at 10:20 amReport comment

A great and informative article. However to properly evaluate it one would need the data from the surplus countiestoo, above all China, but there are many other important players.Why is this so important?


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Because however bad the situation in the West, it will be mitigated if the world economy carries on chugging along,and made much worse if it collapses.Interesting times!

davewmart on May 15th, 2010 at 10:29 amReport comment

Scary stuff, all round I guess.but if this is such a problem how the heck does Japan keep going with thosenumbers!!

dude15 on May 15th, 2010 at 10:43 amReport comment

David Camerons coalition, born of failure, may make the new politics succeed

I see that the DTs package for not finding pages is in good working order this morning; hence the need to post inless obstructive areas

__________________________________________________________________________

I note that the IMF is already warning this new Govt. to up taxation quickly; particularly by putting VAT on food! It

just shows how serious the current debt position of UK PLC really is!

Question: Why did they not tell Brown this months ago?

Question: What is the TRUE DEBT of UK PLC? Why are the politicians no telling the TRUTH?

OOPS! May be the last question is stupid! It should have been: Why do politicians NEVER tell the truth?

As an after thought: Senator OBAMA was a major supporter of sub-prime lending! Now he is bitten by theresults of that profligacy

MikeC on May 15th, 2010 at 10:51 amReport comment

Buy gold.Move to Slovakia, esp. if they decide to get out of EURO.

The guy who grows his own food and live away from the masses will be in fine shape.

bsardi on May 15th, 2010 at 11:51 amReport comment

Paul W. Accepted coal generators have nothing in them that prevents maintenance prolonging life indefinitely. Myunderstanding is that erosion of the graphite moderator blocks within the core, by the CO2 coolant being blownthrough, is an irreversible ageing process for nuclear. Local and temporary (several years)relief can come withselective placement of fuel rods (unspent/partially spent) in eroded areas. This is where we are at with many of theolder Nuclear generators. NuLab dithered and committed as many lies over energy supply as ever they did over theeconomy. As at 1st April they were still leaving messages for the tooth fairy to drop of replacement nucleargenerators that would be running in 2017 and making predictions based on such facts. [GDP up to 3.5% in 2011anyone?] We are living on borrowed time in so many areas it is truly frightening. What would be a tragedy is thatover the next 15 months, the scales are lifted and we eventually get going with a sensible nuclear rebuild, only to

have one of the, by then, 50 year old nuclear plants suffer some minor disaster, which the public and press blow outof all proportion. Bringing the pain of real energy costs on earlier will help push through the tough decisionsnecessary, both from an energy point of view and financially. VAT up to 23% straight away (at least the Masters ofthe Universe cannot avoid that too much, they buy stuff with their highly deserved bonuses). Retirement up 6months every year for the next 10 years. Take a number of the old nuclear stations off line and increase electricity

bills, with greater incentive for off peak use. That will drop peak demand. Let the market take care of energy savingstrategy and then I would not be fielding 3 calls a week from Delhi call centres asking me if I want to take advantage


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of government grants to insulate my loft. I would love to but sadly I spent my own money 20 years ago and did itmyself.

hctroubador 5.01am Detroit as bad as the worst of the post industrial Midlands. The great invest in property myth.With house prices at under $1,500 in some areas and whole districts being flattened by local Govt, because it wascheaper to purchase and flatten rather than provide lighting and services to crime and drug ravagedneighbourhoods, I think Detroit is out there in a league of its own. Estimates put it that total vacant land in Detroit isequal in area to the city of Boston. However as an absolute precursor to what could come to a town near you, bothDetroit and Greece are most eloquent and timely warnings. One trip I would pay for. Sending every MP to go for 3days, 2 nights, to inner city Detroit and just $100 to live on for the 3 days. No swanky hotels. Now sunshine, whatare you going to do to make sure Armageddon doesnt land here.


However as an absolute precursor to what could come to a town near you, both Detroit and Greece are mosteloquent and timely warnings.

We already have experience in Britain, Fredone, of what happens when an industry dies in a city, as it has in Detroit.Margaret Thatcher wrecked a large number of communities in the 1980s when she destroyed the coalmining industryfor union-hating, doctrinaire politic reasons.

bedfordfalls on May 15th, 2010 at 1:23 pmReport comment

One needs to look to Canada. They were in a situation similar to ours in the 1990s. It actually was a quite good timeand they cleared out the stables of waste and entitlement. I lived in Vancouver at that time, and it was a good realitycheck for all. Too many people expecting to be paid to do nothing. We really could do with that here.

noimspartacus on May 15th, 2010 at 2:32 pmReport comment

Bedfordfalls;

Detroit died because the unions refused to accept a pay cut so production went elsewhere.

Im sure a lot of the redundant works hate their union now theyve lost their jobs.

Blue Rock on May 15th, 2010 at 2:55 pm

Report comment Comparing only Federal debt doesnt capture the whole problem.

What many people in the US and Europe often fail to account for is the US states, counties and cities all issueADDITIONAL bonds/debt on top of the federal debt. Ive read this adds 20% to the authors numbers and wouldmake the US worse than Greece even now.

In addition, Americans carry much more personal debt than most Europeans that must also be serviced out of thesame GDP.

Its irrational to assume Americans will forever be able to borrow at 0-3% to service ALL this debt and when those

rates inevitably rise, the tsunami will hit.

saxifraga on May 15th, 2010 at 2:58 pmReport comment

[...] [...]


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The Looming Obama Debt Disaster | NewsReal Blog on May 15th, 2010 at 3:18 pmReport comment

Bedfordfalls. I worked in the motor industry in the Midlands during the period of the good Mr Robinson and thenmoved to South Wales just in time to experience the same Union led insanity there. In one way I was so proud of theSouth Wales coalfield workers. No split in ranks, such spirit of community. Sadly their faith in their leadership waswholly misplaced. Scargil was a fantasist much as Brown has been so recently.

You cannot buck the markets.

Working out where the line is drawn between A fair wage for fair work and we can steal higher wages than themarket can sustain because the Union have created a monopoly and weak management and legislation allowsexploitation of that monopoly, requires wisdom which was so sadly lacking in so many of the Union leadership ofthe 60s and 70s. However, having lived pleasantly in South Wales as the every single deep pit was closed, I canassure you that not a single bomb was thrown, as opposed to two in the last week in Greece. One idiot did throw a

paving slab off a dual carrigeway bridge and killed one taxi driver (quite how that served the Union cause I havenever fathomed). To compare the 1980s UK with Detroit or Greece is not appropriate and to do so reflects a whollymisplaced understanding of what lies ahead for us. Within the coal fields, more than generous settlements were madefor those direct employees who lost their jobs. The private sector jobs supporting the coal industry did not receivesuch feather bedding. Did that feather bedding enable re-generation or mitigate against it ? Too much thread creep toargue here. However, I well remember the Labour council of Coventry insisting on charging full business rates onup-occupied industrial property in Coventry, such was their empathy with their ratepayers. The ultimatum they gavefactory owners was, take the roof off and then we will not bill you. So with no other choice, taking the roof off wasexactly what many did. Despite such lunacy passing for council resolutions, the good people of that city did not trashtheir houses and have a crime and drug spree that ripped nearly every vestige of their personal decency from them.Rather, their stoicism and spirit allowed them to rise above the quality of their elected leadership.

I have far more sympathy with the miners. Adverse geological conditions made it uneconomic to mine. Each tonbrought to the surface, required a massive subsidy, not quite of the order of the subsidy currently being paid tophotovoltaics curtesy of Mr Milliband, but near.The markets could not be bucked. Productivty could only advantage just so far.

However not several hundred miles away in Germany is an example of a industiralised nation managing its way inautomotive manufacture against cheap labour competition. In the UK, spoilt and stupid union leadership and inept

management ensured that the golden goose was killed and its ashes danced upon. Mrs T gave us all a perfect lessonon the facts of economic life. Sadly come Major and Lamont those facts were translated to myth and ignored, bythose who would have described themselves as the disciples of Mrs T.

In recent years we have again lived famously beyond our means. A bitter harvest awaits. Let us hope the same goodsense of its citizenry that we have seen so many times in the past is replicated and people bear difficulty withstoicism, rather than bombs in the street, or in the burning of the innocents (Greece), and allow us agin to stand up tothe challenge in front of us.


[...] the national debt in the US will climb to above 100% in less than 5 years. Edmund Conway at The Telegraphreported, via Power Line: [T]he really interesting stuff is the detail, and what leaps out again [...]

Gateway Pundit on May 15th, 2010 at 5:17 pmReport comment

[...] [...]

IMF: The U.S. has a debt problem - SoWal Beaches Forum on May 15th, 2010 at 5:32 pmReport comment

[...] are a few charts from an IMF report (via the Telegraph) which show the US to be in very bad shape indeed. Thepunch line of this piece is at the [...]

Dinocrat Blog Archive A picture is worth a trillion words on May 15th, 2010 at 5:49 pmReport comment

@ fredone,


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Fair points all, and I concede that Detroit is perhaps not a completely fair comparison to post-industrial British cities but with the caveat yet. Britain is far ahead of the US (actually US states) in the development of the welfare state.I believe it is only wealth transfer that has propped these cities up to even the low standards they currently have. Thequestion is what happens when councils cant afford to maintain estates at even the most rudimentary levels and theinhabitants lose their government benefaction?

In no way should the British people be compared to the Greeks or any other of the Mediterranean nations, but theyhave yet to experience true desperation in the recent generations. Is there a communal spirit and stiff upper lipembedded in British DNA? As a romantic I like to believe so, but I think the world that instilled it is long since past.When the lights go out for extended periods and people are cold and hungry there is no telling what will happen. Imrelatively certain those conditions are coming to Britain sooner than later. Sadly I dont believe there is any way toavoid the perfect storm. I hope Im wrong.

hctroubador on May 15th, 2010 at 6:11 pmReport comment

I also wanted to add that a look at the current electoral map shows that people in the red bastions (Northeast,Midlands, Northwest) all know this as well. They know at some level the Labour government cant stop themomentum, but might put off the end game a while longer.

hctroubador on May 15th, 2010 at 6:17 pmReport comment

[...] 6) US faces one of biggest budget crunches in world IMF [...]

Weekend News - May 15, 2010 InvestmentWatch on May 15th, 2010 at 6:36 pmReport comment

In the US, there are a couple of easy ways out of this mess.1. Pull out of all foreign wars for the protection of Israel (Afghanistan, Iraq). War only if the US is immediatelythreatened.2. Rescind the left-wing schoolteacher pensions. They retire at 55 on 75% salary. So when they top out at an

unbelievable $100000 or more a year for 9 months work ($133000 on a 12 month basis) they get $75000 a year inretirement, much more than I make working full time as a PhD for over 20 years.

edw234 on May 15th, 2010 at 7:31 pmReport comment

Our problem is that we are unwilling to cut our domestic spending and foreign aid. We are continuing on as if thereis no problem whatsoever. We are pretending like we are the US of the 50s and 60s, with a huge manufacturingeconomy. That economy is gone, we dont take raw materials and make them into finished goods anymore. We cant

pretend that the service economy is as good as the manufacturing economy, and our politicians are pushing the

green economy as if it is going to save us. It is going to make things much, much worse.

Russell on May 15th, 2010 at 8:41 pmReport comment

hctroubador. We need to keep our fingers crossed here in the UK. As you say it is no winning hand. I fear for theworst, particularly as the concept of the dollar defaulting will bring with it such a change to the World order.However, everything I hear about our troops in Afghanistan fills me with hope. They do seem to have exactly thesame dna as those who went to the Falklands or put up with being the enemy in NI. OK there are the odd slip-ups

but werent there always. And if it can be in our troops it can be in our wider population. All my peers looking

forward to retirement are all of one mind. If working longer until retirement means not leaving our children withdebt, then tell us how long? and our shoulder is on the plough. But we do need some quality leadership. What wedont want is some idiot pretending there will not be cuts everywhere, including the sacred NHS.You correctly identify the point of weakness and mode from which civil unrest would emanate, were that to be thecase. Rolling back the client state and undoing all the non-jobs is going to be a hell of a lot more difficult than rollingthem out. As to America defaulting will that not be the power-pay with their largest creditor China.


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[...] Telegraph [...]

Budget crunch Newsbeat1 on May 15th, 2010 at 9:04 pmReport comment

As a follow up how things likely to unravel, READ A US way out?.

This article is over a year old but it is more up to date than ever. The times ahead of us are indeed fascinating.

andrewtaller on May 15th, 2010 at 9:22 pmReport comment

Edmund, there is either a bit missing in this paragraph in your article after Table 6 or it is incoherent as youve

written it and needs to be re-edited.

Britain, as you can see from the second column on the left, has one of the biggest deficits in the world. However,because it also has the longest maturity of average debt in the world (far right column), and so doesnt have to issue

as much new debt each year just to keep rolling that stuff over, its gross financing needs are at 32.2pc of GDP, waybigger than Britains, at 20pc. Come to think of it, its actually worse than Greece on this measure.

bamboom on May 15th, 2010 at 9:38 pmReport comment

@Debunker:

The difference now is that the US has off shored practically its entire civilian manufacturing base to china. it is thatfact, rather than the national debt it is carrying, that will be its undoing

It is both. There is a limit to debt and Greece has reached theirs right now and Spain and Portugal will soon follow.The thing that counts, rather than where the manufacturing is done, is the debt to GDP ratio. If the US has 6%growth, whatever it does, then we can grow out of this debt IF we cut spending and neither of those will happen.

The fact is that, sadly or not, the US is being driven into the ground by the far left and that spending is the onlyweapon they have against capitalism.

If you raise taxes severely then the GDP will fall. If you go green and tax gasoline some 2-3$ per gallon to put it on apar with the EU then small businesses collapse and consumers will howl.

If Fitch or S&P downgrades the AAA rating due to the massive US debt then interest rates will rise and business willbe stifled. The ONLY push to the DOW in the past year has been low interest rates.

We have spent too much and do not have the kind of leadership that can revive the economy. WE still have peoplewho want to push affordable housing [http://tinyurl.com/2c49qay] and have the banks just forgive a major portionof mortgages given to people with poor credit.

We are heading for high inflation [http://tinyurl.com/yepumqh] and the formation of asset bubbles like the solarsystems in Spain. [http://tinyurl.com/ylcujeq]

The debtor nations are heading down and the only reasonable avenue is default.A reading of two recent books:

Ascent of Money by Niall Ferguson and the newer book This Time is Different: Eight Centuries of Financial Follyby Carmen M. Reinhart and Kenneth Rogoff show, very clearly, that the vast majority of governments cannotmanage finances with any long term competence. They make enormous mistakes as outlined by 1957 book: War andAftermath 1914-1929 by Pierre Renouvin that offers us a critical but objective scrutiny of the political and militaryactions of various government agencies starting in the 1890s and leading up to August 1914 where most world stockmarkets suddenly shut down for months; this history is enlightening. By 1916 most governments had spent all theyhad and were wildly printing money to fund the Great War. We achieved 51 million deaths out of that adventure and


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enough hate and discontent to set up the next world war for 31 million more to pay the ultimate price. This isgovernment operating in full bloom and proves that diplomacy can recurrently solve no problems. Failedgovernments have no discernable history in the political sense. [http://tinyurl.com/2dt47er]

Debt and defaults are in the future. We have to live with that and may have to move to do so.

[email protected]

rycK on May 15th, 2010 at 9:52 pmReport comment

[...] United States One of the Biggest Budget Crunches in the World Telegraph [...]

Site Maintenance and Additional Articles Worth Reading | Rebel Traders - Market Analysis Without The Hype onMay 15th, 2010 at 10:02 pmReport comment

There could be naught better than the US Govt going BANKRUPT. THis would eliminate the myriad of UnConstitutional, suckling piglet-Agencies overnite, with the further positive result of not having to go to war to get ridof the mess. Civil war, that is. Alls required is CONgress, President and the Court, not FBI, CIA, IRS and a wholealphabet of corrupt agencies.

The US isnt printing money, its all ledger entries.

2010 US Census ILLEGAL http://second-amendment.tripod.com/d2a

doubtingthomas on May 15th, 2010 at 10:19 pmReport comment

The trouble with liberals is that they eventually run out of other peoples money.

brucealexy on May 15th, 2010 at 10:24 pmReport comment

Ricki youre overlooking the obvious. Thye government is running up massive debt because it is spending more thanit is taking in in tax revenue. Therefore it must rebuild manufacturing jobs in America (and the UK must do thesame) to generate the vast quantities of revenues it did in the late 40s, 50s, 60s. and early 70s.

You can see also in the chart above, that the US debt started to rise again as soon as the Reagan era began, and themass off shoring of high wage jobs.

This is so simple to understand yet so few can see it.

People should review some old videos of Ross Perot to see how right he was.

The broad tax base, and national debt is mitigated not by a few billionaire plutocrats, but by millions and millions ofordinary people orking hard, earning a decent living wage and paying their share of income tax. not the minimumwage burger flipping nation that the black box phony bond swindling hedge fund fraudsters have created. It hascrashed and burned, as has the entire globalization project.

Time to bring the jobs, and the real treasure of the western world home, and take it back from communist china.


[...] This article from the Telegraph summarizes the dreary conclusions of an IMF report which says, contrary toAlfred E. Krugman, the United States faces one of the most daunting fiscal crunches in the years ahead. [...]

Streetwise Professor Further My Last: The IMF Calls BS on Alfred E. Krugman on May 15th, 2010 at 11:19 pm


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Report comment This is no problem! The obamanation will just print more money. This is hope and change baby.

lel2007 on May 15th, 2010 at 11:50 pmReport comment

The problem is with the currency because funny money is no laughing matter. As long as bank loans are little morethan numbers on paper and banks are allowed to collect payments on loans they mostly never made, no one will haveany financial peace, including the banks. The imposing facade of our Federal Reserve headquarters is the mereststage prop and behind it is nothing but air and shadows, because the Fed deals in what they cleverly call anexpandable currency, which simply means that whatever real value it has, which isnt much, can be made to seemlike more or less at will, a sort of dream-pantomime that turns into a hideous nightmare every time. Those whocollect the loan repayments get very rich, and those who take out the loans and try to make the payments go bust. Asorry system for a sorry world, and yet it could be a lovely world if all human hearts were fair and generous.

marcusintl on May 16th, 2010 at 2:13 amReport comment

[...] [...]

Debt to GDP Ratio to be 100% by 2015 | Republic Now on May 16th, 2010 at 3:23 amReport comment

Im writing this as someone from the USA

How easily can we produce our way out of this? Well, lets remember that some of our economy is tech. Some ofour growth will be there. You can outsource some of it, but you get what you pay for. Someone has mentioned cheapenergy and coal, so lets talk about those:

The wild card in economic analysis is climate change.The risk is real and we are already seeing some of the consequences. Actic sea ice had been predicted to melt in2080, then in 2040, and now much sooner depending on which research group you talk to.

(http://news.bbc.co.uk/2/hi/science/nature/7461707.stm old link, but gives the years)

Now, if you know your house will burn down at some point within 10 years, do you wait until afterwards to buy fireinsurance? Do you hope someone will sell you fire insurance after the bathroom has caught fire? Do you startremodeling with the most flamable fire-starting tinder material you have? Or remodel with fire-proof/resistantmaterials?

Coal is tinder. Coal is not an option.

Randomly hoping things will magically get better is not an option unless you are willing to work to make thembetter. Fund research into making alternative options cost-effective. They arent an option yet.

Nuclear is an option.

We need to use it. Our plants are aging and need to be replaced. We need to build more. We need to convince peoplethat the risk from climate disasters is worse. Because it is.

zecka on May 16th, 2010 at 3:32 amReport comment

No matter how much real money people come up with to build their state the way they want the government can justprint up fake money and get their way.


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Maybe this will help make the danger of fiat money clear.

Imagine you and me are setting across from each other. We create enough money to represent all of the worldswealth. Each one of us has one SUPER Dollar in front of him.

You own half of everything and so do I.

Im the government though. I get bribed into creating a Central Bank.

Youre not doing what I want you to be doing so I print up myself eight more SUPER Dollars to manipulate you

with.

All of a sudden your SUPER Dollar only represents one tenth of the wealth of the world!

That isnt the only thing though. You need to get busy and get to work because YOUVE BEEN STIFFED with thebill for the money I PRINTED UP to get YOU TO DO what I WANTED.

That to me represents what has been happening to the economy, and us, and why so many of our occupations justcant keep up.

stokeybob on May 16th, 2010 at 4:46 amReport comment

[...] isnt that far off for North America if you want to see the scary picture, here a great article comparing thedifferent counties debts titled: US faces one of biggest budget crunches in world [...]

US State Governors Speak out | Vancouver Secrets on May 16th, 2010 at 5:15 amReport comment

The only thing that is being busted out is the US Citizen. http://www.cafr1.com Plenty of money.

sdchanman on May 16th, 2010 at 6:13 amReport comment

Debunker: how are these rebuilt manufacturers going to make enough money to pay the labor costs in the US? Whowill pay more for the same thing just so an American worker can make $20.00 per hour plus benefits when they can

buy it cheaper from China?

kmyost on May 16th, 2010 at 6:13 amReport comment

kymost, anyone who wants to afford to buy a house. Thats most people. They fortunately are more intelligent than

you, and see the bigger picture.

debunker on May 16th, 2010 at 6:48 amReport comment

Take a good look at the US debt-to-GDP chart in the article. The ratio of debt bottomed out below below 40% ofGDP just after 1980 which coincides exactly with the steep tax cuts Ronald Reagan enacted soon after assumingoffice.

Reagan steeply cut tax rates without cutting spending by a like amount. The result was a tripling of the US national

debt during his eight years in office. The two Bushes increased the debt more. Only that tax and spend Liberal, BillClinton, actually cut the debt and (temporarily) restore fiscal balance.

From the time Reagan cut taxes, to election of Barack Obama, the US national debt increased by a factor of 11 innominal terms. The economy grew only 5 times during the same period. For 28 years, under mostly fiscallyconservative Republican presidents, the debt was allowed to compound at twice the rate of economic growth. Sheer


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madness.

Obamas fiscal performance is not encouraging. But the wildly hypocritical profligacy of his Republicanpredecessors set the stage for the fix the USA now finds itself in.

There can be no doubt: the Reagan boom was a sham based on massive debt. Combined with deregulation and agrowing wealth gap, the fiscally conservative policies of the Reagan Republicans eventually led straight toeconomic disaster.

searchlight on May 16th, 2010 at 6:52 amReport comment

However, everything I hear about our troops in Afghanistan fills me with hope. They do seem to have exactly thesame dna as those who went to the Falklands or put up with being the enemy in NI.

The British are essentially a warrior nation.


>Gasp< What is this heresy?

It is not the axis of evil in Paris Brussels and Frankfurt to blame?

Ahhhhof course this is someone writing about what they know, not the one track mind of Ambrose EvansPratchild

markbarber on May 16th, 2010 at 7:45 amReport comment

[...] Conway, Economics Editor of the Telegraph, provided excellent insight into the International Monetary Fundsanalysis, Navigating the [...]

Mr. Conservative The Socialists Have Spent All of Our Money and Much More on May 16th, 2010 at 7:50 amReport comment

[...] Read entire article [...]

US Becoming Like Greece? America Has Time, But Not Forever. | Nicolas Minacapelli: An Independent AuthenticConservative Voice on May 16th, 2010 at 8:26 amReport comment

Im sure that the bankers will still be able to pay themselves enormous bonuses despite the terrible fiscal collapse

they are engineering for the rest of us.

nimbus on May 16th, 2010 at 8:40 amReport comment

The real question is what is the common man to do? Sell your stocks and buy Gold from the coin pushers? Become asurvivalist and stock up on bottled water freeze dried prison rations? What is the end game for the world rulers

parading as leaders?

thesavagenation on May 16th, 2010 at 9:41 amReport comment

So.every country in the world is in debt??



21/26

They will be rolling in it, will they not..???******************************************************

If you owe the bank a million dollars and cannot repay it, you are in trouble. But if you owe the bank a billion dollarsand cannot repay it, the bank is in trouble.

joev11 on May 16th, 2010 at 10:06 amReport comment

Dear Sir,

This is a most excellent diet of economic exegesis and so comforting to know others are in a worse state thanourselves, the States vis-a-vis the Kingdom.

I would also like to congratulate the hoi polloi for the restrained and mature nature of the proceeding discourse, withthe usual exceptions of course.

Sir, please in the future would you turn your formidable intelect and forensic analysis in the direction of theKingdoms external debt, more than a trifling sum I do hear.

Your humble servant

onmybike on May 16th, 2010 at 11:05 amReport comment

[...] and guess who will be buying those up. If we look at the figure of the IMF in this report US faces one of biggestbudget crunches in world IMF Telegraph Blogs then we clearly see that the 2 countries that are in the biggestcrapper are the 2 countries that [...]

Euro/Eurozone viability - Page 2 on May 16th, 2010 at 11:05 amReport comment

A worldwide re-structuring of debt is on the way.Bond holders will take a 30% haircut.Within 6 mos.U.S. municipalbonds issued by state and local governments will be guaranteed by the Fed,much like the Greece Bailout.Austerity inAmerica will include the shrinking of the military and base closures in secure parts of the world such as Japan andGermany.Private health insurance companies will disappear and government will pay and regulate prices of

procedures.A VAT tax will be coming to the U.S. in 2011 or 2112.Companies dodging taxes by locating HQ in lowtax countries will pay large tariffs to the countries in which they do business.Expect a coalition of the worlds central

banks possibly going to one worldwide reserve currency.Big changes are coming.buy gold/silver this is the worldsoldest reserve currency and the best bet to preserve what you have.Although this could backfire as well if the gold

price is pegged to a worldwide currency.Ive heard $1,000/oz. thrown around.Google revalue gold,interesting.

bondageguy on May 16th, 2010 at 12:28 pmReport comment

Im American in my 60s. I watched this whole thing develop. Its obvious to me that we (all the formerlyindustrialized nations) have been led down the rosy path to ruin by the money lenders and their agents the politicians.Its an age old story: you engineer a situation so a person must borrow to live. With a little time and compoundinterest, that person (entity) is no longer a free person. He/it is controlled by debt. He is a slave, if you will. AsEdmund Rothschild said let me control a nations money and I care not who makes the laws. At the other end ofthe spectrum, the song Sixteen Tons by Tennessee Ernie Ford tells the story.

Conway is only looking at one side of the coin: the debt side. The other side is that someone has a receivable of

exactly the same amount only much better because it earns interest! 5% interest will double the principle in 14years. As bad as things are, theyre going to be twice as bad in 14 years, give or take whatever extra we can come upwith to keep the game going. The score now is 99 0 and were playing to 100.

I remember back in the 1960s, when the Johnson administration began the borrowing binge that led to the presenttopic, the public was very unhappy about it. The popular slogan put out by the politicos to rub the peoples bellies


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and put them to sleep was we just owe it to ourselves. Oh, we do, do we? Well, it we just owe it to ourselves, whydont we just pay ourselves? Why is only the liability side of the transaction talked about and never the asset side?Obviously, it is not a we situation. As George Carlin said, its a big club, but youre not in it.

The tragedy that faces all mankind is that it was all a great deception. The money lenders contributed nothing andin exchange received everything. The debt we are drowning in is simply an entry on a ledger. Its the perfect crime

because not only did they steal everything, people willingly work to pay them back (so they actually stole it twice),and pay compound interest. Good work, if you can get it.

carmudgeon on May 16th, 2010 at 1:01 pmReport comment

Concerns about public financing in the USA?

The USA has a puny tax per capita of 8.6k?Social services are totally lacking.Corporate welfare in the health care industry.

Americas problems are nothing that a snap of the fingers wouldnt solve.

Roll tax cuts back to the Clinton/Reagan era.Increase cap gains taxes.Reform health care and the Pharma industry.Cut defense spending.

The USA has an incredible amount of wriggle room precisely because it is a low tax, low social spending area. Iknow the hawks at the IMF must be eyeing social services cuts but they should look at those projections and realizethey imply an increase to 30% of GDP for health care.

danasta on May 16th, 2010 at 4:07 pm

Report comment [...] US faces one of biggest budget crunches in world [...]

Right-Wing Links (May 16, 2010) on May 16th, 2010 at 4:13 pmReport comment

A number of posters have asked who the creditors are in this global debt orgy. They are you. They are your pensionfunds. Your social security systems. Your Low Risk mutual funds and unit trusts. To an extent they are also netexporters like China and the Gulf Petro-states.

When these bond holders take a haircut or lose everything, there will be hell to pay. For example, the US socialsecurity system has been taking in more cash from the baby-boomers than it has paid out every year since it was

founded. Unfortunately, the US Government has, over the years, taken every penny of this money and replaced itwith IOUs in the form of US Treasuries.

Now, when the Babyboomers come to retire and start drawing on that Social Security pot, all they have is a promisefrom future taxpayers to pay interest on those treasuries. If the US Govt defaults or inflates away the value of thosetreasuriesitll get ugly.

Here is a must watch video on the true nature of the situation the US is in. Its nearly an hour long, but addressesmost of the key points.

Some highlights:

1. If the US took 100% of all its citizens income this year in tax, it would still run a deficit.

2. If the US cut 100% of all government expenditure excepting only Social Security, Medicare and Medicaid, itwould still run a deficit.


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http://www.youtube.com/watch?v=eb1n1X0Oqdw&feature=player_embedded

francis on May 16th, 2010 at 4:48 pmReport comment

[...] be violently sucked in. Consider what it might be like facing the sort of numbers outlined in Edmund Conwaysreview of the IMFs recent cross-country Fiscal Monitor [...]

On the Pensioning of Roman Veterans | Finance Blog on May 16th, 2010 at 6:32 pmReport comment

[...] be violently sucked in. Consider what it might be like facing the sort of numbers outlined in Edmund Conwaysreview of the IMFs recent cross-country Fiscal Monitor [...]

On the Pensioning of Roman Veterans | Stocks! on May 16th, 2010 at 7:21 pmReport comment

The left hand axis on the first graph runs from 0-120. On the second it goes from 0-250. Since both graphs aresupposed to show the same thing, debt as a percentage of GDP for the two countries, shouldnt they be the same?

williamy on May 16th, 2010 at 9:16 pm

Report comment Greetings from America! LMFAO! Our news outlets here dont report much regarding our financial crisis here.

When they do report anything, they lie and what I call, sugar coat the poison. FACT:Everyday, 7,000 AmericanBaby Boomers are now on Social Securty, Medicare, and Medicare Rx Drug coverage! Foreclosures are gettingmuch much worse. Some people are just squatting in thier homes or other homes! Sadly, I need to go on othernews sites around the world to get the facts. Try this website: wwww.usdebtclock.org

gary4452003 on May 16th, 2010 at 10:22 pmReport comment

The English would expand themselves to death, the Germans would arm themselves to death, and the Americanswould loan themselves to death.

Author unknown.

makan on May 17th, 2010 at 3:31 amReport comment

debunker; They are going to pay more for things so they can afford to buy a house? That does not make sense, big orsmall picture.

kmyost on May 17th, 2010 at 3:32 amReport comment

[...] source: IMF via telegraph [...]

UK Debt Default? Economics Blog on May 17th, 2010 at 10:36 amReport comment

It seems as if money printing (sorry, quantitative easing) is the preferred option for the U.S, and us and europe. Themiddle east and asia dont have to print the money because of the cash reserves, but ultimately, it means the currency

becomes worthless and your population cannot buy anything.

If the dollar gets vaporised as a currency, then the world just trades in something else, the world will carry on.Russia, China and co are all setting up trade areas and will probably introduce a commodity backed currency toreflect their strength (i think china has been stockpiling commodities for years) leaving fiat currencies as phantoms.

We need something radical to provide new growth so we can pay off the debt and get back to health. There must be a


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technological innovation that can be rapidly deployed to get the ball rolling. Thin film solar would be a great help.

quetzalcoatl on May 17th, 2010 at 2:22 pmReport comment

@carmudgeon

Perfect crime? i think Just in time economy that did not factor in the medium and long term macro trends that hasundone the system.

quetzalcoatl on May 17th, 2010 at 2:25 pmReport comment

[...] US faces one of biggest budget crunches in world IMF [...]

Financial News Update 05/17/10 NoisyRoom.net: The Progressive Hunteron May 17th, 2010 at 4:06 pmReport comment

[...] [...]

News and videos for Monday afternoon. | Finance Blog on May 17th, 2010 at 8:17 pmReport comment

[...] to recover from the pain New Labour has inflicted.If only we were so lucky. As Edmund Conway pointed outlast week, the U.S.s situation, according to the International Monetary Fund, is if anything [...]

Im Afraid To Tell You Theres No Money Left | The Foundry: Conservative Policy News. on May 19th, 2010 at4:02 pmReport comment

[...] Article written by Edmund Conway Source: http://blogs.telegraph.co.uk/finance/edmundconway/100005702/us-faces-one-of-biggest-budget-crunches-.. . [...]

US Faces One of Biggest Budget Crunches in the World IMF on May 20th, 2010 at 12:12 am

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US Faces One of the Biggest Budget Crunches

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