Sovereign Debt

Above is an updated video which offers an easy explanation about the US Debt problem and how it connects to the world debt problem.  It's well worth the six minutes of time to watch it.

Speaking of US Sovereign Debt, former Reagan economic adviser Laurence Kotlikoff was making news this past weekend talking about the U.S.'s "true indebtedness".

"We're focused just on the official debt, so we're trying to balance the wrong books," Kotlikoff said.

Kotlikoff pointed out that if you add Social Security, Medicare, Medicaid and defense expenditures to the mix, the 'real' debt skyrockets.

• "If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap."

To Kotlikoff the debate currently going on is misplaced and misguided.

• "Why are these guys thinking about balancing the budget? They should try and think about our long-term fiscal problems. We've got 78 million baby boomers who are poised to collect, in about 15 to 20 years, about $40,000 per person. Multiply 78 million by $40,000 - you're talking about more than $3 trillion a year just to give to a portion of the population. That's an enormous bill that's overhanging our heads, and Congress isn't focused on it."

 As we have said before, Sovereign Debt is the issue of this decade.  The breadth and depth of the fiscal earthquake suffered 3 years ago is only just beginning to be understood and appreciated.

The 2008 Financial Crisis has only just begun.

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