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Sovereign Man: Nobel Prize-Winning Economist Joseph Stiglitz Says We Shouldn't Worry About America's Prodigious Debt

The US government debt level has increased to nearly $19.7 trillion, up $120 billion in just six days, as the Obama administration tries to surpass $20 trillion before leaving office. Total US public debt has skyrocketed over the last eight years by $9 trillion, from $10.6 trillion to $19.7 trillion, with $1.4 trillion added in the last fiscal year alone. Even as the economy has grown, the debt has increased much faster, leaving the US government already insolvent with liabilities of $21.4 trillion and assets of just $3.2 trillion, for a net negative position of $18.2 trillion.

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125 views

Sovereign Man: Nobel Prize-Winning Economist Joseph Stiglitz Says We Shouldn't Worry About America's Prodigious Debt

The US government debt level has increased to nearly $19.7 trillion, up $120 billion in just six days, as the Obama administration tries to surpass $20 trillion before leaving office. Total US public debt has skyrocketed over the last eight years by $9 trillion, from $10.6 trillion to $19.7 trillion, with $1.4 trillion added in the last fiscal year alone. Even as the economy has grown, the debt has increased much faster, leaving the US government already insolvent with liabilities of $21.4 trillion and assets of just $3.2 trillion, for a net negative position of $18.2 trillion.

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rmaq
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Sovereign Man

https://mail.google.com/mail/u/0/#inbox/157bf2fb2cac86b0

But, now that Im better and getting brought up to speed, one of the things that caught my attention
this morning was that the US governments debt level has soared to just a hair under $19.7 trillion.
To give it some context, thats up over $120 billion in just six business days.
Its almost as if Barack Obama is intentionally and desperately trying to breach the $20 trillion mark
before he leaves office in January.
Of course, this hasnt been reported anywhere because the media is too busy pretending to be
shocked that Donald Trump is a womanizer.
And yet the debt is a much, much bigger story... though admittedly one that is far less entertaining.
The election is merely a fight over who gets to be the band conductor while the Titanic sinks. And the
debt is precisely the reason for this.
Total US public debt has skyrocketed over the last eight years by $9 trillion, from $10.6 trillion to $19.7
trillion.
And in the 2016 fiscal year that just closed two weeks ago, the government added a whopping $1.4
trillion to the debt, the third highest amount on record.
Plus, they managed to accumulate that much debt at a time when they werent even really doing
anything.
Its not like the government spent the last year vanquishing ISIS or rebuilding US infrastructure. They
just squandered it.
Now, Nobel Prize-winning economist Joseph Stiglitz says we shouldnt worry about Americas
prodigious debt, and anyone who fusses over it doesnt understand economics.
Stiglitz claims that we wouldnt judge a private company like Apple based solely on its debt.
Wed look at other factors like assets, income, and growth before making an assessment of the
companys financial health.
And hes right.
Singapore, for example, is a country with an extremely high level of debt. At first glance, it looks
dangerous.
But if you dive deeper into the governments balance sheet, you see an enormous abundance of cash
reserves.
So taking into account just its cash assets, Singapore has absolutely ZERO net debt.
The US, on the other hand, is not in this position.
The Treasury Department publishes regular financial statements detailing its income, expenses,
assets, and liabilities.
You already know the income numbers-- the government loses billions of dollars per year, and the

trend is negative.
As for its balance sheet, the government reports just $3.2 trillion in assets against $21.4 trillion in
liabilities, for a NET position of NEGATIVE $18.2 trillion.

Now, when were dealing with trillions, its clearly not an exact science.
There are many economists who argue that the federal highway system, military, and federal tax
authority should count as assets that are worth trillions of dollars.
Maybe so. But to be fair, one should also count the trillions of dollars of repairs needed on the
highway system as liabilities.
Or the trillions more in cost of wars. Or the $40+ trillion in unfunded liabilities from Medicare, Social
Security, etc.
Its also important to note that Americas debt is growing at a far quicker rate than its economy.
When President Obama took office, US public debt was about 73% of GDP. Today its 105%. So even
as the economy has grown, the debt has grown much faster.

Any way you look at it, the US government is already insolvent, and its situation is becoming worse.
This leaves essentially two options.
We can choose to willfully ignore this obvious trend and delude ourselves into thinking that the
continued expansion of US debt will forever be consequence-free;
Or, we can acknowledge the tiny possibility that maybe, just maybe, there may be some adverse
consequence, and plan accordingly.
Thats the great thing about risks-- we can take out insurance to protect against their consequences.
Thats why we have fire insurance to protect our homes, life insurance to protect our families.
Of course, there is no policy from Met Life or GEICO which will protect you from capital controls, a
default on Social Security, or Global Financial Crisis 2.0.
Yet there are countless options to protect against these consequences.
The premise is simple: if your country is broke, dont keep 100% of your assets there.
If your banking system is precariously illiquid and questionably solvent, dont keep 100% of your
savings there.
Most of all, it never, ever hurts to have a Plan B and give yourself additional options.
For example, you may be able to take some steps to legally reduce your tax bill; move some funds to
a safer, better capitalized bank abroad that pays a higher rate of interest; or obtain a second passport
based on your grandparents Irish or Polish nationality.
Its hard to imagine that youll be worse off for having taken any of these steps.
And like any great insurance policy, these steps not only protect you against risk, but also give you the
chance to make more money and prosper.

(Thats why the ultra-wealthy often invest in insurance policies as an asset class.)
Having a Plan B doesnt mean hiding in a bunker with a tin-foil hat. Anyone expecting the end of the
world is going to be waiting a very long time.
But taking some risk off the table is something that smart, rational people do, especially in light of
such overwhelming data.

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