When Standard & Poor's reduced the nation's credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.

The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.

"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."

Kotlikoff explains that America's "unofficial" payment obligations — like Social Security, Medicare and Medicaid benefits — jack up the debt figure substantially.



We don't hear more about this enormous number, Kotlikoff says, because politicians have chosen their language carefully to keep most of the problem off the books.

"Why are these guys thinking about balancing the budget?" he says. "They should try and think about our long-term fiscal problems."

According to Kotlikoff, one of the biggest fiscal problems Congress should focus on is America's obligation to make Social Security payments to future generations of the elderly.

"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," he says. "That's an enormous bill that's overhanging our heads, and Congress isn't focused on it.

"

"We've consistently done too little too late, looked too short-term, said the future would take care of itself, we'll deal with that tomorrow," he says. "Well, guess what? You can't keep putting off these problems."

To eliminate the fiscal gap, Kotlikoff says, the U.S. would have to have tax increases and spending reductions far beyond what's being negotiated right now in Washington.



NPR Interview with Laurence J. Kotlikoff, who served as a senior economist on President Ronald Reagan's Council of Economic Advisers and is a professor of economics at Boston University.
http://www.npr.org/player/v2/mediaPlayer.html?action=1&t=1&islist=false&id=13902...

Link -
http://www.npr.org/2011/08/06/139027615/a-national-debt-of-14-trillion-try-211-t...
==============================


That said, I'm sure if we just wack up the interest rates & go for a
nice big round of AUS-terity cuts, then OZ should be fine???

Ex Dame Pansi wrote on Aug 9^th, 2011 at 6:31am:


Well, I'm not sure about "another day another dollar...lost", I initially thought of Clint Eastwoods "a fistful of Dollars" and then settled on another Eastwood classic -
"The Good, the Bad & the Ugly"


We've had the Good, now we're having the Bad and the Ugly is still to come!

Btw, there was a large dip at the end of US DOW trading and the DOW actually finished down by 635 points.
http://au.finance.yahoo.com/echarts?s=^DJI#symbol=^dji;range=1d;compare=;indicat...

In fact, the DOW fell 300 points in the last 40 minutes of trading and DOW Futures are already down, some 80 points in after hours trading contrinuing that trend and the OZ SPI200 is also down 150, which does not bode well for the local market today!.

http://fortunewallstreet.files.wordpress.com/2011/08/most_indebted_countries.jpgw=612&h=679

Link -
http://finance.fortune.cnn.com/2011/08/09/who-in-the-world-is-most-in-debt/?iid=...
=============================================
I would not take these figures as correct, but they do convey an indication of the severity of the situation in both Japan & the USA, in comparison with the Piigs of Europe.

That said, there are other "unfunded debts", such as Baby Boomer Pensions & Health Care costs, which are not included on any of  these fugures.

In the case of the USA, because of the size of the Population & the nature of the beast, those "unfunded Pension & Health costs" are certainly the greatest of any of the above nations and those costs could easily exceed $100 Trillion, over the span of the Boomer retirement years.

Btw, the UK should probably already be on this list, but not to worry, it will be, shortly!

<<If anyone can just tell me, What & How can change the basic direction of the main Economic factors and the river they flow in and I will happily pay attention! >>
.............................................................

There is no fix. It's the global depression we have to have, then start over, hopefully without fiat money. I wonder if the lesson will be learnt that perpetual growth is a myth.

Also, it is LONG overdue for a new economy and it is obvious and staring us in the face that changes to a cleaner technology could be just that.

It often helps to gain a different perception, so perhaps some longer term views may help -

US DOW -
11,269 - 12/08/2011
11,445 - 1 Week ago
12,447 - 1 Month ago (12/07/2011)
10,320 - 1 year ago (12/08/2010)
9,321 - 2 Years ago (10/08/2009)
6,627 - 2 years & 4 months ago (02/03/2009 - The GFC Low point)
11,660 - 3 Years ago (11/08/2008)
14,093 -  4 years ago - nearly (08/10/2007) - The All Time DOW HIGH
http://au.finance.yahoo.com/echarts?s=^DJI#symbol=^dji;range=5y;compare=;indicat...

Australian All Ords -
4,238 - 12/08/2011
4,170 - 1 Week ago
4,563 - 1 Month ago (12/07/2011)
4,422 - 1 year ago (12/08/2010)
4,465 - 2 Years ago (10/08/2009)
3,112 - 2 years & 4 months ago (02/03/2009 - The GFC Low point)
5,039 - 3 Years ago (11/08/2008)
6,760 -  4 years ago - nearly (08/10/2007) - The All Time All Ords HIGH
http://au.finance.yahoo.com/echarts?s=^AORD#symbol=^aord;range=5y;compare=;indic...

The truth is, in the GFC Mk1, we went down like a sack of poo, with shares losing just over 50% of their total value.

"We" then recovered a little and in the case of Australia, it settled (in October 2009) around a third down on its all time high.

In the case of the USA, it continued to rebound until around the end of April 2011, when it reached a post GFC Mk1 high of 12,810, but with wild gyrations since, the DOW now sits at 11,269, although it could just as easily now be under 10,000, IF Thursdays "fortuitous" Unemployment Report had not gone down.  

The US & Australia also had "somewhat" different levels of action after the GFC Mk1, where Australia was actually reasonably well placed, with effectively zero Debt at the start of the GFC, it has escalated that Debt a little over the last 4 years, but it is still currently very well placed, at or around a 15% Debt to GDP ratio.

That said, the USA went heavily into Debt, with a 60% increase over the last 4 years and it now stands at around a 100% Debt to GDP ratio.  
Date              Total Public Debt Outstanding
09/28/2001       $5,807,463,412,200.06
07/31/2007       $8,932,438,299,899.54
09/30/2009       $11,909,829,003,511.75 Bush Jnr Years = 105% increase (13% PA)
07/29/2011       $14,342,369,286,195.61 Obama (so far) = 20% increase (10% PA)
http://www.treasurydirect.gov/NP/BPDLogin?application=np

Both the Bush & Obama records are entirely unacceptable and both were/are highly detrimental to the majority of the US & Global Public!

That said, much of the last couple of years had also been set up by Bush Jnr, although Obama could have changed tact, IF he had the Political willpower, which he did not.  

The Debt situation is now completely out of hand, as you would know being a figures man and the conundrum now is death by more Debt OR death by a collapsing Economy (Global)?

Now, I've told you that, to tell you this.

In my post on Thursday night OZ time, I was pointing out that with the early falls in Europe and the declines in the DOW futures market, in the hours preceding my post, there could be a break downward in the recent up/down gyrations and IF nothing happened to spike the markets again (shortly), then the market could seriously break to the downside.

So, IF the "fortuitous" Unemployment Report out of the USA had not popped up or something equivalent to it, then the market may have broken on the downside, leading to a very nervous Friday and a close for the weekend possible below 10,000 on the DOW. That could easily have happened, but for the intervention of the "fortuitous" Unemployment Report and instead, the DOW finished for the weekend at 11,269?

Fortunately, something did intervene, the above did not eventuate that day and we all continue on to fight another day.    

It could just as easily have happened and I suggest given the major Economic factors in play, it will happen sometime in the not too distant future.  

Whether you or anyone else agrees or disagrees with my observations, is entirely up to each individual, as is what you do or don't do, with the information/thoughts that I supply! (PS - That's my disclaimer)

In the interim, good luck (with your investments) & watch the Debt (the General/National & Global Debt)!

U.S. Stocks Fall After Germany, France Propose Financial Transaction Tax

U.S. stocks fell, following the biggest three-day rally since 2009, as German and French leaders proposed a financial-transaction tax and rejected selling euro bonds to halt a debt crisis threatening economic growth.

“Europe will continue to be an overhang until they come up with realistic policies,” Peter Jankovskis, who helps manage about $2.6 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “We’ve already got disappointing economic numbers out of Europe earlier today. Then, you have a program which is not really doing anything to address that.”

European Recovery Weakens
Earlier losses in stocks today followed a report showing European economic growth slowed more than forecast in the second quarter as Germany’s recovery almost ground to a halt amid the worsening debt crisis. Gross domestic product in the 17-nation euro area rose 0.2 percent from the first quarter, the worst performance since the euro region emerged from a recession in late 2009. Economists had forecast growth of 0.3 percent, according to the median of estimates in a Bloomberg News survey.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said they’ll press for closer euro-area economic integration with tougher deficit rules and stricter supervision to stamp out the debt crisis. Merkel and Sarkozy rejected euro bonds and expanding the 440 billion-euro ($633 billion) rescue fund. They also proposed a plan to resubmit a financial- transaction tax, which was rejected in 2010.

‘Euro Council’
They proposed debt limits be written into national law and establishing a “euro council” to be headed by European Union President Herman van Rompuy as part of a planned “economic government” for Europe. While joint euro-region bond sales may come eventually, their introduction now would put the most stable countries of the euro zone in grave danger, Sarkozy said.

Link -
http://www.bloomberg.com/news/2011-08-16/u-s-stock-futures-slide-after-german-ec...
===========================================
There's an old saying comes to mind, "you can lead a horse to water, but you can't make it drink".

I am reminded that Greek Politicians had Goldman Suchs draw up "plans", to make it look like Greece was ok, when it wasn't, which is a bit like the current USA situation!

That said, how is a European Financial Transaction Tax, any different to a Carbon Tax OR raising General Tax Tax rates, particularly Business & high income earners?

The Truth is, they all seek to raise taxes and as part of an answer to Deficits & Debt, both will be required, certainly in the USA & Europe.  

All over America tonight, millions of elderly Americans are wondering if their money is going to run out before it is time for them to die. Those that are now past retirement age are not going to be rioting in the streets, but that doesn't mean that large numbers of them are not deeply suffering. There are millions of elderly Americans that are leading lives of "quiet desperation" as they try to get by on meager fixed incomes.

As health care costs soar, millions of elderly Americans find themselves deep in debt and facing huge medical bills that they cannot possibly pay. A lot of older Americans would go back to work if they could, but jobs are scarce and very few companies seem to even want to consider hiring them. Right now caring for all of the Americans that have already retired is turning out to be an overwhelming challenge, and things are about to get a whole lot worse. On January 1st, 2011 the very first Baby Boomers turned 65.  A massive tsunami of retirees is coming, and America is not ready for it.

Sadly, most retirees have not adequately prepared for retirement. For many, the recent economic downturn absolutely devastated their retirement plans. Many were counting on the equity in their homes, but the recent housing crash crushed those dreams. Others had their 401ks shredded by the stock market.

Meanwhile, corporate pension plans all across America are vastly underfunded. Many state and local government pension programs are absolute disasters. The federal government has already begun to pay out significantly more in Social Security benefits than they are taking in, and the years ahead are projected to be downright apocalyptic for the Social Security program.

So needless to say, things do not look good for the Baby Boomers that are now approaching retirement age.

The following are 21 signs that the new reality for many Baby Boomers will be to work as wage slaves until they drop dead....

#1 According to a shocking AARP survey of Baby Boomers that are still in the workforce, 40 percent of them plan to work “until they drop.”

#2 A recent survey of American workers that included all age groups found that 54 percent of them planned to keep working when they retire and 39 percent of them plan to either work past age 70 or never retire at all.

#3 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

#4 A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.

#5 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

#6 Most of the bankruptcies among the elderly are caused by our deeply corrupt health care system. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

#7 The U.S. government now says that the Medicare trust fund will run dry five years faster than they were projecting just last year.



#9 Over 30 percent of all U.S. investors currently in their sixties have more than 80 percent of their 401k retirement plans invested in equities. So what happens if the stock market crashes again?

#10 All over the United States predatory lenders are coldly and cruelly foreclosing on elderly homeowners. You can read what one lender is doing to a 70-year-old woman and her terminally ill husband right here.

#11 Medical bills are absolutely devastating large number of elderly Americans right now. Many are going to great lengths to try to pay their bills. An elderly woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends. However, a neighbor ratted her out, and so now the police are shutting her garage sales down.

#12 Social Security's disability program has already been pushed to the brink of insolvency and wave after wave of new applications continue to pour in.

#13 Approximately 3 out of every 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity. However, by claiming Social Security early they get locked in at a much lower amount than if they would have waited.

#14 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010. That was not supposed to happen until at least 2016.  Sadly, in the years ahead these "Social Security deficits" are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.