Printer Friendly Page | OpEdNews 9/4/15 5:52 PM

OpEdNews 12 pt Show Comments Show Only Comments Show Only Article

Original Content at
http://www.opednews.com/articles/Debt-Collapse--The-Declin-by-William-Edstrom-Banks_Bonds_Capitalism_Corporations-150825-693.html
(Note: You can view every article as one long page if you sign up as an Associate Member, or higher).

August 25, 2015

Debt Collapse: The Decline and Fall of the United States of America
By William Edstrom

There's going to be a collapse in the United States of America. Again. This collapse around, there's nothing the United States (US) government ca
do to 'rescue' the US economy because the Federal Reserve Bank's interest rate is 0%. They cannot lower interest rates. The only thing the US
government can do is print more money. Printing too much money causes hyper-inflation which in turn causes things worse than hyper-inflation.

::::::::

There's going to be a collapse in the United States of America. Again. This collapse around, there's nothing the United States (US) government ca
do to 'rescue' the US economy because the Federal Reserve Bank's interest rate is 0%. They cannot lower interest rates. The only thing the US
government can do is print more money. Printing too much money causes hyper-inflation which in turn causes things worse than hyper-inflation.

In the 1900's, there were stock market crashes, like in 1929 and 1987, because stocks were overpriced. The cause of the October 2008 financial
collapse was different. The cause was too much debt. The Fed's lending rate was 5.25% in 2008, so the Federal Reserve Bank ("Fed") lowered th
interest rate to 0% to encourage money lending to large banks to in turn encourage spending, hiring and re-lending. Simultaneous with ZIRP (i.e
the Fed's Zero Interest Rate Policy), the US Treasury Department printed 4.5 trillion dollars in exchange for $4.5 trillion in US Treasury Bonds
(IOU's), so that there would be $4.5 trillion more money for large banks to borrow. This $4.5 trillion in money printing was called Quantitative
Easing (QE) and occurred in 3 rounds, QE1, QE2 and QE3, from December 2008 to October 2014. The Fed Funds interest rate has been 0% since
December 2008.

The US Federal government kicked the debt collapse can down the road with ZIRP & QE. The 7 years of plenty (plenty of no interest loans & plen
of freshly printed money) that began in December 2008 will end shortly.

Debt is money that has to be paid. The amount of money that the government in the USA has to pay is larger than the $18.5 trillion Federal
government debt figure mentioned in the corporate media, just as the US Gross Domestic Product (GDP) is lower than the $16.98 trillion figure a
cited in the corporate media.

The $18.5 trillion government debt figure often cited is $13.5 trillion in US Treasury Bonds (IOU's) plus $5 trillion in money borrowed by the US
Federal government from US Federal government trust funds like the Social Security trust fund. The 50 US states owe $0.7 trillion for state bond
they issued. The US municipal (e.g. cities, counties) bond market is $3.7 trillion. Fannie Mae and Freddie Mac, two government authorities, still o
$1.97 trillion, mostly for bad mortgages from years gone by. Other debts listed in the March 2015 Financial Accounts of the US report
(www.federalreserve.gov/releases/z1/current/z1.pdf) include $6.23 trillion owed by government authorities (aka "government sponsored entities
other than Fannie Mae and Freddie Mac, $1.04 trillion in loans taken out by the US Federal government (e.g. government credit card balances,
short term loans) and $0.63 trillion in loans owed by government authorities (e.g. their credit card balances, short term loans). The total of these
debts owed by government in the USA is $32.77 trillion, as of March 2015.

When US government people claim $18.5 trillion in government debt, they are neglecting to tell us about their loans, their government credit car
balances, the debts of the 50 states, the debts of 3,033 US counties, thousands of towns and cities plus thousands of government authorities like
the Tennessee Valley Authority and the New York City Metropolitan Transit Authority.

There's more. "Unfunded liabilities" ". Unfunded liabilities mean money that they owe, but they don't have. There are thousands of US governme
pension plans (e.g. Teachers, Police, Counties, Cities, etc.). Many of these pension plans don't have enough money to pay the pensions that were
promised to government employees. The 50 states now have $4.7 trillion in "unfunded pension liabilities" ", money that they owe, but they don't
have (click here). The Federal Employees Pension Plan is now short $1.9 trillion in money that the government will have to pay. The largest
government pension plan in Puerto Rico became insolvent (lost all it's money) in 2012. Now the government has to pay $20.5 billion for that. In
total, there is currently $6.62 trillion that the government in the USA has to pay for pensions. Pension contributions into pension plans have been

http://www.opednews.com/PRIVOXY-FORCE/populum/printer_friendly.php?content=a&id=194205 Page 1 of 4
Printer Friendly Page | OpEdNews 9/4/15 5:52 PM

total, there is currently $6.62 trillion that the government in the USA has to pay for pensions. Pension contributions into pension plans have been
less than what pension plans pay out to retirees, which is why the government in the US is short by $6.62 trillion for government pensions as of
March 2015.

Pension plans that do have some money left tend to invest that money on wall street. $6.32 trillion of pension plan money was invested in stocks
and bonds as of March 2015. The stock market has gone down 10% as of August 21, 2015 which means $0.632 trillion in pension fund money w
lost on wall street this summer. Now, the government has to pay $0.632 trillion more to replace the pension money that was lost on wall street t
summer. The government in the USA owes $7.252 trillion in unfunded pension liabilities as of August 21, 2015.

Tobin's q is a measure of how much the stock market will fall. Currently, Tobin's q shows the stock market will lose 86% of it's value. Which mea
there will be an additional $4.89 trillion that pension funds will lose on wall street by 2019, which means another $4.89 trillion in unfunded pensio
liabilities, which means the government will have another $4.89 trillion to pay for pensions by 2019.

$6.62 trillion plus $0.632 trillion plus $4.89 trillion = $12.142 trillion. By 2019, the government in the USA will need to pay $12.142 trillion in
unfunded liabilities for government pensions.

Then there are "unfunded entitlements". These are healthcare costs that the government has to pay. Government pensions are a combination of
monthly payments plus healthcare benefits (above and beyond Medicare benefits). The government currently owes $1.95 trillion in healthcare
benefits for the Federal Employees Pension Plan. States, municipalities and government authorities owe an additional $4.2 trillion for retiree
healthcare benefits. Then there's Medicare and Medicaid which cost $0.83 trillion in 2014. These costs go up by 6% a year. So, 2016 to 2021,
$5.46 trillion will be owed for Medicare and Medicaid (average $1.09 trillion a year). Obamacare costs owed by the government are $0.18 trillion
year.

Add $1.06 trillion (for Medicare, Medicaid & Obamacare in 2015) to $6.15 trillion that the government has to pay for "unfunded entitlement"
healthcare benefits promised to retired government employees (above and beyond Medicare) equals $7.21 trillion the government in the USA ow
currently, for healthcare promised.

Obamacare is adding $0.18 trillion a year to total government healthcare costs? Yeah, in subsidies. You thought Obamacare was going to make
government healthcare costs go down in the US? Why would you think that? Because someone in the Federal government said that. Like I said,
why would you think that. We know the Federal government people are liars. Just like we know the money changers on wall street are thieves.

While healthcare costs go up 6% a year, inflation hasn't been going up 6% a year and taxes haven't been going up 6% a year. I think you get it
now that the US government has a big debt problem. The US government's binge borrowing spree began in 1982 and has gotten worse by the da
since then. Which brings us to the Summer of 2015, when the USA has only just begun to fall off a big debt cliff. Woe.

There's more. The Federal government bails out wall street whenever wall street has a big problem. They did it in the 1900's, they did it in the
2008 collapse and the Federal government will pay what wall street owes the next time wall street has a big problem. Which is now. The final slo
motion economic collapse of the USA already began in August 2015. So, how much does wall street owe? How much has wall street promised to
pay? Wall street has promised to pay more than the US government has promised to pay.

Many people borrow money (called margin loans) to buy stocks. There are $0.5 trillion in margin loans outstanding. Then there's $3.95 trillion in
repurchase agreements (repo agreements). A repo agreement is when the seller (e.g. of a stock) agrees to re-buy (e.g. the same stock) at a set
price. Plus $21 trillion in credit default swaps. Credit default swaps are a form of derivative. Bankruptcy legislation in 2005 gave "super priority"
status to derivatives to be paid first when bank bankruptcies happen. Credit Default Swaps are just one form of derivative. 25 banks in the USA
have a total of $236 trillion in derivatives. Globally, there are $630 trillion in outstanding derivatives. About half are in the USA. Derivatives are
bets. The only difference between a casino bet and a wall street bet is that casinos have the money to pay casino bets, wall street doesn't have t
money to pay derivative bets. So, who's going to pay the approximately $315 trillion in US derivative bets?

Uncle Sam has paid for wall street when the wall street people can't pay their own way. Which makes wall street's debts basically US governmen
debts. Wall street and the US government are intertwined, like fingers of the same glove. Wall street people "donate" billions of dollars to corpora
party (e.g. Republican Party and Democratic Party) candidates each decade. There's a revolving door between wall street and the top levels of th
US government that has been revolving for decades. Washington is wall street and wall street is Washington.

Uncle Sam might let the margin loan borrowers go down. Ditto for the repo agreement people. The derivatives are the financial elephant in the
room that no corporate party Presidential candidates or Congressional candidates want to talk about. Yet. Not all of the $315 trillion in derivative
in the US will go belly up. Most expire within 10 years, although some derivatives are for longer. In a close to worst case scenario, $135 trillion in
derivatives will go bad between late 2015 and 2020. Wall street can't pay $135 trillion for bad derivatives. So, how is the US government going t
pay for $135 trillion in derivatives gone bad in a collapsing economy?

Deagle Inc., a military/intel supplier, circulated a worst case scenario of US GDP falling from $17.4 trillion to $0.8 trillion and "depopulation" even
declining the US population from 319,000,000 to 80,000,000. Which would mean a drop in average GDP to about $200 per person per month in
USA (what the minimum wage is in some inland Chinese provinces).

The total that the government in the US has to pay is $32.77 trillion plus $7.252 trillion for pensions plus $7.21 trillion for government healthcare
(all 3 figures as of Summer 2015) equals $47.232 trillion plus routine Federal government operating costs of $2.6 trillion a year (excluding
Medicare & Medicaid).

Autumn 2015 bottom line: $49.832 trillion owing by the government in the USA.

Add $135 trillion in bad wall street derivatives by 2020 plus another $2 trillion borrowed by the government in the USA from 2016 to 2019 for
routine government spending. Add an additional $5.19 trillion in unfunded pension liabilities that the government in the USA will have to pay by
2020.

2020 bottom line: $192.02 trillion owing by the government in the USA. Costs spiral up during a debt collapse.

http://www.opednews.com/PRIVOXY-FORCE/populum/printer_friendly.php?content=a&id=194205 Page 2 of 4
Printer Friendly Page | OpEdNews 9/4/15 5:52 PM

How is the government in the US going to pay the $192.02 trillion it will owe? The total Federal budget is about $3.5 trillion a year. The total US
GDP was declared to be $16.98 trillion in 2014.

There are more government accounting tricks you should know about. The government changed how GDP is calculated. The US Federal
government decided as of 2013, to count Research & Development (R & D) twice each year when adding up the GDP number. Since GDP has bee
calculated, scientist salaries get added in with everyone else's salaries and R & D equipment spending gets added in with all other equipment
spending. Now each component of R & D gets added into the GDP number then the total R & D spending number gets added to the GDP number
too. The US Federal government added $0.5 trillion in R & D costs (like scientist salaries, R & D equipment) then they added $0.5 trillion in total
& D costs when calculating total 2014 US GDP. Clever huh? Counting R & D spending only once, the US GDP was $16.48 trillion in 2014.

A bigger trick is to count $2.627 trillion in "equipment depreciation" as current year GDP income. Equipment depreciation is the number that
corporations pick for corporate tax forms as a corporate tax deduction. In 2014, corporations wrote down $2.627 trillion as a number on tax form
to deduct from their profits, so that corporations did not have to pay taxes on that $2.627 trillion. The actual $2.627 trillion is for equipment that
was purchased years ago (or decades ago). None of the $2.627 trillion in equipment depreciation went into the economy in 2014. None of the
$2.627 trillion in equipment depreciation was income (or spending) in 2014, but the Federal government accountants liked counting $2.627 trillio
in equipment depreciation in 2014 as income because it makes the USA's GDP number look bigger by $2.627 trillion. Another clever trick to try to
make the US GDP figure look bigger, huh?

When we subtract equipment depreciation ($2.627 trillion) and R & D spending that was counted twice ($0.5 trillion), we get the real USA GDP
figure of $13.85 trillion for 2014.

100% government debt to GDP is considered to be the percentage where countries collapse from too much governmental debt. Government figu
of $18.5 trillion debt divided by $16.98 trillion GDP yields 109% government debt to GDP in the USA, a little over the 100% threshold for a count
to collapse from too much debt.

Greece was at just over 100% government debt to GDP in 2008 when their slow motion economic collapse began. By 2015, their economy has
declined so much that it's 180% government debt to GDP in Greece.

But, the US Federal government owes $49.832 trillion and the US GDP is only $13.85 trillion, truth be told. 49.832 / 13.85 = 360%. Government
debt in the US is at 360% of the US's GDP which is past the point for a collapse for any country.

The economic collapse, which has only just begun in the USA, is past due. Accounting tricks and fake numbers repeated often have tricked many
people into thinking the debt problem in the USA isn't as bad as it is. Truth be told, the debt problem in the USA is worse then US government
officials have been telling us. And it's going to get much worse as wall street's debts pile on during the current wall street meltdown.

If GDP contracts 10% during the first year of the USA's final economic collapse, then GDP will decline to $12.5 trillion in 2016. If only 10% of the
US derivatives go bad in late 2015-2016, then only $31.5 trillion in bad wall street debt will get added to the $49.742 trillion that the US
government owes. Bottom line: $81.242 trillion owed / $12.5 trillion GDP will equal 650% US government debt : GDP. Just 16 months into the U
economic collapse, the USA will be much worse off than European Union Member Greece is seven years after their economic collapse began. But,
Greece has been getting help from countries like Germany and France with it's debts.

In my first article, in this USA debt bombs bursting series, titled "Silent Run in Puerto Rico", I gave a snapshot of Puerto Rico's 2015 debt collaps
as a snapshot of what's coming soon to the USA as a whole.

In this article, I overviewed the big picture of how serious the USA debt collapse problem is, focusing on big ticket debt items like government
bonds, government loans, government credit card balances, what the government in the US has to pay for escalating pension and healthcare cos
and wall street's biggest debt item that will have to paid, one way or another, their derivatives. The government in the USA currently owes $49.8
trillion and the US has a GDP of $13.85 trillion which means 360% government debt to GDP in 2015.

These 3 figures go a long way to explaining why the stock market is crashing (again) and how the US stock market crash, credit crunch, commod
collapse, energy collapse and what not are all just symptoms of the larger problem: the government in the US is on the hook for too much mone
The reason for the USA's economic collapse is because of the USA's debt collapse which is because the government in the USA owes too much
money. With individuals in the USA owing $13 trillion and US corporations owing more than that, we can't generate new demand for Chinese goo
(or any country''s goods) anymore and that's boomeranging around AND the amount the government in the USA owes is going to ratchet up to
over $100 trillion before the decade's end.

The US government borrowed too much money. The US government owes too much money. Now, there are debt bombs bursting in the USA.
USA's debt collapse is the decline and fall of the USA. US style capitalism, based on money-lending and debt, is a miserable house of cards.
cards are now tumbling down in a gentle late summer breeze. What we see in Greece, Detroit, Puerto Rico and now the USA as a whole are the e
results of US style capitalism. (Muslim style capitalism, based on investment and joint ventures, in contrast, is faring better.) We need a better
system in the USA.

What we have seen happen in Greece, Detroit and Puerto Rico is what is now happening all over the USA. What led to too much government deb
in the USA (e.g. too much military/war/intel/secret police spending; too little wall street oversight), what will be the sequence of US debt domino
falling (e.g. will Kanakee County IL collapse first or will Perry County KY collapse first, Atlantic City NJ first or Yonkers NY first, Chicago or LA,
Illinois or New Jersey?), what will be the sequence of US debt collapse events (pension cutting, lethal healthcare rationing, $60 limit at the ATM,
"haircuts", banks seizing money from your bank account, bank runs, emigration, war, crime, QE4, hyper-inflation, hyper-unemployment) and wh
can be done about it are yet other installments past due in the USA debt collapse story. Coming soon.

Submitters Bio:

William Edstrom graduated from Columbia University in 2003. He has worked as a scientist for ten years, has co-authored publications in scientif

http://www.opednews.com/PRIVOXY-FORCE/populum/printer_friendly.php?content=a&id=194205 Page 3 of 4
Printer Friendly Page | OpEdNews 9/4/15 5:52 PM

William Edstrom graduated from Columbia University in 2003. He has worked as a scientist for ten years, has co-authored publications in scientif
journals such as Nature and the Journal of Biological Chemistry, and co-authored Agents of Bioterrorism: Pathogens and Their Weaponization, a
Life Sciences textbook (Columbia University Press, 2005). William is a member of the Educational Writers Association and he has also published
non-fiction work with Independent Media organizations such as the Mott Haven Herald and Truthout's Speakout.

Back

http://www.opednews.com/PRIVOXY-FORCE/populum/printer_friendly.php?content=a&id=194205 Page 4 of 4