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XMFRedwood (92.44)

Real Balance Sheet of the U.S. Government

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May 25, 2010 – Comments (1)

Has anyone ever looked at the balance sheet of the U.S. Government?  Check it out here, click on “Financial Statements” and go to page 11 of the document.  I'll summarize it quickly*:

Assets: $2.7 trillion

Liabilities: $70.6 trillion 

Net Worth: -$68 trillion

 

Breakdown of Liabilities

Balance sheet liabilities (incl. debt): $14.1 trillion 

Present Value of Social Security, Medicare etc.: $52.1 trillion 

Intergovernmental debt: $4.4 trillion  

Obviously the U.S. is a not-for-profit entity, but this is taking it a bit far!  If the government was a corporation it would clearly be bankrupt because lenders would cut it off.  The only thing that keeps it afloat is purchases of our debt by foreigners and the Federal Reserve (more on this in a future post).  Our size is a big factor too – everyone has a stake in the U.S. and stands to lose if we hit financial trouble.  But this doesn’t mean the current state of affairs will last forever.  How and when will this house of cards unravel?  This year?  Next year?  In 5 or 10 years?    

Andrew

* Healthcare and intergovernmental debt isn't on the official balance sheet but I have put it there because that's where it belongs.

1 Comments – Post Your Own

#1) On May 25, 2010 at 10:34 AM, russiangambit (29.30) wrote:

It would be intresting to make a DCF model of the US government so see whether it is really bankrupt - the income stream from taxes, an ongoing concern for next 200 years and the liabilities against that. Of course, at the rate we are going there is no income stream because all the income from taxes is automatically consumed by the ongoing liabilities.

On the other hand, some people would say (the prgcap coems to mind) that this disucssion  makes no sense because this is not how monetary theory works. A coporation cannot issue its own money but US government can. And it issues all the debt in that same currency. Countries go bankrupt when they issue debt in foreign currency. With debt in own currency US cannot default, technically because it can always issue more to cover the liabilities.

And further,  US money is  the reserve currency of the world.

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