"Forget the PIIGS; the U.S. is in worse shape."

There's been so much talk about the PIIGS--Portugal, Ireland, Italy, Greece and Spain--all of which (though Greece, primarily, in the recent past) have received special attention for being the weak links in the euro zone--potential sources of the collapse of the euro as a currency.

Really? asks Chuck Butler, president of EverBank's World Markets, in the lead story of the April Currency Capitalist newsletter.

You're afraid of Greece defaulting and causing the collapse of the euro? "It doesn’t make sense. Greece’s total contribution to the total Eurozone GDP is just 2%. If you remove 2% of the total Eurozone’s GDP, do you really think the EU will collapse? That’s like saying the U.S. GDP would collapse if Idaho left."

Add up all five of the PIIGs, and they account for just 14% of the total Eurozone GDP.

Here's what you and I ought really to be worrying about, Butler says: all the deadbeat states in the American federal union. "The list of deadbeat states includes the 'great states' of California, Michigan, New York, Massachusetts and even Obama’s territory, Illinois. Count up all these states’ debt and the 'hit' to the U.S. total GDP is more than 30%!"

Any one or all five of the PIIGS could leave the Eurozone--or be kicked out--and the hit to the states that remain would be relatively negligible.

But what can the United States of America do about any one--or all five--of the states that Butler mentions?

Absolutely nothing. "So the U.S. is saddled with these defaulted states’ deficits, whereas the Eurozone could very well say, good riddance to the PIIGS, and move on as a stronger entity!"

********

I have heard plenty about California's economic problems. I assume Butler knows this. So in his article, he takes on Illinois. Just to make sure we are listening.

“The state is in utter crisis,” said Representative Suzie Bassi. “We are next to bankruptcy. We have a $13 billion hole in a $28 billion budget.”

“The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400 million, are closing one day a week. Schools are owed $725 million. Unable to pay teachers, they are preparing mass lay-offs. ‘It’s a catastrophe,’ said the Schools Superintendent.”

I was reminded of Butler's article because of something I just read about Los Angeles being bankrupt today . . . though, apparently, the city may be able to hide the full depth of its problems until May 5th.

See the full sad story here.

Nationalized Health Care

I woke up Christmas morning thinking about this video (0:31):



The people who put the video together obviously believe that a nationalized healthcare system would be/will be a good thing.

Clearly, this family was put into a tremendously difficult circumstance. And then their neighbors came together and bailed them out. Indeed, all the footage and, it seems, all the music, too, is from neighbors' fundraising efforts.

"It took our neighborhood to come together to save us," the narrator says.

But rather than noticing how her family's difficult circumstance were actually overcome through unified community effort. And rather than noticing how truly thrilled participants seem to have been to have helped her, she concludes:
If we can get it in Washington Park [Winston-Salem, NC], then why can't they get it in Washington, DC? Look: "Public Option," "Trigger" . . . --I really don't care what they call it: something's got to change."

And then, finally, a placard: "Isn't it time to put people before politics?"

Ummmm.

My morning wake-up dream/thoughts included these things:

• I would prefer recipients of aid recognize it is a privilege and it is the result of the largesse--the charity, if you will--of those who make it possible for them to enjoy the help they are receiving.
   
• If we are receiving services for which we have not paid, that is a gift; it is not a "right."
   
• Someone is sacrificing in order to make it possible for any or all of us to receive medical help beyond our means. Those of us who receive that aid should recognize the sacrifices of others and express appropriate gratitude. We ought, certainly, not to take the attitude that the receipt of such aid is our "right" and we have the "right" to "demand" such aid.

Upon further reflection, what really bothers me is the notion that some bureaucrats in Washington can cobble together a better, more equitable, more efficient system--in the space of even a few months--than the free market, with all the competing forces of open competition, has been able to create over centuries.

Beyond that, I am deeply disturbed by what I have experienced within and under the drugs regime of our federal government.

I have meant to write on the problems of thyroid/thyroxine over the last couple of months. I expect I will finally get to it sometime in the next week.

I do not regard our government as my friend in the realm of pharmaceuticals. To put them in charge of our entire health care industry is downright scary to me.

*******
And one last set of comments.

I noted the concluding placard in the video: "Isn't it time to put people before politics?"

My question: Are we really dealing with "politics," here? Aren't we dealing with a bankrupt government, already acknowledging it is in debt equivalent to almost 100% of Gross Domestic Product (GDP) ($12.1 trillion of acknowledged debt in a country with a GDP of just under $14.25 trillion) . . . and, if it were to account for its contracted future obligations the way normal businesses are required to account for such things: its total "unfunded future obligations" amount to just a bit over seven times GDP ($106.5 trillion).

Let's put that into perspective.

The ratio of government debt to GDP is really not as important as government debt in comparison to government revenue. After all, the government can't consider total GDP as grounds for spending--either on new obligations or to pay off old ones. It can only spend its actual revenue. And when we look at the debt-v.-revenue numbers, here's what we're really looking at: a government with revenue of not quite $2.2 trillion and an acknowledged debt of $12.1 trillion already on the books.

Put in terms that you and I might be able to digest, that means a family with a net (post-tax) income of $35,000, has a current debt load of (12.1/2.2=5.5; 5.5 x $35,000 =) $192,500. And if we were to include future obligations not funded, the federal government's obligations, for a family with net (post-tax) income of $35,000 is (106.5/2.2 = 48.4; 48.4 x $35,000 =) $1,694,000.

--And this government--this government, that hasn't been able to balance its budget in more than 30 years--through good times and bad--is proposing to take on additional major obligations?

With what money? Whose money?

Do you think the Chinese, who hold close to $800 billion of our government's debt, and the Japanese, who hold about $700 billion, are going to sit idly by as American congresspeople continue to ratchet up their debt with no reasonable idea of how they ever intend to repay it?

I don't. And so, until the American Congress can come up with a plan to pay off its debt, I say: "No new purchases."