Porter Stansberry's Analysis of the American Debt Problem

Porter Stansberry, a conservative financial and societal analyst wrote an analysis yesterday in his S&A Digest that puts America’s financial cards on the table.

1. The Federal Reserve’s QE2 program has bought back US Treasuries in a scope equal to about 70% of all the Treasuries issued during the QE2 period. The effect is to pay our international creditors with paper money created by Federal Reserve Chairman Bernanke for just that purpose.

2. Stansberry’s view is that President Obama has ordered an investigation of the oil industry to hide the fact that the US Federal Reserve has, by creating all the above Dollars, started an inflationary spiral upward that will make petroleum, gasoline, food, clothes, and almost everything we use more expensive. The price of gold, silver and most other commodities is rising because investors and ordinary people are buying them to try to protect themselves from inflation and the weakening US Dollar.

3. Stansberry wrote: “We spent $2.3 trillion on direct benefits to taxpayers last year, while the government's total income was only $2.2 trillion. Roughly 60% of all Americans now receive some significant financial benefit from the government. Meanwhile, less than 50% of all people pay any federal income taxes. And roughly 10% of all taxpayers foot virtually all the significant income taxes levied.” But, 75% of Americans continue to agree that the “rich” should pay more taxes.

4. In order to stop the collapse in the value of the US Dollar and the inflation that accompanies it, real budget control must start now.

5. Stansberry’s figures show that “even if you collected 100% of the income of all the people who make more than $250,000 a year, the U.S. government would have still run a deficit last year. Even if you doubled the entire amount of income taxes collected, the Federal government would have run a deficit last year. There is no way to balance our budget, no way to prevent the literal bankruptcy of our country and the runaway hyperinflation that would result, unless we dramatically cut the government's budget. We have no choice.”
6. Stansberry analyzes the problem of taxes and spending as follows: “GDP is roughly $14 trillion today. So no matter how you organize the tax base, you end up with $2.8 trillion to spend….[But]…you've got interest payments and debt repayments ($500 billion per year) to make….That leaves us with roughly $2 trillion to spend. Here are our current expenses: Medicare and Social Security are now spending $1.5 trillion and will quickly grow…. The military spends over $700 billion each year. Domestic social programs (food stamps, Department of Education, etc.) cost $500 billion. Federal pensions cost more than $200 billion a year. So... we've got $2 trillion to spend....but our bills are running to $3 trillion per year, and they're scheduled to increase, substantially.”

If Stanberry’s analysis is correct, and I have no reason to doubt it, then my conclusion is that we have to cut $1 trillion from the budget NOW. Not the $60 billion that Democrats and Republicans are bickering over, but real money, and if we don’t step up to our responsibility, we will be the generation that destroyed America forever. Stansberry said that if we don’t do it now, “there's no longer any doubt our currency will be destroyed, our savings lost, and the assets of our country stripped by foreign creditors.”
As Tea Party founder Rick Santori keeps asking, how bad do things have to get before we wake up and do what has to be done? The clock is ticking and there is much less time left to act than President Obama would like us to believe.