US Debt

Right now, US has an overall debt load (short, long-term including the present value of future unfunded obligations to the Social Security fund, Medicare and Medicaid) as follows:

1. Overall Federal debt: about 100% of GDP
2. State and other public debt including Fannie, 3. Freddie, Sallie Mae, FarmerMac, etc.): about 100%-180% of GDP depending on method of calculation
4. Private sector debt (corporate and personal, mortgages, car loans, credit cards, leverage buy-outs, etc.) about 250-280% of GDP
5. Present value of unfunded/shortfall of Social Security Fund, Medicare and Medicaid between now and 1035: 350% of GDP
6. Various bailout deals and crash prevention programs, etc. 12% of GDP so far plus at least another 25% in the works for the next 2-3 years.

Add it all together, put it all in a pool and then slice it into a debt rescheduling program over the next 30 years and you will soon figure out that the debt load is just too large to be managed by current methods and economic programs.

This is the biggest economic readjustment since the implosion of the USSR.

Also, the total dollar sum is too large to be manageable by some sort of a worldwide rescue program.

The options are:

a) Repackaging and rescheduling of U.S. debt--something that many others have tried and done, some successfully like Russia as successor to all of USSR debt, some failures like Argentina that repeats the usual default show, some others like Europeans from 1950s to 1980s that finally reduced their debt enough to turn around and breath comfortably.

b) Default and renege. I give it 50-50 chance that it will happen and creditors will be forced to take less than 100 cents on the dollar, over a 30-50 year rescheduling.

c) A very tight financial discipline and reformulation of finance to present a business plan for either (a) or (b) above feasible.