Saturday, April 12, 2008

Three Additional Sites Added to the Compendium of Financial Disaster Websites

12 April 2008

I have added three new sites to my previously-published Brief Compendium of Financial Disaster Websites.

The additions to the
original post are entered below:

I have decided to add a link to the US Bureau of Economic Analysis to my inventory of "financial disaster websites." In other words, if you are skeptical, you don't have to believe third party sources. The US Government itself can tell you how bad things are in many domains (though don't believe the inflation or aggregate money supply numbers for a moment, those have been reworked to the point of near-meaninglessness).

Some tidbits from the site.... The US net investment position recently stood at -$2.5 trillion. What does that mean? Foreigners own $2.5 trillion more of US assets than American own of the assets of other countries. (The US has never before been in such a position - this is the first time in US history that this has occurred.) In other words, while Americans have been buying goods and services abroad at a furious pace - rather than saving - foreigners have been buying America's assets in turn.

Warren Buffett has commented on this phenomenon eloquently in his classic "Squanderville" parable.

It's difficult to evaluate who is gaming whom, however, as the assets that Americans are giving away - at a $700 billion per year clip - are rapidly declining in value (at a now almost 20% per year rate, based on estimated M3 money supply figures as of April 1, 2008, and in recognition of flat or negative current recessionary GDP growth).

On the personal side, Americans'
interest payments on debt were up from $208.3 billion in the first quarter of 2005, to to $272.3 billion in the last quarter of 2007. Net personal savings between 2005 and 2007 ranged from -0.5 to no more than 1.0% of net income on a quarterly basis. In other words, Americans are saving very little, and were paying 31% more in interest payments (due to their mounting debts) from Q1 2005 to Q4 2007, against an increase in disposable income of only 14% (virtually all of which got disposed of, by the way, with negligible net savings, as mentioned).

Strikingly, despite repeatedly-cited sweeping tax reductions under the Bush administration, personal tax payments were up much more than disposable income, 29% during the same period. This is not an issue I have studied, but the data seem to give the lie to the notion that tax savings are boosting the American economy, at least at the individual taxpayer level! I am certain that funds to maintain the $3 trillion Iraq War have to come from somewhere, and it appears that financially strapped taxpayers have been doing their bit - though their ability to continue footing the tax bill will certainly decline as the recession advances from its current early stages.

As taxpayers progressively lose the ability to fund American government expenditures during the recession, my guess is that even more monetary expansion will be called for, spelling further pressure still for the beleaguered US Dollar, and reinforcing the fundamental strength of the precious metals.

If you're looking for ongoing analysis of America's recently-acquired wasteful ways, go no further than Bill Bonner's Daily Reckoning Website. While there are hundreds if not thousands of financial analysts who are critical of America's profligate financial habits, probably none has been more vocal nor consistently articulate on this issue than Mr. Bonner.

Oh, and here's a third one, which I just decided to add at the last minute. The Heartland Institute was formed to discover, develop, and promote free-market solutions to social and economic problems. Among other issues, the Institute is concerned with the issue of unfunded government liabilities, which, on the other side of the coin, are viewed as so-called citizen entitlements.

The folks at Heartland make clear that while Social Security may be an unfunded liability, it is unlikely to be an entitlement for young Americans, as the government has pocketed citizens' contributions so far, and simply plowed them into unsustainable government expenditures.

I probably don't agree personally with all of the Institute's positions on issues, but I will aver that the free market approach of the Institute is refreshing!

Remember to visit my original post for the initial compendium, as entered on April 6, 2008.

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