Economic Collapse: The Financial Death of the US Empire

The US stock market has dropped 2500 points in 9 days. Trillions of dollars in wealth disappeared as the Dow lost six years worth of growth. The Bush administration and Congress have tossed ever increasing amounts of money at failing firms, hoping to appease the economic gods, rather as the ancient Canaanites sacrificed children to Baal. But the markets refuse to be appeased, and financial contagion has circled the globe. Twelve more days like that and it hits zero.

Even before the economic crisis spiraled out of control, the US government was effectively broke. The national debt currently stands at $9.8 trillion, up $4 trillion (about 72 percent) since George W. Bush took office. With the pre-bail-out federal deficit in 2009 expected to hit a half trillion dollars, earlier this year Congress upped the debt ceiling to $10.6 trillion. But truly frightening are the many liabilities yet to come due. Uncle Sam is an extraordinary wastral and soft touch, like the person who cosigns notes for relatives, buys rounds of drinks for his friends, and promises everyone he knows that he'll take care of them.

The federal government makes loans and loan guarantees for most any purpose known to man or woman – education, energy research, housing, agricultural land, airlines, veterans, and more. The Federal Deposit Insurance Corporation is billions of dollars short of the reserves necessary to cover expected bank losses. Washington is on the hook for generous pensions for its own workers as well as billions of dollars in guarantees of pensions for private workers whose companies fail. Then there's Medicare and Social Security, which together have an unfunded liability – that is, promised benefits exceeding expected revenues – of more than $100 trillion. No one knows where the money is going to come from to pay all of these bills, but that hasn't stopped Congress from continuing to expand benefits. In 2003 the Republican Congress and Republican president created the Medicare drug benefit without bothering to figure out how to pay for it, adding trillions of dollars more to the system's unfunded liabilities.

Now the government's liabilities are going up again, as Congress and the administration spend wildly in an attempt to revitalize the economy. Indeed, the administration and Congress apparently are prepared to bankrupt America to save American business. So far this year they have spent: $850 billion for the Wall Street bailout plus the financial "sweeteners" needed to buy enough votes for passage; $300 billion to bail out the housing industry largely through the Federal Housing Administration; $200 billion in Federal Reserve loans to commercial banks; $200 billion (and probably more) to bail out and essentially nationalize the political piggy banks Fannie Mae and Freddie Mac; $144 billion or more to buy mortgage-backed securities through Fannie and Freddie (yes, the same entities being bailed out by Uncle Sam because of their past purchases of bad debt); $87 billion to repay JPMorgan Chase for financing Lehman Brothers trades; $85 billion for a loan to bail out and effectively nationalize insurer American International Group; $50 billion to guarantee money market funds; $37.8 billion in a second loan to AIG, $29 billion to finance the buyout of Bear Stearns; $25 billion in loans to the auto industry, which continues to sink as demand for cars falls; $10 billion in direct Treasury Department purchases of mortgage-backed securities; $4 billion in mortgage community grants.

That's $2 trillion.

Read more here and here.