When our great leader came into power on January 20,
2009, the government's many debts added up to $10.6 trillion.
This week, with his regime less than four years old, the
Red Sea of debt has risen by 51%, broaching the latest debt ceiling of $16
Maybe, just maybe, justifying the critics in their
claims that some of the clowns in Cirque de Obama lack a certain
restraint when it comes to using the national credit card.
Now, I could go on at great length about this lack of
restraint, or the inevitable consequences that must follow as surely as cries
of global warming follow every warm day, but the latest e-letter assembled by
dear friend and La Estancia de Cafayate neighbor Susan
"Kung Fu Girl" Fuji covers the territory very well.
And so, out of a combination of sloth and admiration
for her article, I received permission to reprint her letter below. As you'll
read, by bringing together a number of sources on the topic, Kung Fu Girl
does a solid job of shedding light on just how much one trillion dollars is.
Getting a clear understanding of what a trillion
dollars actually is – and sharing this information with your friends
and family – is important, because by now it is abundantly clear that
the administration firmly intends to follow Keynes straight into fiscal, then
monetary, hell. If you were to listen to luminaries such as Nobel Prize
winner Paul Krugman, government borrowing and
spending even at the current torrid pace is trivial and not nearly enough.
Yet, for most people, the mention of a trillion dollars
doesn't mean much at all… it's just another abstraction in a world of
abstractions. Kind of like drone attacks.
But what, exactly, does over $5 trillion in fresh debt
since the Obama show began actually mean? After all, some day it has to be
paid off, right? (Of course, on top of this is another tens
of trillions of dollars in unfunded government liabilities related to various
And to shed light on that, here's Kung Fu Girl…
Holy Smokes, Batman, $16 TRILLION?
By Kung Fu Girl
One of the biggest promises I made to you when starting
Kung Fu Finance was to tackle the job of demystifying finance for you, to the
best of my ability.
For an industry that prides itself on words like
"credit default swaps," "derivatives," "inverse
yield curves," "gold-to-silver ratio," "diminishing
returns," "ROI," "Capex,"
"P/E ratio," "beta" and more, that's no easy task!
Even the very numbers themselves are difficult to
understand or imagine.
How does one envision a trillion dollars?
Let alone $16 trillion… the
threshold that the US crossed just yesterday on our debt!
Yes, the US debt surpassed $16 trillion
yesterday. It's not "official" quite yet as the 2-year bond auction
that pushed us over the edge still needs to settle, but next week this will
be all over the financial news.
Zero Hedge wrote a great article on this
that I highly recommend you read – it's short, sweet and to the point,
and Tyler points out that it took only 286 days for us to add
another trillion to our debt (whereas it took 200 years
for us to accumulate our very first trillion!).
At this rate of growth, our total US debt load will
surpass (not including unfunded liabilities):
- $17 trillion on June 10, 2013;
- $18 trillion on March 23, 2014;
- $19 trillion on January 3, 2015; and
- $20 trillion on October 16, 2015
But hey, at this point, we're so used to hearing those
numbers tossed around like fluff… "million,"
Who can even grasp how much that is or what that really
means to our economy?
My poor little brain certainly cannot get a handle on it…
how much is $16 trillion anyway? Is it possible to ever
pay off this debt?
These are the questions I've been asking myself for the
past several years, and recently I found an outstanding video from Tony
Robbins who has the exact same questions I do, and who actually answered
them in a
great little video in simple, easy-to-understand human terms!
I highly recommend you watch the video if you have the
time (it's less than 20 minutes), but in case you are time constrained (like
me!), I'll net it out for you below, because I found it very helpful in
framing the problem that we are facing here in the US (and just how massive a
problem it is).
How on earth do you envision a number like a billion or
Well, you have to convert it to something we can relate
to, like seconds.
How long ago was a million seconds?
(Kung Fu Girl, ever bad at estimating things like this,
has no idea… maybe a month?)
What do YOU think?
Was it a day ago? A week ago? A year ago? 10
seconds was 12 days ago.
How about a billion seconds?
(Kung Fu Girl, again clueless… maybe several
seconds was 32 years ago.
That was back in 1980, when Carter was president, The
Empire Strikes Back was in the box office, and yours truly had big '80s
hair and used way too much Aqua Net.
Just look at that comparison for a minute, a million
vs. a billion… that's 12 days vs. 32 years, a huge
But the number we hear thrown around by politicians
today isn't a million or a billion… it's TRILLIONS.
And as I said above, our debt just passed $16 TRILLION
So how long ago would a trillion seconds have been?
500 years? 1,000 years?
seconds was… just short of 32,000 years ago!
That's back in the day when man wasn't even known as
MAN… we were homo sapiens, Neanderthals, to be exact!
The second from the right... Homo neanderthalensis.
I don't know about you, but that certainly helps put it
into perspective for me.
32,000 years ago, a trillion seconds, was
a very, very long time ago.
And, if you earned a million dollars every single
day of your life and you started in the year of Jesus Christ's birth,
making a million dollars every single day up to 2012, you would not
even be close to earning a trillion dollars.
It would take you almost 1,000 years to
earn a trillion dollars!
And that's just ONE trillion…
But our national debt just passed $16 trillion
(and that's not counting the $117 trillion of unfunded liabilities like
Medicare and Social Security!).
Tony's team built on the work of Iowahawk,
updating all of the US budget numbers for 2012, to attempt to answer the
"Just how are we going to pay for all
of this debt?"
Because in 2012 alone, President Obama and Congress
plan to spend $3.79 trillion.
That is $10.4 billion a day that we have
to live on, and we borrow more than $4 billion of that each day just to stay
So, what should we do?
Well, Tony and Iowahawk
suggest we start with two of the biggest and therefore "most evil"
corporations in America, Exxon Mobil and Walmart,
and take every single penny of their combined 2011 global profits. No one
will have a problem with that, right, because these "evil
corporations" should pay!
That number is $46.7 billion, which gets us from
midnight on January 1, 2012 to 12:45 PM on January 5th.
That's ALL the global profits from two of
the largest corporations in the world, and yet we've barely funded the
government a few days.
Well, what about the other 498 companies on the Fortune
500… why don't we take all of their profits, too?
That gets us $567 billion, and to 12:15 AM on February
Unfortunately, that's nowhere near where we need to be,
and is only a few weeks after the Super Bowl.
Speaking of the Super Bowl, and all of that awful
corporate advertising, let's grab that too – all corporate advertising
from 2011 gives us another $200 million and runs the country for
Not even a dent.
Well, let's take ALL of the 46 years'
worth of Super Bowl ads – that ought to be huge!
And it is… that's $5.2 billion, which brings us
12:15 PM on the same day, February 29th.
OK. Obviously we need to do more – these Fortune
500 corporations and their advertising are simply not doing the trick.
So, let's really do it. Let's soak those rich people.
We can start with athletes… everyone knows they
are wildly overpaid anyway and add no value to the world (kidding…), so
let's take all of the salaries of everyone in the NFL, NBA, NHL, MLB, the PGA
Tour and NASCAR. Not their endorsements but their salaries, total $10.1
(Remember, it takes $10.4 billion to fund the country
That gets us to…
11:35 PM on the next day, March 1st.
Well, what about the really rich people?
Let's take 100% of every penny of everyone who makes
above $250,000 per year.
According to the 2010 census, there are 2.35 million
households that make more than $250K per year, and the total income from all
of those households is $1.363 trillion.
Now we're talking!
So let's just eat them and take everything that
everyone makes over $250,000 a year, and see where that gets us…
To 1 PM on July 10th.
We've taxed the richest people and the richest corporations,
and we're barely halfway through one year – we're going to have
to start cutting spending somewhere.
But where to start?
Well, let's stop spending on the wars in Iraq and
Afghanistan… I'm sure a lot of people would like to see that happen!
Let's stop spending on that tomorrow and bring
everybody home, and that will save us $117 billion, which is enough to get us
to 8 PM on July 21st.
Well, shoot… that's only 11 more days!
But who else can we tax who's living too well? We still
need more money!
Well, Iowahawk says, screw
you, Star Wars (yes, THAT Star Wars…)
we're going to take every penny you've ever made from movies, toys,
lunchboxes, the whole shebang!
$26.6 billion... not too shabby!
It took you 35 years to come up with $26.6 billion, so
we will implement a retroactive tax and take it all, which will bring us
9:20 AM on July 24th.
And speaking of those fancy Hollywood people…
we've already taken all of their money, but why don't we evict everyone in
We'll confiscate their homes and sell them all at
market value and take all of their sales proceeds. That will bring us another
$48 billion, which is enough to get us to…
Damn… we're still only in JULY.
This is still not working. What else can we do?
Michael Moore assures us there is plenty of money out
there, all tied up with the rich…
Let's see…those well-known billionaires, Warren
Buffett and Bill Gates, are worth $100 billion between them.
Maybe it's time for an "accidental fall down the
stairs"…? The inheritance tax will then allow us to keep half of
that, $50 billion, and that will bring us to…
7 PM on August 2nd.
But let's get serious, there
are 398 more billionaires, according to the Forbes 400, with a combined total
net worth of $1.4 trillion!
Let's just kill them all off and take 50% of their
estate! That's another $700 billion, which brings us to:
2 AM on October 9th.
At least we've made it to autumn!
But forget this 50% stuff… heck, let's just take all
of their money, plus that of the hundred or so other "almost
billionaires," which buys us another 32 days, to:
12:30 AM on November 10th.
That's the start of the holiday season, so let's get
our Grinch on… let's confiscate all of the proceeds from all of the
expected holiday sales!
That's $469 billion, which brings us to:
12:55 PM on December 25th.
Merry Christmas! We're almost there…
And remember, this money is for America's poor, so
let's get rid of all foreign aid, the dying-children aid, those things we're
trying to make a difference with… let's keep it all for ourselves!
That will bring us another $53.3 billion and take us
3:55 PM on December 30th.
We STILL have a day and change to pay for.
So, in order to cover the remaining $13.8 billion,
let's hit up every single man, woman and child in America (that's 311 million
people) for $44 each, to pay up.
Finally, at 12:00 AM, January 1, 2013, we have made it.
Happy New Year.
But what happens next?
We've already taken all of the profits, all of the
salaries, all of the assets and all of the revenues and holdings of the rich
and of their corporations, and we've liquidated them.
We have destroyed all advertising revenue, professional
sports, movie stars, etc… and we have scraped through for only ONE
We have killed off the golden goose… there are no
more golden eggs. No more profits or revenues available to tax.
Meanwhile, President Obama and Congress are proposing
to spend another $3.8 trillion in 2013.
How are we going to pay for that?
Well, grasshopper… I think you get the point.
Besides having a firmer grasp of the utter
gargantuan-ness of these numbers, I hope you understand just how much
we need to sacrifice to bring our debt under control… and how much the
politicians are not talking about this, on either side, at
least in any frame of reference that will actually make a difference.
Because despite the somewhat rosy revision of today's
GDP report (hey, we can grow our way out of this, right? And avoid all of
those tough decisions!), we have a real fiscal solvency problem on our hands.
This matters to you as an investor.
I dearly hope you're not investing in Treasury bonds
(we talked about how to short those a
few QnA's ago…), and I hope you can see that
rampant inflation looms not far in the future (although we may see a brief
deflation first, depending on Europe).
Unfortunately, our investment decisions can no longer
be made based solely on market or asset fundamentals… we truly do
live in a politicized economy.
On that note, I am off to the aptly-named Casey
Conference next week ("Navigating the Politicized Economy"), and I
hope to see you there! If you are not able to attend in person but still wish
to hear the information, you can pre-order the Summit CDs at a
I hope this helped you understand these crazy numbers
and our debt a little better… please let me know your opinion in the
To your financial success,
mentioned Kung Fu Finance before, and Kung Fu Girl's regular missives. They
are well worth adding to your already stuffed inbox. For more on Kung Fu
Finance, and to sign up for her free e-letter, click here.