US Government has Pledged $23.7 Trillion
Today Neil Barofsky, the special inspector general of the Troubled Asset Relief Program (TARP), testified before Congress that the United States has pledged up to $23.7 trillion to provide stability to the current financial crisis.
If you remember, late last year our government committed $700 billion for the TARP program in order to save the financial sector and prevent a deep recession. What his report indicates is that the government has actually committed significantly more through several other federal agencies and programs (Federal Reserve, FDIC, FHA, GNMA…)
The mainstream media seems to be downplaying his report and testimony. They state that some of this guarantee is for FDIC and obviously all banks will not fail and therefore his number is wildly inflated. But I argue, if you cosigned a loan with someone, would you not want to know your true exposure? Especially since it is twice our GDP?
What else does all this mean? As we continue to issue more debt (i.e. print more money), we continue to be at the mercy of our creditors and lenders (such as China and Japan). What would be the result if the supply of our debt far exceeded demand? What happens if our creditors stop buying our debt due to a fear of our ability to repay? Or fear that when we repay, the value of our currency will be worth much less?
I fear that the result of all this debt is higher interest rates, a devaluing of our dollar, much higher taxes for everyone, and much higher inflation. This may not happen overnight, but you do not need to be an economist to figure out we are in a mess.
Click on this link if you desire to read his entire report or just the executive summary. I would really enjoy hearing your thoughts on this issue.
by Scott Heintzelman - Scott is a CPA, CMA and CFE living in Pennsylvania. Scott is a partner serving on the executive team at McKonly & Asbury LLP, a regional accounting firm with multiple offices in the Mid-Atlantic. The firm has been an IPA ALL-STAR as well as winning Best Places to Work in Pennsylvania for numerous years.