Letters 4 – 20 – 2011

S&P cut its outlook on the triple-A rating of U.S. debt to negative  

“We’re really canceling something that didn’t exist,” was former Federal Reserve Chairman Alan Greenspan’s response to proposed cuts in promised Medicare and Social Security entitlements, this, on last week’s “Meet the Press” show. Why didn’t they ever exist? Because the promised benefits were never affordable in the first place. The promised benefits were mathematically and actuarially impossible to meet.

The S&P cut to its outlook on the triple-A rating of U.S. debt to negative prompted me to put together the attached file, displaying 20 PowerPoint charts.

We are not in a “Recession,” as is widely thought.

We are in a deep and prolonged “Deleveraging” process, caused by decades of largely unproductive accumulated debt, also known as “leveraging,” (see attached PowerPoint charts).

This debt has shown little return-on-investment, as much was spent on transfer payments (think entitlements) and consumer-consumption, rather than fixed infrastructure investment and structural regulatory, tax, bureaucratic and agency reforms; all necessary for the kind of innovation and productivity required of an aging and outdated 20th century, sclerotic economy.

The world is now broken up into two parts: 1) that of the developed and debt-ridden nations of the U.S., Europe and Japan and 2) that of the fast growing, nimble emerging nations of China, India, Brazil, etc…

Look for competitive currency devaluations and interest rate risk to become household names.

Included in the PowerPoint charts are likely outcomes and solutions and there is this, as well:


Tom Licata


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Note: Rob Roper is on vacation this week. Please send your letters and comments to Robert Maynard at robmayn@myfairpoint.net.