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The Daily Reckoning Weekend Edition Saturday, January 8, 2010 Buenos Aires, Argentina Letters to Congress: Timothy Geithner vs. Addison Wiggin, The soaring national debt and what it means for you (and your children), Plus, all the reckonings from this past week, ready for America's retirement reading... ------------------------------------------------------- Patrick Cox Announces His Predictions for 2011... Five Market "Wealth Quakes" Could Land You 10,720% Gains in the Next 13 Months New presentation reveals shocking 2011 predictions! These five "Wealth Quake" events could make you 10,720% richer in the next year...just for starters. But you must hurry! This epic presentation expires soon. For the biggest shot at huge wealth - watch this right now. ------------------------------------------------------- Joel Bowman, from Buenos Aires, Argentina... Let's have some fun with numbers. According to the official figures, the national debt currently stands at $14.01 trillion dollars. That's more than $45,000 per citizen, or almost $127,000 per taxpaying American. If you add in debt held by households, state and local governments and financial institutions, that number (the total US debt) blows out to well over $55.5 trillion, or more than $680,000 per average family. How much in savings does the average family have to offset this amount? $7,918. "Now just hang on a second," we hear our fellow reckoners moan, "wasn't this supposed to be fun with numbers?" Wait for it... Letting these figures run for a few years, based on their current trajectories, we see that, in 2015, the national debt explodes to over $22 trillion dollars. Per citizen, we're now looking at close to $70,000, or $184,000 per taxpayer. Total debt, as measured above, has now grown to over $63 trillion and the average family's share of that stands at nearly three-quarters of a million dollars. Average savings per family, by the way, have now fallen to just $2,791. And this doesn't even account for unfunded liabilities, which are growing like mould on cheese. According to Professor Laurence Kotlikoff's estimate, total US off-budget and on-budget debt comes in at more than $200 trillion. We'll leave you to do the math on everyone's share of that one. Of course, by the time you read this, these numbers will be yesterday's news, new and larger ones having taken their place. So where's the fun, you ask? Where are the rib-ticklers, the knee- slappers and the side-splitters? Glad you asked. With the national debt currently standing at $14.01 trillion, the US is just weeks away from busting through its so-called "debt ceiling" of $14.29 trillion. As usual, politicians have gone out of their way to miss the point entirely. Earlier this week, Treasury Secretary Timothy Geithner wrote a letter of concern to Congress. You might expect it to contain a desperate warning about how grossly enlarged the debt had become. Not quite. Geithner's letter, instead, warned of the "catastrophic consequences" of not raising the debt ceiling! Consequences, said he, which "would last for decades." Right, because the consequences of running up gargantuan deficits against your global competitors never carry lasting consequences. The problem, apparently, is that America doesn't have enough debt. She obviously needs room to accrue more, to really hit her gluttonous stride. Just look at all those nations throughout history that have successfully borrowed their way to prosperity! There's...um...er...hmmmn.... The letter continues, "Never in our history has Congress failed to increase the debt limit when necessary." Gee, could that be part of the problem? Are you laughing yet, Fellow Reckoner? No? What a wonderful comedy this would be...if it weren't so darned tragic. In response to Geithner's letter, Agora Financial's executive publisher, Addison Wiggin, penned his own letter to Congress. We are proud to republish it, in its entirety, as this weekend's guest essay. Please feel free to forward it to your friends...even if they work for the government... ------------------------------------------------------- January 7, 2011 The Honorable Harry Reid Majority Leader United States Senate Washington, DC 20510 Dear Mr. Leader, I'm writing in response to Treasury Secretary Timothy Geithner's appeal to you to raise the debt ceiling. I understand that you didn't ask for my opinion. And with no political positions on my curriculum vitae, you may not even recognize my name. But I have co-authored two books warning about the United States' fiscal situation, starting with Financial Reckoning Day in 2003 and followed by Empire of Debt in 2005. I mailed copies of the latter to you and the other members of Congress free of charge. While it may not be sitting on your nightstand, I trust that you're at least aware of the book. After we published the book, I wrote and produced a documentary, I.O.U.S.A., which was screened in competition at the Sundance Film Festival, nominated for a Critics Choice award and shortlisted for an Academy Award. The film attempts to present the fiscal crisis facing the United States in a way that the average American could understand. The film took two years to produce and premiered on Aug. 22, 2008 - almost a month before Lehman Bros. declared bankruptcy, kicking off the Panic of '08. So after a decade of attempting to bring the root causes of our economic woes to light, I humbly suggest that the shortsighted tone of Mr. Geithner's appeal is itself part of the problem. It is, in fact, no different than Secretary of Treasury Hank Paulson's frantic three-page proposal that kicked off the bailouts in September 2008. Sir, in short, by raising the debt ceiling, we're delaying the day of reckoning yet again. Instead of paying for our excessive spending today, we'll pass that burden on to our children and grandchildren. I have three young children. And I, like many Americans, already find it a challenge to educate them and provide for their health care. Now I must also worry about what their future is going to look like...what opportunities will they find when it's their turn to join the work force or start businesses? Mr. Geithner shares his fears of a default in his letter to you. But his request simply means my children - everyone's children - will have to deal with that default on their own. Do we really want our children burdened by higher taxes, excessive government regulation, higher mortgage rates, reduced incentives to start their own businesses and, as things are going, the end of the freedoms that you, Mr. Geithner, the rest of the American public and I cherish? Freedom is the very promise that America bestows on history. But now, through our own malfeasance, we are in a position of telling the world, "We cannot afford to offer you the opportunity to enjoy that freedom anymore." How did it come to this? And why perpetuate the very malfeasance that threatens our future prosperity? For most of America, understanding the fiscal condition of the nation is no easy task. For that, they place their trust in you. No doubt, it's easier to do exactly what our Treasury secretary is asking you to do - ignore the problem and continue to kick the can down the road. But I'm asking you, on behalf of future generations, to think deeper about the problem and begin addressing it today. To help you with your decision, here are some images you can use to illustrate the magnitude of the national burden. As Mr. Geithner stated in his letter to you, "In February of 2010, Congress passed legislation to increase the debt limit to $14.29 trillion." To grasp that staggering figure, imagine stacking $100 bills on top of one another. To reach $14.29 trillion, your stack would soar 9,721 miles into the sky! Said a different way, that's like 1,767 mountains of $100 bills the size of Mount Everest piled on top of each other. Of course, the current debt wouldn't be a problem if tax revenue were exceeding our spending and therefore reducing the debt. But we both know that is not happening. Even if we taxed all Americans 100% of their income for an entire year, we still wouldn't be able to pay off our $14.29 trillion hole What's more, the interest we're paying on the current debt is forcing us deeper and deeper into the hole. According to the TreasuryDirect.gov website, the interest payment on our debt was a massive $1.13 billion per day - for a total of $413 billion - in 2010. The interest payment alone amounts to record-breaking deficits hit during the Bush administration just a few short years ago. If you agree to raise the ceiling, you effectively agree to drive up the interest payments until they exceed tax revenue - creating a situation in which we'll be forced to default, eventually. And the longer it takes to happen, the worse it will be for our children. The Treasury secretary outlines how catastrophic a default would be for the financial system and the integrity of the United States: Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. When, I ask you, do we begin addressing the root problem? When do we admit that we're spending beyond our means and begin to address the problem in earnest? "We can live beyond our means for a very long time," to paraphrase a leading financier from I.O.U.S.A., "and we can do it on a very large scale - but we cannot do it forever." The United States is like a private company suffering from a pension burden it did not plan for and that is losing market share because its products are no longer competitive. And it is as if the management has decided to take an extended vacation, rather than hold a meeting to find a way out of the hole. In Congress, you don't address the real problems. You talk around them, play politics with them and then make frantic appeals at the 11th hour to borrow more money to paper over the problems again for yet another year. At this pace, how do you honestly believe the government will ever balance its books again? In the era of uncertainty created by mayhem in Washington and ever-increasing global competition, how do you expect the economy to get back on track? Let's put the numbers aside for a second. I'd like to ask you a simple question: Imagine for a moment that you've chosen to smoke cigarettes all your life. You've ignored the warnings about them that appear all around you. Then, eventually, and unfortunately, you get diagnosed with lung cancer. Luckily, you've caught the disease in its very early stages. The doctor presents you with two choices. First, you can enter chemotherapy. The road to recovery, the doctor tells you, will be harsh. You'll suffer extreme nausea. You'll hardly be able to swallow from the ulcers you develop in your mouth. In short, you'll go through hell in an attempt to beat the disease. But because you caught the disease after the first symptoms appeared, you have a high chance at a full recovery. The doctor also offers a second alternative. He's worked out a deal that allows you to rid yourself of the disease instantly. No pain. No suffering. No hell. All you have to do is agree to give the disease to your 2-year-old grandson. Would you make that deal, Mr. Leader? I trust you'll make the right decision about our nation's fiscal health. At the very least, there needs to be an honest debate over raising the debt ceiling. If you provide the rubber stamp Mr. Geithner is asking for, you will be as guilty as he of passing the buck. Each time the buck gets passed, the stakes get higher. The default Mr. Geithner fears only looms more ominous in our future. The newly elected speaker of the House, John Boehner, has gone on record saying he'll agree to increase the debt limit because we have to be "adults" about addressing the fiscal crisis the nation faces. What, may I ask, is "adult" about failing to address this issue altogether? Sincerely, Addison Wiggin Executive publisher, Agora Financial Co-author, Financial Reckoning Day and Empire of Debt Executive producer, writer, I.O.U.S.A. cc: The Honorable John A. Boehner, Speaker of the House The Honorable Nancy Pelosi, House Minority Leader The Honorable Mitch McConnell, Senate Minority Leader The Honorable Dave Camp, Chairman, House Committee on Ways and Means The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means The Honorable Max Baucus, Chairman, Senate Committee on Finance The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance All Other Members of the 112th Congress Joel's Note: A nation doesn't just wake up one day and discover it owes more money than it can possibly repay. That takes years - decades even - of neglect, denial and dishonesty...at all levels, from individual to state. Maybe those to whom the above letter is addressed will discover suddenly the necessary backbone to do what's right. Maybe not. As far as we can see, you've got two choices: 1. You can trust your elected officials, your "leaders," to do the right thing, to make the tough decisions they've avoided making up until now, or, 2. You can take responsibility for your own future - educate yourself and your family on what's happening and how to prepare yourself accordingly. When Agora Financial acquired Laissez Faire Books, we did so with the goal of promoting liberty and the rational economics that best supports it. If you are interested in learning more, feel free to visit the LFB website. Might we suggest starting your course with Bill and Addison's first book: Financial Reckoning Day. Do so today and we'll throw in a complimentary copy of our award-winning documentary, I.O.U.S.A., absolutely FREE! Details Here. -------------------------------------------------------

ALSO THIS WEEK in The Daily Reckoning... Risking Everything By Eric Fry [Reckoning on Oct. 4, 2010, from Laguna Beach, California] Some asymmetrical risks are obvious - like playing Russian roulette...or buying a mortgage-backed security from a Goldman Sachs broker. But many asymmetrical risks are less obvious - like jaywalking at night...or placing 100% of one's net worth in a single currency. In all likelihood, the jaywalker will cross the street without incident and the single-currency investors will suffer no harm for lack of diversification. But if the jaywalker happens to encounter a vision- impaired driver or the single-currency investor happens to encounter an imprudent government, something bad will happen...something very bad. Getting Outta Dodge By Daily Reckoning Readership [Edited by Eric Fry and Joel Bowman on June 21, 2010] Were I without family ties, I might consider expatriating to one of the quiet, out-of-the-way towns in Central- or South America that I drove my VW bus through in 1977-1978. Spending a year and a half living life at a slower pace and speaking in a second language was world view- opening for this California born American. Through it all, I met many wonderful, amazingly generous people. Unfortunately, I also saw a lot of grinding poverty and misery. I finally lost count of how many times I stared into the barrel of a loaded submachine gun held by an edgy 19 year-old soldier at some border crossing or roadblock. Why Gold Still Has a Long Way to Run By Rob Marstrand Buenos Aires, Argentina The supply of paper currencies is infinite; the supply of gold is finite. This striking contrast provides an excellent reason to exchange the former for the latter. The gold supply is limited...very limited. If you brought it all together and made it into a gigantic cube, it would measure about 19 meters along each side - about three meters short of the length of a tennis court. New Year's Resolutions and Predictions By Chris Mayer Gaithersburg, Maryland The New Year invites guesses about the year ahead. I thought I wouldn't bother this year, but then I found myself scribbling out some investment resolutions and predictions on a napkin over breakfast. Here are some of them... The World Goes Crazy By Bill Bonner Baltimore, Maryland In three sentences, Montagu Norman, ex-chief of the Bank of England, described the handiwork of a whole generation of his fellow financial plumbers. This was the generation that made central bankers what they are today. Before 1914 they were expected to do nothing, that is, neither to aid the economy nor harm it. Since 1945, hardly a day went by that they do not clog a pipe or inadvertently blow up a gas main. ------------------------------------------------------- Revealed: The Full Power and Promise of Science's Next Decade... ..Could give your family FIVE generations of HUGE WEALTH! Expert researcher breaks his silence after 2 years with this shocking new presentation. Get all the details on the most lucrative science breakthroughs ever published, right here. ------------------------------------------------------- The Weekly Endnote: Got a few words of your own for either Mr. Geithner or Mr. Wiggin? Simply address them to your managing editor atjoel@dailyreckoning.com and keep an eye out in future reckonings for your fellow readers' thoughts. Oh yeah, and have a great weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning

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