With 22T of debt and 122.5T of unfunded liabilities, would be US collapse if the US Dollar wasn't the world's reserve currency?
Answer: yes.The US is by any measure bankrupt. And indeed without being the world’s reserve currency the US would now be Venezuela. For decades the US has been economically mismanaged, witnessed by the crash of 2008.Currently, America spends 17% of it’s GDP on interest payments alone. Within the next ten years that is forecast to rise to 25%. For the second year America will have a deficit of 1.2 Trillion. Essentially America is addicted to to an ever increasing level of debt. Were America to live within it’s means massive cuts would need to occur to every single element of American life.So why is America the reserve currency?? Simple: there are no realistic alternatives. The IMF is attempting to create a world currency, which currently known as SDR’S, or “special drawing rights”.
How much is the US national debt plus unfunded liabilities? What does it mean for the rest of the world in the long run?
Currently, total public debt is $13.1 trillion and intragovernmental debt is about $5 trillion. What's really relevant to how this affects us, though, are interest payments on the debt, and in that department we're doing very well. We'd do even better if more of the debt was rolled over into long-term bonds while interest rates are low. The above is based on testimony given to Congress in February by Bruce Bartlett, former Reagan advisor. http://www.budget.senate.gov/rep...Unfunded liabilities are a lot harder to measure, because they are only estimates and methods of estimation vary wildly. The humongous numbers are projections out to infinity, which is a ridiculous way to measure them, since they make too many assumptions. More importantly, what's relevant is what percent of GDP these liabilities are, since obviously the economy will be growing as well. The projected unfunded liability for SS in 2088 are 6.1% of GDP. The projected unfunded mandate FOR Medicare is expected to reach 3.2% of GDP. So, in total, they're expected to reach 10% of GDP. These projections assume no changes in the law; clearly there will need to be changes. Don't let people throwing around huge numbers scare you. They're intentionally leaving out the information to make sense of what's going on.
Are the current macroeconomic policies of the US Federal Government sustainable long term? Will the US eventually face economic collapse?
No, current U.S. Fiscal Policy is not sustainable, and unless significant changes are made to U.S. Federal Law by the U.S. Congress, there will be an economic crisis which might result in collapse of The Economy of the United States of America.This long term scenario is why the United States Credit Rating Downgrade (August 2011) happened. Credit Rating Agencies ignore Political Rhetoric and look at bottom-line issues, i.e. what current law says we’re actually going to do (… unless we change the law).The basic problem is described in both:Are the promised benefits of U.S. Entitlement Programs higher than achievable federal tax revenues and the maximum amount of public (national) debt that can be serviced as a percentage of GDP? (Yes, by multiples)Is it possible to cover the unfunded liabilities (promised benefits) of U.S. entitlement programs by taxing the rich? (No, not even close - the USA is rich, but not that rich)See also Will the US ever experience the debt crisis that Greece is experiencing? which specifically deals with the insane notion that we can print U.S. Dollar to “pay” for these promises because the USA is “monetarily sovereign.”
What is the total liabilites and owner's equity in the balance sheet you prepared in Exam Figure 4?
Total liabilities plus owner's equity should equal total assets of a company.
Accounting - Investors vs. Creditors?
Investors are people who buy equity in a company. Creditors are people who loan money or goods to a company and thus create liabilities for the company. Creditors expect and have a legal right to be paid what they loan, including interest. Investors have no guarantee they will ever see their money again. When a company is liquidated, creditors have priority over investors in sharing in the proceeds.
The Garcia Industries balance sheet and income statement for the year ended 2006 are as follows:?
A. Determine the length of the inventory conversion period. Inventory conversion period = inventory/(cost of sales/360) = 12/0.16666 = 72 days B. Determine the length of the receivables conversion period. Receivables conversion period = receivables/(sales/360) = 14/0.277777 = 50.4 days C. Determine the length of the operating cycle. The operating cycle = inventory conversion period + receivables collection period = 72 days + 50.4 days = 122.40 days D. Determine the length of the payables deferral period. Payables deferral period = (the accounts payable + wages, benefits, and payroll taxes payable) / ([the cost of sales + selling, general, and administrative expenses]/360). = (10m + 2m)/([60m +20m]/360) = 12/0.22222 = 54 days E. Determine the length of the cash conversion cycle. The cash conversion cycle = inventory conversion period, plus the receivables collection period, minus the payables deferral period = 72 days + 50.4 days – 54 days = 68.4 days F. What is the meaning of the number you calculated in (e)? The cash conversion cycle is the length of time between the payment of accounts payable and the receipt of cash from accounts receivable. It is important to working capital management because a firm may choose to finance its raw materials and inventories through trade credit.
What is a simple and easy definition of "Liquidity" and how it is involved in the current crisis?
The ability to transform assets into cash. Banks have assets which no one wants to buy because no one knows how much they are worth, thus it is hard to convert them into cash. Same with houses, in this market it is difficult to sell them because no one wants to catch a falling knife.