Systemic Debt

Systemic Debt is my measurement of all the debt that is in the system.  I am using 12/31/2011 as the measurement date, because that is the last date that I have all the data for.  Here are the components:

Systemic Debt as of 12/31/2011

TCMDO (includes debt held by public)  54,600 [1]

Intragov. Holdings                     4,775 [2]

FERS (as of 9/30/2011)                 5,792 [3]

Soc. Security unfunded                 8,600 [4]

Medicare unfunded                      5,300 [5]

                                     -------

Total Systemic Debt                   79,067

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Notes:

1. TCMDO, Q4 2011 from http://research.stlouisfed.org/fred2/series/TCMDO

2. Intragovernmental holdings, from http://www.treasurydirect.gov/govt/reports/pd/mspd/2011/opds122011.pdf.  

3. Fed Employee and Vet Benefits Payable, as of 9/30/2011, from http://www.fms.treas.gov/frsummary/frsummary2011.pdf.

4. Social Security information as of 12/31/2011 from http://www.ssa.gov/oact/tr/2012/tr2012.pdf ("The open group unfunded obligation for OASDI over the 75-year period is $8.6 trillion in present value and is $2.1 trillion more than the measured level of a year ago.")

5. Medicare information as of 12/31/2011 from http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2012.pdf. ("The present value of future expenditures less future tax income, decreased by the amount of HI trust fund assets on hand at the beginning of the projection, amounts to $5.3 trillion. This value is referred to as the 75-year “unfunded obligation” for the HI trust fund, and it is significantly higher than last year’s value of $3.0 trillion.")

Now, what is the significance of this?  This is pretty much all the debt in the system, both public and private, and the majority of all the debt in the whole world.  I am not including unfunded portions of Medicare parts B or D, or Obamacare, because these do not have trust funds and so are not really entitlements.  Although a lot of this debt is private, there is an implicit guarantee by the FedGov and FedReserve not to allow widespread defaults.

Debt must increase each and every year into infinity, or the economy is considered to be in a recession.  So assuming an increase of 3%/year, that is about $2.4 trillion that the debt must increase every year.  Of the total debt, about $44 trillion of this is private debt.  The private sector has very little appetite for increasing its debt.  Therefore the Federal debt (including unfunded liabilities) must increase by at least $2 trillion/year.  Some of the federal funds are used to pay down the private debt.

The solution?  Again, 1) higher taxes, 2) cuts in expenditures and/or promised benefits, or 3) default.  The real question - can the debt just continue to expand forever, without collapsing?  That is the assumption that our financial system relies on.

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The debt is an asset to someone. Most of the debt is owed by the US government.  Who is it owed to?

Type          Owner/Beneficiary    Debtor
------------  -------              --------
Private Debt  Banks                Private companies and households

Public Debt   Bondholders          US Gov.

Intragov      Retirees/Recipients  US Gov.

FERS          Fed. Retirees        US Gov. 

Soc Sec unfund  Retirees           US Gov.

Medicare unfund Retirees           US Gov.