“The United States is now, in some very general sense, bankrupt”

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Kemp: “The United States is now, in some very general sense, bankrupt”

Here is a radical proposal from John Kemp, the former Sempra Metals economist, who seems to have had enough “resting” between jobs. His provocative ideas would appear to apply to the UK as well as the US.

First take a deep breath, and recall President Franklin Roosevelt’s wise advice that there is nothing to fear but fear itself.

Then let’s admit something painful: The United States is bankrupt, in the sense that it’s assets (housing stock, corporations and cash flow, plant and machinery) are now worth much less than its liabilities (in the form of mortgage-backed securities, other debt and loan instruments). In particular, large parts of the housing stock are now worth much less than the owners paid for them, and less than the outstanding value of the mortgages, or the collateralised bonds that have been issued against them.

  It is a longish article, and worth reading, so I won't quote bits of it here. He has an interesting global sort of mark-to-market plan to deal with the situation.