I saw the film in Asheville, NC, on opening night last Thursday. And I was lucky to get in. The movie sold out. More than two dozen people were turned away. (Some ticket holders were auctioning off their tickets to the highest bidders!)

What’s all the fuss about? I.O.U.S.A. is a long overdue documentary that takes a hard look at Washington’s out of control spending habits, the national debt and the fiscal crisis that looms ahead of us…

Just How Big Is the National Debt?

We all know the national debt is big. But as this film shows – often in humorous ways – the average American doesn’t have the faintest clue how big.

As a result, we are letting our elected representatives get away with murder.

This is not a problem of Republicans or Democrats, liberals or conservatives. There is plenty of blame to be shared on both sides of the aisle. And the real tragedy is that our children and their children will bear the brunt of it.

I used to say Congress spends our tax receipts like a drunken sailor with four hours of shore leave.

That was before one reader wrote to say my comments were “an insult to drunken sailors everywhere. The sailor is confessedly drunk and spending his own money. What’s your Congressman’s excuse?”

Indeed…

• Every American is now burdened, most of us unknowingly, with more than $175,000 in federal liabilities and unfunded government promises. That is each and every American’s share of the U.S. government’s $53 trillion in current obligations.
• And every year in which no down payments or reforms are made to these obligations, the total grows by $2 trillion to $3 trillion – or $6,600 to $10,000 per person – on autopilot.

Adding Up The National Debt

How exactly does this $53-trillion national debt add up?

• First, there are the federal government’s known liabilities that it is legally obligated to fulfill. These include publicly held debt, military and civilian pensions and retiree health benefits.
• Then there are various contractual requirements, including federal insurance payouts, loan guarantees and leases. As of September 30, 2007, they added up to $1.1 trillion.

So where does the remaining $51 trillion or so come from?

That’s what the government has committed to pay in Social Security and Medicare benefits in excess of revenues. As of January 1, 2008, current and promised future Social Security benefits amounted to $6.7 trillion. And between Medicare’s three programs (hospital insurance, outpatient and prescription drug), current and future promised Medicare benefits amounted to $34.1 trillion.

Think about this for a moment: 53 trillion. It’s the kind of number astronomers should be throwing around, not legislators.

This is not just some gloom-and-doomer’s conjecture, incidentally. These are the official numbers straight from the U.S. Government Accountability Office.

I.O.U.S.A. Conclusions About The National Debt

I’ll concede that I don’t share all of the I.O.U.S.A. filmmakers’ economic and investment conclusions about the national debt. (You’ll notice, for instance, that many of the people interviewed in the film hedge their statements with “if nothing is done” or “if present trends continue.”)

• But present trends will continue and nothing will be done if Americans don’t sit up and take notice of the shenanigans going on in Washington.
• Politicians will only tackle the problem – and only then under the cover of a “bi-partisan commission” – when voters stand up and demand that something be done.
• In order for that to happen, voters must become aware of the magnitude of the problem.
• And let’s face it. Most Americans will never read a book – or even a long article – on the challenges posed by our snowballing national debt.

That’s why this film is a wonderful antidote to the ignorance and apathy out there. Do yourself a favor and see it.

Click here to view the I.O.U.S.A. trailer.

Source: The Biggest Threat to Your Financial Future

The movie has already stirred up much debate about the rapidly growing national debt and its consequences for the United States and its citizens

Below are a some emails from readers at Joel Bowman’s Rude Awakening blog with feedback on the movie…

First up, this one from John in Seattle…

I.O.U.S.A was excellent on all counts, but a week later I wonder whether the momentum will be lost.

In the Seattle screening, people were so agitated and motivated it seemed they were ready to storm Congress, had the building not been situated 2,300 miles away. Unfortunately the event did not equip movie-goers with the tools to tap into their personal networks and spread the word.

Here I am, telling everyone I know they should see the movie, but it’s not playing in any local theaters. I have nothing else to offer them. I wonder if too much time was spent making the movie, and not enough time thinking about how to turn it into a grassroots phenomenon.

Which raises my next question…even if by some miracle we all acquiesced to higher taxes to pay down our debts, what is to stop the Congress from going on a spending spree? Nothing, which is why it will take a heart-stopping crisis for Congress to actually take action on the debt.

And another from Robert in Canada…

I wonder if we’ll see I.O.U.S.A being promoted by teacher’s unions across North America and kids forced to watch it in their classrooms? Like they did with Al Gore’s movie.

Oh I know the answer…….No.

That says a lot about where we are and where we are likely going.

From Mr. Edwards in Oregon…

My wife and I viewed the movie  in Medford, Oregon In a theater with about 85% occupancy. Of particular interest was the percentage of persons under 40.

We were disappointed that, in response to a query concerning ‘what can we do’ the answer was essentially to become informed. That is pretty broad and not much help.

I feel that to suggest an analysis of each of our representatives’ voting records as related to the Constitution and to our own sense of right and wrong and fairness would have been a worthwhile and usable suggestion. The possible unintended consequences that seem to lurk around so much Congressional efforts deserve exposure. Perhaps a web site could provide a convenient vehicle for interested parties to pursue pertinent evaluations of members of Congress.

Thanks for the viewing opportunity and for continuing to keep us all informed as to what is happening in the world

And this one from Art in California…

I saw I.O.U.S.A. in San Jose California

The theater was surprisingly filled for an boring dry financial flick most people would think? Obviously it was not and quit entertaining. I being a 5 reader and investor knew allot so I brought 5 members of my family who mostly don’t understand when I try to explain to them so this movie was for them. The rolling penny graphs over time were cool!

I know of several other people who wanted to see it but couldn’t. So the one night only at select theaters restricted your success, I imagine. Too bad Peter Schiff wasn’t on the panel. He would have set Warren Buffett’s whiskers on fire! Dave did well to drive the wooden stake though Warren’s Pollyanna heart. Warren’s not used to being questioned or over ridden in opinion I guess – he squirmed allot, Dave was serious!

Warren came off as “an aloof too rich for too long out of touch old guy”. I respect his savvy as being the best investor alive, but he’s shamefully out of touch on the crisis. His words were too deceptive but, like other readers said, he was too Pollyanna. Too bad he wasn’t drunk so he could have an excuse for his performance. Everyone I talked to said the same: his world is not ours.

This movie is a warning to the working man about to get stiffed on his paycheck, government over taxation and M3 monetary inflation in the near future. The public is angry and I’m sure we’ll see the waves come this November. All the best will be looking for the DVD. Everyone I know has nothing good to say about Washington or its leadership voids and frankly people here are ready for a revolution!

And, finally, some thoughts from Brandon from… er, somewhere in the country…

I’m only commenting on Mr. Buffett’s comments in detail, but the movie was good. I think he missed something crucial when he was reassuring the masses that we would all have our SUV’s in 2020. He said that China can’t dump the dollar so we shouldn’t worry.

Thank you Mr. Buffett, NOW I’m reassured.

Now can I ask what happens when China, rather than dumping the dollar for another currency, decides to buy resources or goods from America with all those dollars? It’s hard to feed 1.3 billion people.

What happens during a shortage of food, or anything else for that matter, when the Chinese just start buying whatever they’re short on from us in dollars? Prices go way up because they’re outbidding us and there are now more dollars floating around here in the states so we get an inflation double-whammy. So they buy rice, oil, wheat, steel and coal from us so they are still running and all we’re left with to burn and eat are little green pieces of paper.

Problem: my car doesn’t run on those and I don’t find them tasty.

P.S. If you missed the movie but are still interested in what all the fuss is about, click here to see where it’s playing this week. You can also check out the trailer right here.

Good day… And a Happy Friday to one and all! Yesterday did indeed turn into a Tub Thumpin’ Thursday for the euro (EUR), so let’s hope today ends up being a Fantastico Friday!

Well… The game of “your economy is worse than mine” backfired on the dollar bulls yesterday, as the Leading Indicators printed an awful number. I said yesterday that it was too bad that the markets normally ignored this data… But they didn’t yesterday, as the number was so bad, they couldn’t ignore it… Sort of like that spoiled rotten bratty kid, throwing himself to the floor of the grocery store, and throwing a temper tantrum because you said he couldn’t have a candy bar! If you’re next in line to check out at the grocery store, you want to ignore the child, but you just can’t because it’s so obnoxious! Well, that’s how it was with Leading Indicators yesterday… Here’s the skinny…

U.S. Leading Indicators, (which is exactly what they are!), fell 0.7% in July (consensus was for a fall of 0.1%), with 5 of the 10 indicators falling… The Conference Board that measures this data said that this data pointed to “slow growth the rest of the year, and possibly an economy grinding to a halt.” Of course Pfennig readers already knew this, but it’s nice to see the rest of the crowd coming to the same realization. I’m not crowing here because I was right… I live here, work here, etc. I don’t want to see us in a long protracted recession, but as long as it’s there, I want everyone, including the un-dynamic duo of Bernanke and Paulson to admit it! Along with the markets of course!

“If there’s a second-half recovery, it’ll be the second half of 2009,” said Ken Goldstein, labor economist at the private research organization. “The recent decline in gas prices isn’t enough to overcome all the negative momentum that’s been building up.”

On a side bar… One of the indicators that was positive was consumer sentiment… What? People are confident, just because oil drops for what looks like a short-term drop? Geez Louise… What are people thinking? Maybe Addison Wiggin’s movie I.O.U.S.A. – which I hear is selling out theaters all over the country – will get people to stop feeling confident because they just bought a big, flat screen TV!

OK… So, this data really brought the problems of the U.S. economy front and center, and sent the dollar to the woodshed for the first time in almost a month!

My friends over at Turtle Hollow Inc., who do a fabulous job of tracking business cycles, tell me that with the awful printing of Leading Indicators today, they now feel that the recession will be “more severe”. I’ve been using their business cycle model for a couple of years now, and they are fabulous!

So… Was yesterday the end of this dollar run? Well, all I can say is that if the dollar’s run didn’t come unglued at the hinges yesterday, then we at least saw that things are becoming less secure… In that I mean simply that the dollar bulls were very confident that the dollar had gotten up from its deathbed and was a healthy specimen, only to have the rug pulled out from under it yesterday. The dollar bulls aren’t so confident this morning.

Commodities were soaring; gold, oil, and the base metals were kicking sand in the dollar’s face again… And the commodity currencies basked in the glow of the warm sun yesterday. I guess all the pent up concerns with Fannie (NYSE:FNM) and Freddie (NYSE:FRE) (a financial institution back in the news), and then the awful data, just created the Perfect Storm…

But today is a new day folks… And what happened yesterday is now history. The attitudes could change in a NY minute, and the dollar could be back in favor. This is what I’m talking about when I say things are less secure. Wishy-Washy market sentiment leads to very volatile markets, and that’s what we saw yesterday. Now, let’s move on to today, and see what Bullwinkle has up his sleeve. Hey Rocky, wanna watch me pull a rabbit out of my hat?

Well… This time every year, central bankers from all over the world, (bankers and journalists also get invited) meet in Jackson Hole, Wyoming for the Fed’s boondoggle. These meetings normally leave a lot of sawdust on the floor, but little in the way of direction for the markets. The meeting gets kicked off this morning, with the opening comments by Big Ben Bernanke. Big Ben will speak about “financial stability”… Geez Louise, I would love to be in the audience to heckle him for that one!

I had to laugh at a report that printed yesterday on Canadian inflation. Seems that inflation in Canada is rising… July’s inflation rate was 3.4%, which was the fastest monthly rate since 2003! I bet the Bank of Canada (BOC) is wishing they hadn’t followed the lead of the Fed Reserve and cut rates so low! Of course, in Canada, they like to play the “remove food and energy from the data” game like we do here in the U.S. to make inflation look muted… But that dog won’t hunt with me!

The thing to think about with this report in Canada is the market mentality that exists these days that reward currencies from countries with rising inflation. Strange but true… And thus, the Canadian dollar rallies!

Recall the earlier this week I told you about a story that Reuters printed that cited an agreement between Brazil and Japan? I said at the time that this could be huge for the real (BRL), if Japanese investors flocked to Brazil like they did to Australia and New Zealand in the past. Well… That looks like it could be coming to fruition, as the real racks up a two consecutive days of gains versus the dollar.

I read an interview with one of my fave economists, Nouriel Roubini, last night. (Yes, I was able to come home and not fall asleep!) Man… Like my old fave, Dr. Kurt Richebächer, he tells it like it is, and doesn’t worry about what the “mainstream media” is saying. I used to joke when I would get my Richebächer newsletter, that it was time to “put away the sharp objects”. You find yourself doing the same with Mr. Roubini… But, in Nouriel Roubini’s defense, his forecasts are usually correct! Anyway… What I was going to talk about here is that Nouriel Roubini continues to say that the United States is in a recession that will be a long protracted recession, and that the problems that sprung up from the housing debacle/bubble will continue to plague the U.S. economy.

I was doing an interview yesterday, and the interviewer asked me to look to next week and project what the dollar would do. I said, “Well, we have a slew of housing data due to print next week, and that should weigh heavily on the dollar”… After I said that, I thought, but then with the markets having become comfortably numb on U.S. data, the housing data might get swept under the rug. Maybe the wake up call from Leading Indicators got the focus back on what it should be focused on… The rot on the U.S. economic vine!

The second revision of second quarter GDP in the U.K. printed a zero this morning, and that has pound sterling (GBP) on the run, which hurts the euro in the crosses. But for the most part, this is a “sell pound sterling” story only.

Yen (JPY) is back above the 109 handle after spending yesterday in the 108 handle. (Remember, yen is a European priced currency, so the lower the number, the greater the value in dollars). There wasn’t any news from Japan that squelched that rally, so it had to be profit taking.

Currencies today 8/22/08: A$ .8740, kiwi .7140, C$ .9565, euro 1.4850, sterling 1.8590, Swiss .9150, ISK 81.50, rand 7.6710, krone 5.3475, SEK 6.3150, forint 157.60, zloty 2.2225, koruna 16.4350, yen 109.40, baht 33.94, sing 1.4080, HKD 7.8060, INR 43.42, China 6.8335, pesos 10.10, BRL 1.6090, dollar index 76.40, Oil $116.07, Silver $13.61, and Gold… $828.60

That’s it for today… The end of a very long week didn’t get here soon enough for yours truly! The doctor visit went well yesterday, I am scheduled for two scans in September, and if they are clean, I will be finished with my treatments. YAHOO! Of course I can’t count my chickens before they are hatched, but just thinking about the end of these treatments is like manna from heaven! The kids from the office here that were all in Orlando for training this week, came back sooner than expected and will be in the office today. That’s a good thing! Florida is getting hammered with rain from Hurricane Fay; our thoughts should be with those folks. Our Jacksonville branch offices are going to be closed today. Maybe I should re-consider my thoughts about buying beach property! The Big Boss, Frank Trotter, just called (on his way to play hockey this morning) to see how I’m doing. It’s late, so I had better hit the send key… I hope your Friday is Fantastico!

Source: Leading Indicators Fall!

It’s funny how people react to it. Their perceptions are colored by their preconceived notions. Conservatives see it as a veiled call for tax increases. Liberals see it as a veiled call for slashing Social Security. It is, of course, neither of those things. But this is good. As I knew well back in my journalism days, if you managed to anger both sides of an issue, you did a decent job.

Now… I suspect many of the people who read this blog and saw it last night were disappointed that the movie was not a wholesale indictment of central banking. That’s an understandable sentiment… but that’s never what this movie set out to be. For one thing, the late Aaron Russo already made that movie a couple of years ago. In contrast, I.O.U.S.A. is an attempt to start a very broad discussion among an ideologically diverse group — including, yes, certain establishment figures like Pete Peterson. And the discussion begins on a simple point of agreement — that, contra Alexander Hamilton, the national debt, certainly at its present size, is anything but a “national blessing.” Seems to me that repudiating a central principle of the one founding father who threw a monkey wrench into the grand American experiment from the get-go is a darn good place to start the discussion, no?

Reuters has an account of the live-via-satellite panel that followed the premiere. For all the passion former Comptroller General David Walker conveys, for all his recall of how debt had doomed earlier republics in history (let us not forget this whole movie thing got started with his reading Bill and Addison’s Empire of Debt), his starting point for a solution to this godawful mess — forming the proverbial bipartisan blue-ribbon commission — was thin gruel indeed.

Which perhaps underscores the notion that people in power aren’t going to do anything meaningful until ordinary folks like you and me get mad. So if you didn’t have the chance last night, go see the movie and get mad.

Source: I.O.U.S.A. — The discussion begins

The premiere of I.O.U.S.A. is just a day away and the excitement continues to build. Movie theaters are already selling out for this one-night event, so we urge you to click here to buy your tickets now.

As I’ve explained before, the live event on Aug. 21 is our one chance to fill up theaters and have the critical message of the film heard. To help put “butts in seats,” the discussion following the film will be broadcast by satellite to a theater near you. It will feature Warren Buffett, Pete Peterson and Dave Walker. Also on the panel will be William Niskanen, chairman of the Cato Institute, and Bill Novelli, CEO of AARP. It will be moderated by CNBC’s Becky Quick. It promises to be an exceptional and lively event.

If we’re successful on Thursday night, the film that will be showing in 400 U.S. cities will have a much greater chance of rolling out to theaters across the country. That’s why we need you, along with your friends and colleagues, to come out and see the film.

I’ve included the link to the trailer for you to watch and pass on to your friends.

If you do come out, we’ve promised to give you a special thank-you gift in return. This is not just a token of appreciation; it is something of real value, something that you can use to make better personal investment decisions.

If you come out to see I.O.U.S.A. during the Aug. 21 event, we’ll give you a complimentary subscription to our flagship publication, Strategic Investment. We’d normally charge $99 for an annual subscription, but if you come out to support the film, you can have it free of charge for one year.

Here’s what you do… After you’ve purchased your tickets, forward a copy of the confirmation e-mail you receive to customerservice@agorafinancial.com and we’ll give you a complimentary one-year subscription. If you’re already a subscriber to Strategic Investment, we’ll extend your subscription for another a year. If you’re a Reserve Member, we have an additional gift reserved for you. Forward your confirmation e-mail to find out what it is.

The widespread attention the movie is attracting is thrilling. And we want you to be part of it. That’s why we’re asking our loyal readers to come out for this one-night-only exclusive event.

For more information on how to secure tickets, visit our I.O.U.S.A. site and click on “Find a Theatre Near You” in the upper right.

— The Energy Information Administration’s weekly inventory report this morning shows oil supplies fell 3.2 million barrels over the last week — a far cry from analysts’ estimates of a 2.5 million barrel increase. Within minutes, light sweet crude shot past $111. If it closes above $110.13, we’ll have a new record high today.

Get used to it, says the EIA. Hours before the inventory report, the EIA raised its average oil price forecast for the year from $87 back in January to $101…with or without a recession in the U.S.

— “Consumers are beginning to shrink,” admitted our friend Alan Greenspan on CNBC yesterday, continuing his Rep Rehab tour, “the automobile markets are beginning to contract, production is beginning to ease and we are in the throes of recession.”

Over the weekend, he said he didn’t think the U.S. was in recession yet. But we hesitate to accuse the former Fed chair of misspeaking. In his mind, the “throes” of a recession may well be something different from an actual recession.

— The International Monetary Fund (IMF), for its part, expects a “mild recession” in the U.S. this year. It put a price tag of $945 billion on losses from the credit crisis this morning. That would mean — with only $232 billion in write-downs behind us — we’re barely a quarter of the way there.

“There has been a collective failure,” says the IMF’s director of monetary and capital markets, Jaime Caruana, “to appreciate the extent of leverage in the financial system and the associated risks of disorderly unwinding.”

— Minutes from the Federal Reserve’s Open Market Committee meeting last month released this week reveal the Fedheads are only mildly freaked by their situation. “Many participants,” the minutes say, “thought some contraction in economic activity in the first half of 2008 now appeared likely.” Some fretted about “a prolonged and severe economic downturn.”

If you’re keeping score at home, the FOMC meets again April 29-30. In Chicago, traders have priced in a 100% chance of another 25-basis-point cut, with 44% odds of a 50-point cut.

— Meanwhile, quants behind the scenes are desperately trying to engineer new ways to increase liquidity…without dropping the fed funds rate.

The Fed’s Term Auction Facility (TAF), offering 28-day loans to commercial banks, spat out another $50 billion yesterday, for a total of $310 billion since last December. But they need more, more, more…

“The likeliest option…is for the Treasury to issue more debt than it needs to fund government operations,” surmises Greg Ip at The Wall Street Journal this morning. “The extra cash would be left on deposit at the Fed, where it would be separate from bank reserves on deposit, and thus would have no impact on interest rates. The Fed would use the cash to purchase an offsetting amount of Treasuries in the open market; for legal reasons, it generally cannot buy them directly from Treasury.”

“There are good reasons for legal limits on the Fed directly purchasing Treasuries,” comments our Dan Amoss, appalled at the Fed’s gumption. “Doing so basically means the Fed would print dollars to pay for the federal budget deficit — a move that would quickly lead to a total loss of confidence in paper money. History shows that when central banks start directly monetizing government deficits, confidence in paper money collapses quickly.

“The idea to expand the supply of Treasuries is also bad. This would put more purchasing power into the hands of a wasteful federal government. Since the government doesn’t produce any goods or services to offset its buying power, this idea would also add pressure to consumer prices.

“In short, there are no easy answers to a problem created by easy money and runaway credit growth. Expanding the money supply — no matter how sneakily — will only hurt confidence in the dollar.”

— “The U.S. has no way of avoiding a financial Armageddon,” says our friend the always chipper John Williams, expecting something much more ominous than a mild recession.

“Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations — a solution rarely seen outside of governments overthrown in revolution…”

At the current pace, “Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests and gross mismanagement.

“While the dollar has taken a heavy hit — down roughly 20% against key currencies from last year — selling of the U.S. currency still has been far short of the outright dollar dumping that eventually will lead to flight to safety outside of the U.S. dollar.”

— “You don’t have to predict it,” Paul Volcker replied yesterday to a question about the coming dollar crisis at the Economic Club of New York. “We’re in it.”

We’ve met the former Fed chairman several times. Once at a Grant’s conference at the Regis Hotel in New York a few years ago. And then again a few months ago when he granted us an interview for I.O.U.S.A. At the time, he warned Ben Bernanke not to let inflationary pressures build in the economy because once they start…they’re very hard to stop. Volcker earned his reputation the hard way fighting the inflation by forcing interest rates to heights this economy would suffocate under.

Yesterday, he said he’s experiencing flashbacks. Citing the rising price for soybeans and oil as two indications we’re “at a point when we have to worry” about inflation, he went on to warn today’s Fed not to favor special interests and “subordinate the fundamental need to maintain a reliable currency” in order to steer clear of recession at all costs.

“The Fed has a particular duty to defend the integrity of the ‘fiat currency’ in its charge,” the WSJ paraphrases Mr. Volcker. “And exchanging dollars for ‘mortgage-backed securities of questionable pedigree’ both raises the specter of moral hazard and potentially undermines the world’s faith in the integrity of the Fed’s balance sheet.”

In other words, look out below.

We told you yesterday our fully updated and revised edition of Demise of the Dollar is on Amazon yesterday. Unfortunately, we gave you the wrong link. Try this one instead. And if you’re in the Philadelphia area, there is a screening of I.O.U.S.A. tonight at 5:00 p.m. at the Philadelphia film festival.