Overview
“Insoluble insolvency” refers to a state where a sovereign entity’s long-term fiscal obligations—such as entitlements and debt—cannot be resolved through conventional means like tax increases or spending cuts. Coined by Dr. Jim Tozzi, this concept describes a systemic, mathematically unsolvable condition where a government’s liabilities exceed its assets without fundamental structural change.
Key Aspects of Insoluble Insolvency:
- Definition: Unlike standard insolvency, which is a temporary or rectifiable inability to pay debts, insoluble insolvency is a condition in which an entity’s intertemporal budget constraint cannot be satisfied.
- Context: It is often used to describe severe, long-term fiscal imbalances, particularly regarding the U.S. government’s financial obligations.
