Posted on 08/20/2012 7:02:42 AM PDT by SeekAndFind
Most people don't understand the unsolvable problem the U.S. government has created for itself and its citizens. Sovereign default is beyond a likelihood; it is inevitable.
When and which (possibly all) obligations are defaulted on will be determined by panicked politicians under duress. A complete financial and economic collapse appears unavoidable. I hope that is the worst that will occur.
Official Government Debt
The official federal debt is $16 trillion. This debt represents 100% of current GDP. Ken Rogoff and Carmen Reinhart studied countries with high levels of government debt. This Time Is Different: Eight Centuries of Financial Folly contains their complete findings. The authors concluded:
"In our study "Growth in a Time of Debt," we found relatively little association between public liabilities and growth for debt levels of less than 90 percent of GDP. But burdens above 90 percent are associated with 1 percent lower median growth. Our results are based on a data set of public debt covering 44 countries for up to 200 years. The annual data set incorporates more than 3,700 observations spanning a wide range of political and historical circumstances, legal structures and monetary regimes."
Elsewhere, the authors state:
"Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP. The U.S. has passed their danger point, and recent U.S. GDP experience conforms to their findings. The economy is growing at subnormal rates despite unprecedented stimulus efforts. A recent Rasmussen survey found that only 27% believe that the economy is improving."
(Excerpt) Read more at americanthinker.com ...
Yup. Our elected officials are not the problem. WE, the electorate, are the problem. And as you say, anyone that could solve this would not have a chance of getting re-elected.
And I’ve been making the same arguments regarding interest rates. Anyone who thinks rates will go up in any sort of short- or mid-term doesn’t realize it would be the equivalent of putting a gun to the country’s head and pulling the trigger. I make all my “borrowing” decisions based on the firm belief that interest rates will be either stagnant or lower in the foreseeable future. Anyone who says otherwise is sellin’ somethin’.
The governments insane spending has moved beyond treason and is starting to feel like wanton belligerence.
Why not? The bar bill will be the least of anyone’s problems pretty soon. They will be more concerned with staying alive.
The interest rates are being kept low by two things:
1. The Fed, which is buying debt with monopoly $$
2. Big investors and funds who are too scared to do anything but try to preserve their wealth.
If you had brough USTs, you would have done pretty well as rates have gone lower and lower. But they can only go so low and now they are negative vs. inflation.
Under normal circumstances, the Fed’s actions would have triggered much higher inflation by now. But the situation in Europe gives us room to manuever. Also, I am convinced that companies are being threatened (behind the scenes) to keep a lid on big price increases. At some point, however, a “Black Swan” event will cause the house of cards to crumble—the question is when. So far its all holding together.
That's the "current" debt, effectively the sum of everything we owe right now. In regular person terms, that would be along the lines of the sum of "current credit card minimum payments and monthly utility bills" that we appear to be able to pay at this time. However, we need to borrow .40 of every dollar spent, which increases that current debt.
I've read that the actually debt, including all the unfunded liabilities (SS & Medicare) is somewhere between 70 and 115 trillion dollars.
Mark
So far its all holding together.
Yep. And it will hold together until it falls apart. And the longer it is “propped up unnaturally”, the worse it’s gonna be when it does fall. It could literally be that one hour meltdown scenario thing I keep seeing.
Greg Mannarino Interview: People Are Going to Suffer on A Biblical Scale !
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