Posted on 07/23/2018 10:42:32 AM PDT by Kaslin
The global debt level is reaching shocking new heights. The Institute of International Finance recently estimated the current total world debt is roughly $247 trillion—a truly unprecedented figure.
But as frightening as the global debt has become because of the dangers it poses to the world’s economic stability, Americans should be far more terrified of what this problem might mean for them, especially if the globe endures another major financial collapse before the United States can get its fiscal house back in order. Put simply, America is on the verge of experiencing an absolutely catastrophic period of economic change, and it’s due mostly to its skyrocketing debt, which is the result of decades of reckless government spending—by both political parties.
Although understanding how international financial markets work can be tricky, there are two basic reasons Americans should be deeply concerned. The first is that U.S. debt payments will likely over the next decade consume an increasingly larger share of the federal budget. In fiscal year 2018, which ends September 30, 2018, America will pay about $310 billion to service its national debt. The Balance reports these payments are the fourth largest budget expenditure in the current federal budget. Excluding Social Security payments, only “military spending ($874.4 billion), Medicare ($582 billion), and Medicaid ($400 billion)” are more costly.
Over the past decade, the size of these payments has not increased substantially, in large part because interest rates remained at historic lows as the world tried to pull itself out of the 2008 financial crisis. However, now the U.S. economy and many other leading economies are improving dramatically, interest rates will inevitably have to rise to ensure inflation doesn’t get out of control. AEI’s James Capretta estimates, “If the average real interest rate … gradually rose to around 2.2 percent over the next decade, then federal interest payments could reach $1.2 trillion in 2027 — or more than $0.3 trillion above CBO’s current forecast.”
This massive figure would consume so much of the federal budget that the government would be forced to raise taxes just to continue paying for existing government spending, stifling economic growth. This would be particularly problematic should the United States enter another deep recession, because during recessions, tax revenues often fall because of lower economic production.
Even more troubling, however, is the effect these debt problems could have on our currency. On its current trajectory, the United States will by 2027 likely be paying $500 billion to $1.2 trillion every year to cover federal debt interest payments. If the economy were to crash, the only way for America to continue making those payments without raising taxes or cutting spending, both of which would be very difficult to do in a deep recession, would be to seek additional loans from foreign governments or to print money. The former would only work, if at all, temporarily, and would eventually exacerbate the problem as interest payments grow ever higher. The latter is the most likely scenario, but printing money would create inflation, devaluing existing cash. The reason this would be so dangerous if the United States already has massive amounts of debt is that it could significantly undermine the world’s faith in the U.S. dollar, which is used every single day for international business transactions.
There is no global currency, so when two countries or, more commonly, two parties from different countries buy and sell, they often do so using dollars. There are some exceptions, of course. In the European Union, for instance, people buy and sell using euros, but for most of the world’s business transactions, dollars remain the currency of choice. The same is true for many of nations’ centralized banks. The reason this has occurred is that, following World War II, America has been the world’s most reliable and stable economy, making the dollar in the minds of many the safest currency among the more than 180 currencies available in the global marketplace.
That perception has slowly been changing, however. Over the past decade, top officials in countries like China have openly questioned the stability of the dollar and even wondered why some other country’s currency couldn’t replace it as the global standard. Some folks at the United Nations would love nothing more than to replace the U.S. dollar with a U.N.-sanctioned global currency, and some Europeans would surely push the euro as a better alternative.
If the dollar were to be replaced as the world’s currency of choice, it would cause economic turmoil in the United States. Not only would our markets and stock exchanges collapse as investors’ pessimism about America soars, hundreds of billions of dollars in cash would likely come rushing back to the United States, where foreign investors would buy up whatever stable assets they could, most likely real estate. More dollars in our markets would cause additional inflation, making our money even less valuable. This would likely force the Federal Reserve to raise interest rates to keep inflation in check, thereby making it even harder for businesses to get loans (because they would be more expensive with higher interest rates), causing the economy to continue spiraling downward.
Eventually, the United States’ economy would recover, although it might never regain its status as the world’s most important economy. But in the meantime, Americans would likely endure a Great Depression-sized recession.
All of these problems are avoidable. If America were to steadily reduce its debt, the world would likely stick with the U.S. dollar for the foreseeable future; if it ain’t broke, don’t “fix” it, as they say. The only way for this to occur, however, is for politicians in Washington, DC to get their act together and move away from our currently unsustainable policies. That doesn’t appear to be happening on either side of the aisle, and the results could eventually be far-reaching and monumental.
....lol at people who talk about kicking the can down the road as if that was the worst possible reaction. Hell we have self-proclaimed socialists entering mainstream politics. That’s like putting a house fire out with a gasoline tanker.
“believe that we can keep going on like this indefinitely without any repercussions whatsoever”
The easy spenders seem to have history on their side.
“future currency is”: AMMO.
Lead & brass.
“foreign investors would buy up whatever stable assets they could, most likely real estate”
That’s what they are doing.
However, there is no safety. New cities can be built for far less. Farmland can be taxed and expensive farm labor required. The EU has fined Google 5 billion Euros.
Wealth really can’t be stored up in a world that is 70% leftist.
Even all existing gold might be made nearly worthless by one large asteroid brought to Earth.
Live the best you can today because ten years from now might be very bad.
“’future currency is’: AMMO”
One shouldn’t need too much of that.
One round to make one example, plus a few more for possible additional examples.
‘pour encourager les autres’
The history of that phrase is interesting:
https://www.everything2.com/title/Pour+encourager+les+autres
“...both parties need to come toether to fix it...”
Democrats and others not interested in recovery just love
Cloward-Piven.
IMHO
“...both parties need to come toether to fix it...”
Democrats and others not interested in recovery just love
Cloward-Piven.
IMHO
The Chinese have a low trust factor.
The Europeans tend to have arrogant elites that make stupid decisions.
That leaves mainly the USA and its dollars.
“The bill is on the way.”
There will be no bill.
Just work<->stuff/housing barters.
“All of these problems are avoidable. If America were to steadily reduce its debt,”
First things first !
Re all those illegals—past and present== They get NO benefits of any kind AND their Soc Sec money goes to legal CITIZENS ! Additionally, for each year of ILLEGALITY in our country, they must delay any SOC SEC for TWICE the number of years they “screwed with our system”..I.E. supposd to get it at age 65..NOPE ! here illegally 7 years must wait til 79 years old ! Etc ETC eTC !!!!!!
So embracing socialism and more debt isn’t such a good idea?
When we lose the World’s Largest Economy title?
It is estimated that the US has over 200 trillion in assets vs 20+ as the National Debt.
Inflation is generally a function of the changes in the money supply. What has been amazing for the last 10 years is that a huge increase in the money supply produced no inflation.
It should also be considered that about 1/3 of the interest on the debt is payed to the Federal Reserve. Its profits are paid into the national treasury so we are paying that to ourselves.
“They get NO benefits of any kind”
Their kids get tens of thousands of dollars worth of SNAP, Medicaid, TANF (sometimes), tax credits, Etc ETC eTC !!!!!!
This has been my greatest complaint of the last three Republican presidents, let alone the Democratic ones.
Budgets. Why can’t we have balanced budgets?
Gold a valuable commodity and a beautiful one. It, by itself, will never be money again.
How would small currency be made? A dollar is about 1/1500s of an ounce. You would need a microscope to see a dollar much less a dime or penny.
Countries claiming to be on the Gold Standard with convertibility were on and off, off and on depending the needs of the nation at the time. See the history of Great Britain during the Napoleonic Wars.
Countries on the GS are handcuffed by it (see its role in the Great Depression). It would be highly impractical to impose one due to the lack of gold in the world and other reasons.
Silver would be under the same negative though less initially acute. How much silver is in a dime?
A “bill” is paid every year.
It will chug along so long as the interest on debt can be paid by US Treasury. Currently they are paying $one Billion EVERY DAY for interest. With the current trend, we will have bigger interest payments than (defense+all other discretionary spending) in about 10 years.
At that point, Treasury debt will require very high interest rates like junk bonds. That is when the shyt hits the fan.
US Treasury is paying $1,000,000,000 EVERY DAY, in interest on the debt, Right Now!
I still have well over 150,000 rounds for 8 calibers left, after selling 50k to friends and family, for cost.
I’m investing in a new Company that Manufactures Cans that are specifically designed to be kicked down the Road.
Off to Shark Tank I go.
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