I’ve frequently warned about America’s overall debt: “Government debt is $70 trillion: $9 trillion plus the unfunded liabilities of ‘Medicare, pension, and Social Security programs.‘”
David M. Walker, former Comptroller General of the United States, is one of the few power brokers who’s been sounding the same alarm. The Peter G. Peterson Foundation, with which Walker is now affiliated, reported:
“NEW YORK (Dec. 15, 2008) – The sum of America’s liabilities and other financial commitments now exceeds the collective net worth of its citizens, the Peter G. Peterson Foundation has calculated using the latest official data. Growth in the government’s unfunded promises for social insurance programs such as Medicare, combined with a drop in Americans’ net worth due in part by lower home equity values, is causing this unprecedented milestone.”
“The Foundation’s calculations are based primarily on the new consolidated federal financial statements as of September 30, 2008 which do not reflect the additional toll taken by more recent market declines, bailout packages, and record October and November deficits. The financial statements show approximately $56.4 trillion in debts, liabilities, and unfunded promises for Medicare and Social Security versus the Federal Reserve’s estimate a total household net worth of $56.5 trillion, both as of September 30, 2008.”
“Given more recent developments, it’s clear that America now owes more than its citizens are worth,” said Foundation President and CEO David M. Walker. ‘Passing this shocking milestone highlights the need for President-elect Obama and the next Congress not only to turn the economy around and boost consumer confidence, but to put a process in place that will lead to tough choices getting made to strengthen the government’s financial condition once the economy begins growing again.'”
Rome is burning. But nobody is stopping the arsonists.
Courtesy of the same source comes the Real National Debt:
Total Federal Burden
So what happens when the country with the world’s reserve currency defaults on its debt? Is there a single sane human being that thinks we will ever pay this off?
[Your savings and assets, for one, will continue to depreciate.–IM]
I think we can muddle through the next decade by cutting back on plasma TV purchases, driving used cars a few more years, and such – but by 2020, the TERABUCK debts and the baby-boom retirees (moi aussi!) will completely overwhelm the system. The US might wind up collapsing Somalia-Congo-Pakistan style with underground economies and local warlords taking up when the Federal Reserve counterfeiters completely run out of steam. Those who can may live in little gated communities, South African style while the governments lose any ability to “manage” the country. Having tried to micromanage the entire world, the government may not even be able to provide rudimentary law and order in 20 years.
No amount of growth can ever repay that debt, and we don’t have any prospect of growth anytime soon.
America will repudiate those debts — by paying them off in worthless, devalued currency. The INSTANT the holders of that debt begin to question whether they will get paid back in devalued dollars or worse, they will try to be first in line to sell before the value plunges. The dollar will tank overnight. The government will be unable to borrow at any interest rate, so the Fed will start printing money.
In Weimar Germany, people were surprised at how quickly hyperinflation wiped them out.
This scenario looks ever more likely. I won’t be surprised if it happens sometime this year. The ‘stimulus’ will help bring it on.
“China Losing Taste for Debt From U.S.” See:
To get more overseas money, we have to offer more interest rate which is “anti” stimulus – so the Federal Reserve Counterfeiters are between a rock and a hard place….
Nevertheless, I see the big financial tsunami coming closer to 2020 but I agree with John Danforth in that it will be quite sudden and overwhelming.