Debt is not a good thing. Too much debt in any economy, be it personal economy or a national economy, leads to collapse.
The US economy and dollar is very unhealthy. It is already known that the US debt levels are toxic and deadly, but according to a recent report, they may be far higher than reported, with estimates up to 2000% of the economy according to reports:
Total potential debt for the U.S. by one all-encompassing measure is running close to 2,000% of GDP, according to an analysis that suggests danger but also cautions against reading too much into the level.
AB Bernstein came up with the calculation — 1,832%, to be exact — by including not only traditional levels of public debt like bonds but also financial debt and all its complexities as well as future obligations for so-called entitlement programs like Social Security, Medicare and public pensions.
Putting all that together paints a daunting picture but one that requires nuance to understand. Paramount is realizing that not all of the debt obligations are set in stone, and it’s important to know where the leeway is, particularly in the government programs that can be changed either by legislation or accounting.
It doesn’t really matter what the official debt number is at this point because what matters is that the entries system is very unsustainable and cannot continue on as it currently is.
One point that is consistently left out of any discussions is how while social programs do cost money, most of US spending is on “national defense,” and the programs that exist are largely funded by money printing, which is debt creation. As Alan Greenspan put it, the US can pay any debt she wants because all she needs to do is to print the money to pay it.
This is the deception of the debt issue, for while it is real, the US can continually string along her position because she is the world’s reserve currency and other nations depend on her currency to enrich themselves and maintain their own economies.
This is likewise where a major war will be important as I have discussed, because it is an opportunity to destroy the old currency, create a new one (a new dollar) pegged to the old dollar, and to “reset” the debt balance in the country. This would be with the intention of continuing the previous agreement made at Bretton Woods to ensure US financial supremacy across the world.
The key is not always gross dollar amount but rather ability to pay.
“U.S. debt is large. And it’s growing. But if we want to think about debt problems (in any sector – sovereign, households, firms or financials) the conditions rather than the levels are more significant,” Carlsson-Szlezak said. “Debt problems could, arguably would have, already happened at lower levels of debt if the macro conditions forced it.”
‘Profoundly negative effects’
The warnings about potential debt hazards come as the total federal debt outstanding has surged to $22.5 trillion, or about 106% of GDP. Excluding intragovernmental obligations, debt held by the public is $16.7 trillion, or 78% of GDP.
That latter total, considered to be more relevant as an economic burden, is likely to rise to 105% by 2028, according to Congressional Budget Office projections. However, the CBO notes that the numbers are subject to revision depending on how government policies play out.
Advocates for fiscal reform argue that the debt impact has indeed reached the point where action is necessary.
“Globally, we have become over-reliant on borrowing as a solution for everything. Political excuses abound for why it doesn’t matter, which just clearly isn’t the case,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan committee of legislators, business leaders and economists that counts former Federal Reserve Chairs Paul Volcker and Janet Yellen among its members.
“We are quickly approaching a situation where we have dug ourselves a debt hole which is doing to have profoundly negative effects on the economy for probably decades going forward,” MacGuineas added
Since 1973, America’s power in the dollar has come from her promise to be able to service debts, a promise that she has gravely violated and for the purpose of national benefit.
One could argue that, based on the information above, the dollar was created always with the intention of destroying it at a future date. If and when this does happen, as it likely will, it would likely not be done to give the impression of the government of doing this directly, but would be done in the context of “another nation”, which would be a pretext to start or increase the conditions for a war since it would be presented to the public as an “attack” on the nation.
The nation that is in the best position to be likely set up by the US for such a situation is China. The US has serious problems with her, the nation is indebted to the Americans by way of the fact that a US refusal to pay in any form will cause a financial collapse in China, and the Chinese cannot retaliate in any way lest it be presented as an “attack” that the US can use to justify giving weapons to Japan.
But the final point is most salient, especially for the common man:
“A default on U.S. treasury bonds would be catastrophic to the global economy – whereas changes in policy (while painful for those whose future benefits were diminished) would barely register on the economic horizon,” he wrote.
Impacts on individual parts of the economy would vary.
Moody’s Investors Service recently warned that an already growing number of junk-rated companies could “swell dramatically” in the next downturn, “substantially increasing default risk.” (source, source)
The economic conditions bear a strong semblance to 2003, and then in 2008 there was the crash. Major companies were “bailed out,” and the economy never recovered. The average man was stuck with debt and few ways to pay it.
The same situation of the past is being brought about again intentionally.
Now is the time to work hard, save money, and prepare for the future.
The next economic downturn is going to be devastating, and those who are not prepared will be severely hurt. This includes many of the Zoomers, who are following in a path similar to the Millennials and have a strong chance of being forced into their miserable situation.
Take the steps to prepare while the time is still available.