The United States The biggest mountain of debt of all can be found in the United States. 30 years ago, the national debt was a little bit above a trillion dollars. Today, it is rapidly approaching 17 trillion dollars. At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain. And since Barack Obama entered the White House, the debt to GDP level has soared to unprecedented heights… Sadly, this is just the beginning. One reason for this is that the U.S. is facing some tremendous demographic challenges in the years ahead. In other words, our population is getting older. It is being projected that the number of Americans on Social Security will rise from 57 million today to more than 100 million in 25 years. How in the world are we possibly going to pay for that? Already, we are very heavily dependent on foreigners to pay our bills. According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt at this point. China and Russia account for about one-fourth of that total. Right now, China owns approximately 1.275 trillion dollars of our debt, and Russia owns approximately 138 billion dollars of our debt. So what would happen if we went to war with Syria and they decided to quit borrowing from us and they started dumping our debt instead? That is a very good question. And actually, according to Zero Hedge foreigners have already started to dump a little bit of our debt… Today’s TIC data showed something disturbing: for the fourth month in a row, foreigners were net sellers of US Treasury paper in July, as total foreign holdings declined from $5.600 trillion to $5.590 trillion which represents 49% of total marketable debt (including the debt owned by the Fed of course). In other words, since peaking at $5.724 trillion in March, foreign-held debt has declined by $134 trillion, at a time when yields have surged on fears the Fed’s tapering of its own purchases of bonds will mean less Fed frontrunning opportunities. We certainly cannot afford for that to continue, because we desperately need other nations to finance our reckless spending. Our debt is wildly out of control, and the only way we can keep the entire system from collapsing is to go into even more debt. As I noted recently, if the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times. That is a whole lot of money. But most Americans do not consider it to be a problem because disaster has not struck yet. Unfortunately, they simply don’t understand how quickly an exponential problem can overwhelm you. I think that the following illustration from Simon Black is particularly helpful… Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room. Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry. But let’s assume that it’s an exponential leak. At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth. By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over. For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes. By the time that our politicians and the talking heads on the mainstream media admit that we have a debt emergency on our hands, it will probably be far, far too late. The greatest debt crisis the world has ever seen is coming, and there is nothing that anyone can do to stop it. But you can take measures to get prepared for it. Please get prepared while you still can.
Posted on: Fri, 20 Sep 2013 16:17:49 +0000
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