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Drowning In Debt

An ancient proverb that is oft-repeated even in our time is that you will always end up reaping what you sow.  Well, the U.S. government has been sowing seeds of debt for decades and our politicians have endlessly attempted to assure us that everything is going to be just fine.  Well, everything is not going to be just fine.  The truth is that the U.S. government is literally drowning in debt.  Right now, the total debt of the U.S. government is  $14,223,730,274,180.80.  It is a debt that is so large that it defies comprehension.  It is also a debt that is absolutely impossible to pay off under our current financial system.  Someday the weight of this debt will completely collapse our entire economy.  The only thing that is keeping that from happening already is our ability to borrow even more money.

For the moment, the U.S. government is still able to borrow gigantic sums of money at extremely low interest rates.  That makes it possible for us to be able to rack up amazingly large budget deficits.  For example, the Obama administration is projecting that the federal budget deficit for this fiscal year will be an all-time record 1.65 trillion dollars.

All of this borrowing is enabling the U.S. economy to maintain a false level of prosperity at least for now.  But we are working with borrowed time.  The U.S. government will borrow about 43 percent of what it spends this year.  That cannot continue indefinitely.

A small minority of our politicians in Washington D.C. want to get this debt under control, but the truth is that it would not be easy to do even if there was the political will in Washington D.C. to do it.  If we wanted to balance the federal budget today we would have to eliminate 43 percent of federal spending.

Doing that would absolutely collapse not only the U.S. economy, but the entire global economy as well.

But if we continue to add to our debt at this pace it will make our eventual collapse much worse.

We really are caught between a rock and a hard place.

Our choices are massive economic pain now or even worse economic pain later.

At this point, it appears completely impossible that we will ever have a balanced budget again under the current system.

The White House Office of Management and Budget is now projecting that mandatory federal spending (mostly for entitlements) will exceed the total of all federal revenues in this fiscal year.  Back in 2008, the federal government warned us that this could happen 50 years from now.  Instead, it is happening right now.

Do you understand what that means?  It means that if we wiped out all discretionary federal spending (including the entire Department of Defense) we would still have a federal budget deficit.

Yes, the U.S. government really is drowning in debt.

Running a 1.65 trillion dollar budget deficit is national financial suicide.

Most Americans cannot even conceive of how much money a trillion dollars is.

If you were alive when Jesus was born and you spent one million dollars every single day since then, you still would not have spent one trillion dollars by now.

That is how hard it is to spend a trillion dollars.

If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars.

Unless the United States resorts to some Zimbabwe-style money printing, the truth is that there simply is not enough money in existence to pay off the U.S. national debt even if we wanted to.

If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

Are you starting to get an idea of how much trouble we are in?

Sometimes it is helpful to try to break it down to a more personal level.  Have you ever run up a balance on a credit card?  It can be a lot of fun to go out and spend all that money, but eventually a day of reckoning comes.

Well, on a national level we have lived the “high life” for decades.  It has been a great party.  But now that party is coming to an end and a great day of reckoning is fast approaching.

If you divided up the national debt equally among all U.S. households, each one would owe a staggering $125,475.18.

So do you have an extra 125 grand sitting around to pay your share?

Sadly, instead of attempting to grapple with the situation, our politicians have pushed the debt accelerator to the floor.

During Barack Obama’s first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

Wow.  That is quite an “accomplishment”.

But haven’t people been warning about this for decades?

Yes, they have.  The national debt was a huge issue when Ronald Reagan ran for president back in 1980.  Back then our politicians were pledging that they would do something about our exploding debt.

Well, that didn’t work out too well.  The U.S. national debt is now over 14 times larger than it was back in 1980.

But we haven’t gone off a cliff yet, have we?  Is there a chance that somehow we are going to come out of this okay?

No, there is not.  Debt is a very cruel master, and it is only a matter of time before financial disaster strikes.

The following comment was recently posted by a reader named “Bob” on the Economic Collapse website….

The current debt “problem” the US faces kind of reminds me of a similar situation a friend of mine was in back in the mid 1990′s. He had a credit card. He maxed it out. He ordered another credit card from another lender to use it to pay off his maxed out credit card. Then he kept on using the NEW credit card until it too was maxed out. Then he went out and ordered another credit card from another lender and started the process all over again. In the end, when he finally filed for bankruptcy, he had 8 maxed out credit cards @ $40,000 each, a house & car payment and all the other things needed to stay alive. When it was all over he ended up with nothing and was living in a trailer park AFTER his wife divorced him for keeping it all a secret from her. This will NOT end well for the US if it keeps up.

The only way that the game can keep going is for the U.S. to be able to borrow the trillions of dollars that it needs each year to roll over existing debt and finance new debt.

However, there are signs that our lending sources are drying up.

Japan is the second largest foreign holder of U.S. government debt, but due to the recent disaster in that nation, they will not be buying more of our debt for the foreseeable future.  In fact, they will probably be selling off much of the debt that they already hold.  Japan currently holds about $882 billion in U.S. Treasury bonds and they are likely going to have to liquidate much of that in order to fund the rebuilding of their nation.

Also, some of the “big boys” in the bond industry are now moving away from U.S. government debt.  For example, PIMCO, the biggest bond fund in the entire world, recently acknowledged that they are dumping all of their U.S. Treasuries.

That is not good news for U.S. government finances.

A recent article on Business Insider noted that PIMCO has moved out of U.S. Treasuries very, very quickly….

Investing firm Pimco, the world’s biggest bond trader, recently disclosed that its largest mutual fund, the Pimco Total Return Fund, has reduced its holdings of U.S. government securities from 12 percent in January to nothing at all.

Does PIMCO see some trouble on the horizon?

Probably.

The truth is that anyone with half a brain should be able to see that there is trouble on the horizon for U.S. government finances.

With the U.S. government drowning in so much debt, the only way that the system is going to avoid collapse is for the Federal Reserve to continually print increasingly larger amounts of money and for the U.S. government to continually borrow increasingly larger amounts of money.

PIMCO and others can see the horrible inflation that is on the horizon and they are not going to jump back into U.S. government bonds until interest rates are much, much higher.

But when interest rates on U.S. government debt go higher, that means that interest payments on the national debt will absolutely soar.

What a mess.

There is no way that this thing ends well.

Perhaps that saddest thing of all is what we are doing to our children and our grandchildren.

We are saddling them with the biggest debt in the history of the world and we are completely destroying their economic future.

Is that not a crime?

If you were in their position, how would you feel about what this current generation is doing to them?

We were the wealthiest, most prosperous nation on the planet.  We didn’t have to go into debt.  We didn’t have to mortgage the future for the sake of the present.

But that is what we did.  Now we are absolutely drowning in debt.

We are trapped in a debt black hole that is going to swallow up all of the wealth and prosperity that previous generations handed down to us.

Shame on you America.  Things did not have to turn out this way.

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  • mondobeyondo

    There are several hundred billionaires in the world.

    There are no trillionaires. Not a single one. Not U.S. dollar trillionaires, anyway. There may be a couple of Zimbabwe dollar trillionaires.

    That is how huge a trillion dollars is.

  • Gary

    The most popular way to reduce the deficit, according to 81% of Americans? Put a surtax on federal income taxes for those who make more than $1 million per year.

    – NBC/Wall Street Journal Poll, March 2, 2011

    We have a revenue problem and not a spending problem as the evil right wants us to believe.

    TAX THE RICH HARD AND START TO SPREAD THE WEALTH.

  • http://www.planorperish.com Gutter Economist

    From Porter Stansberry (edited):

    The only way to stop the debt crisis we face is to reduce the total level of government spending – immediately and permanently. I believe we need three simple amendments to our Constitution.

    (1) We should have a balanced budget amendment. It’s hard to imagine why anyone would object to this, regardless of his politics. Politicians ought not have the right to burden future Americans with debt. It’s disgusting that we would leave a burden like this for our children and grandchildren.

    (2) We need a constitutional amendment that ensures sound money. If you tell the politicians they’re not allowed to borrow, they’ll inflate instead. There is no reason Americans shouldn’t enjoy the stability and safety of sound money. Every argument you’ll hear against backing our currency with gold comes from bankers and swindlers who need the ability to be bailed out so they can make risky bets with enormous amounts of borrowed money. Let’s put a stop to this, once and for all. The American government is the world’s largest holder of gold. Let’s put it to work for us, right away, in the form of sound money.

    (3) We need a logical way to put a stop to the narrowing of the tax base. Everyone who votes should share in the burdens of government – otherwise the incentive will always exist to vote for more government spending. I suggest a constitutional amendment limiting tax rates and abolishing all taxes except for income tax. Tax every adult under the age of 65 20% of his income – whatever the source. Give everyone a $24,000 annual personal exemption. Above that, everyone pays. No other deductions. We could get rid of the IRS. You could do your taxes on a post card. How much did you make? Send the government 20% of it.

    http://www.planorperish.com/?p=4434

  • Nexus

    You can come up with all the ideas you want but sadly the window of opportunity to address the problem has past. The outcome will not be debt for future generations but the rubble of economic collapse. The US ‘carry trade’ market has the potential to collapse as soon as interest rates track up and that may trigger a financial domino effect.

    http://finhelper.com/the-carry-trade-can-be-unforgiving/
    http://financial-dictionary.thefreedictionary.com/Carry+Trade

    However, the idea of making the tax system less complex (get rid of thousands of pages of regulation) is attractive – set a single figure for all individuals and a single figure for all businesses. Then do a global deal to close down all the tax havens. In addition to this change the law so that tax evasion becomes a criminal and not a civil offense.

  • ken

    Gary, I regret to inform you that you have been sold a BS bill of goods and are a so-called “useful idiot.”

  • no one

    @mondobeyondo

    How can you be so certain no trillionaires exist? If they did, do you think they would publicly make them selves known? Better the unwashed masses didn’t know. They would spend just a small portion of their interest payments in controlling, bribing and influencing the press that they didn’t exist.

  • no one

    The US is done. The Republic has failed due to lobbyist, excessive paper capital, overly powerful and influential bankers.

    The people of this country, to include the middle class and working poor are meaningless in the United States. They don’t have lobbyists to visit congress people daily.

    The Bank crapped in the country that allowed them to exist. Now they exist internationally, until they get into trouble and drain what is left of the nation. How quickly they forget that American people fought to protect them from Communists. As soon as the Communists failed, they turned on the American people.

  • uneducated

    How come american have all those problem and keep making war to other nation??? Is war adds more debs to the economy??? I’m an uneducated man but this feels like stupidity in the highest order.

  • Robert Savio

    There will never be a balanced budget amendment NOR term limits for Congress and the House because THEY are the ones that vote on it and, to protect their privileged way of life and their corporate masters, they will never propose such legislation.
    These two matters should be placed before the American People and let THEM decide the issues. Of course THAT will never happen because we all know that the concept of the People’s will has been long dead in this nation.
    We simply have to admit that our country, as it once was, is history and the “New World Order” will be the demise of the United States within the next 50 years.

  • http://BrophyWorld.com BrophyWorld

    I concur with Nexus that “the window of opportunity to address the problem has past. The outcome will not be debt for future generations but the rubble of economic collapse.”

    I suggest voting with your feet because it’s more effective than voting in a ballot booth. Imagine living with a responsible government like Hong Kong, in a Mediterranean climate like California. Chile offers a combination of pleasant climate and fewer government burdens than many others. If you’re ready to shed the debt your government has imposed upon you, it is a good destination to consider:
    http://brophyworld.com/move-to-santiago-chile/

  • john w

    1) Almost all gains in income in the past decade have gone to the very rich, while their taxes have been going down. Raise their taxes.

    2) The military take 27% of America’s annual budget. Cut this by at least a third.

    3) Warren Buffet has a great idea for taxes – I might not have it quite right, but it is something like this: make the first $24,000 of income exempt – that’s what a family needs for basic living expenses, insurance, health care, etc. Above $24,000 everyone pays a flat rate, with no exemptions of any kind. Aggressively enforce corporate tax. Make the tax burden for small businesses more realistic – their businesses provide local jobs, so lets not tax them out of business.

    4) Cut Social Security by 5-10%. Social security should be there to keep people out of poverty, not to keep them in the middle class. Anyone can suffer calamities that put them in poverty, and these people need our help. The rest of us shouldn’t expect much. If we want to stay in the comfortable middle class, it is our responsibility to save/invest/keep working for it. Don’t wnat to invest in stocks? Invest in your family and let them be your social security. Change social security to a needs-based system that protects national stability by keeping people out of poverty. I am not saying people should be cut off – but that payments should be modest.

    5) I am old myself. Start a movement/mentality that encourages people to accept death instead of living an extra two years and using $100,000 a year for health care to be able to have those extra years. What a waste of national wealth. Live a life worth living in your first 70 years and forget about clinging onto life for a final one or two years when you can’t take care of yourself or really enjoy life. I am not saying we should choose who dies. I am saying that I for one will accept my own mortality and let money be spent on things more productive than me lying in a bed for an extra year or two at the end of my life. Our grandparents died at the end of their lives. They didn’t have insurance companies pay out massive amounts for medical care that only put off the inevitable for a year or two.

    5) We waste a huge amount of national wealth on health care. Start a preventative health program to avoid diabetes, obesity, cancer, heart disease, etc. Make people pay a larger percentage of costs for tests so they don’t take so many unnecessary ones. As citizens and as a country, we spend way too much on health care – only to be at the bottom of the league table when its comes to the actual health of people.

    6) Our elected officials get good pay. Cut all their perks – they can afford to pay for them.

    7) Volunteer. I am not a big Obama fan – but -people made fun of him for having worked in community development. What a load of you know what. Half of local/state taxes that you pay go to fund things that could be done just as well by volunteers – and volunteering would get people off their back sides. Just think. Instead of watching news programs that misinform them, people could actually meet other people who have views different from their own and realize that those people really aren’t that different from themselves. And getting off the couch once in a while might actually lower health care costs.

  • PatriotRider

    Minor correction to your article…replace “borrowing” with “printing money” and you will be correct.

  • Adrian

    How have we been piling up debt over the past couple of decades if we had a surplus at the end of Clinton’s presidency?

  • Paul in Switzerland

    I always find it interesting to read such blogs and comments that imply that President Obama (or the Democrats, or anyone but the Republicans) is responsible for the excessive debt of the United States.

    The primary sources of the current US debt (close to $12 trillion of the $14 trillion) can be directly linked to two Administrations: the Ronald Reagan and the George W. Bush Administrations.

    Sadly, people read sites like this and do not go “behind the numbers”. To see from where the current debt really came, go to:
    http://zfacts.com/p/1170.html

    Take a look at the graphs, read the Excel spreadsheets, and analyze the information yourself.

    And may the truth set you free.

  • Tim

    There are over 70 million baby boomers who have only begun to retire, but mandatory federal spending already exceeds federal revenue. Incredible. Most politicians in Washington are reluctant to enact needed entitlement reform because they know it would be political suicide.

    I’m really surprised that the system hasn’t collapsed already. If they continue with more quantitative easing after the current program ends in June, it will only be a matter of time before the currency becomes worthless. If they raise interest rates to a level necessary to head off inflation, the interest on our national debt will increase and eventually lead to hyperinflation. There’s really no way out of the situation we’re in. They’re just trying to stave off the inevitable.

  • mondobeyondo

    @ No One

    I am quite sure there are no trillionaires. It would not be that easy to hide if you had that much money. Your face would be all over Barron’s, Fortune, Money, Time, Newsweek, U.S. News and World Report, the Wall Street Journal, and even Tiger Beat. Hell, you could OWN each and every one of those magazines. Look what Oprah Winfrey’s done with her “O” magazine. Her face is literally on every single cover.

    One major magazine listed the wealthiest men in the world (Carlos Slim, Warren Buffett and Bill Gates are the top 3). So being a trillionaire – awfully hard for people not to notice that.

  • Piglet

    “How have we been piling up debt over the past couple of decades if we had a surplus at the end of Clinton’s presidency?”

    The so-called surplus was an illusion, as it counted Social Security payments deducted from paychecks the same as tax revenue, not something that was going to have to be paid out. Go to this website

    http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm

    and check each year of the Clinton administration (or any other administration, for that matter) and you’ll see that the national debt grew each year. On 30 Sep 1992 it stood at $4.06 trillion, and 8 years later it was $5.67 trillion. That is NOT a surplus. It’s better described as hoodwinking a gullible public that wants to hear good news instead of facing reality.

    Neither major political party is going to pull your fat out of the fire. Remember the words of Arthur Sylvester, Deputy Secretary of Defense for Public Affairs during the Vietnam War era: “Look, if you think any American official is going to tell you the truth, then you’re stupid. Did you hear that? Stupid.”

  • mondobeyondo

    Will our creditors be digging us out of our debt, or will they be digging our grave?

  • meme

    where did the us gov come up with the money to bail out the banks ask your self’s that do away with the fed and that would fix all your problems should have voted Ron Paul in to office that would have saved you all from all this mess that your in now but what do I know

  • William

    Moving past the approx $1.6 TRILLION deficit for FY 11 (ends 30 Sept 2011), if the lunatics in the US Congress managed to trim 500 BILLION DOLLARS from FY 2012 expenditures, the 2012 deficit would STILL BE ABOUT ONE TRILLION DOLLARS. Chipping around the edges with publicity stunts from the Republicans and Democrats will not save this nation. Maybe the unnecessary wars and tax cuts we clearly could not afford do not look so great now…….

  • pogue

    Warren Buffet’s plan sounds similar to the Fair Tax-check it out. The Fair Tax takes power from government by making the tax completely fair-24% tax on all transfers of money, regardless of class or purpose. To me, the taxes should be identical for all, anyway, since we’re supposed to be treating everyone equal before the law. If that’s the case, then my share should be the same, at least proportionally, as a rich guy or a poor guy. I don’t think it’s right that some people pay nothing, especially if they have the right to vote. It just doesn’t seem right to have my tax dollars going to someone who doesn’t pay taxes. As if they’re going to vote for belt tightening or anything like that. Anyway, the problem with just going to a flat tax is we already did that. Originally, the tax was only levied on the very rich, but they kept changing it to this current state. The Fair Tax is set up so you can’t change it except for the percentage that everyone pays. And you get a 1000-1500$ a month rebate to cover your basic cost of living expenses. It’s a good idea and one that would enable us to get rid of the IRS and that ridiculous code of tax rules even they don’t understand.

  • A Dodgy Bloke

    A couple of things one you can strip everybody with a net worth of over a million dollars of everything they own give them a tent and a sleeping bag. It would cover part of defect for one year. The next year you would still have defect of over a trillion dollars, and we would still have the unfunded liabilities of hundreds of Trillions it simply would not solve the problem. The United States has a spending problem, it has an delusional political elite who thinks they can kick this can down the road long enough for it to be somebody’s else’s problem. We have a public where any critical thinking dying, they want health care, they want their Government program but they want to cut somebody’s else’s program.
    If interest rates were to go up 5% that would add another 700 billion to interest on the debt. This isn’t going to be kicked down the road for our kids to deal with it’s to late, watch interest rates when you see a steady climb get real ready.

  • Texas girl

    John W “I am old myself. Start a movement/mentality that encourages people to accept death instead of living an extra two years and using $100,000 a year for health care to be able to have those extra years.”

    You are so right about this. I heard a story that stated a 93 year old woman had a stroke/heart attack and the hospital spent $350,000 (if I remember the number correctly) to keep her alive. She lived for another 3 weeks. This is selfish and ignorant. I can’t understand how a person that is 80 years old thinks it is right to spend a quarter of a million dollars so they can live for a few more years. I have told my family if I reach 70 then don’t bother trying to keep me for longer. God will take me home when He thinks is the right time. I don’t need the doctors to make that decision. Your other points were fantastic too!

  • Tom

    Ken… you are wrong, he is not a useful idiot, he is a useless idiot.

  • http://www.pathtoasia.com rhea

    I think our government is far too addicted to spending to cut back. Even if they DID cut back, I don’t know if it’s possible for them to cut back enough to be effective and still “stay in business,” as it were. Lose. Lose. Lose situation.

    We help Americans find jobs and prosperity in Asia. For details, visit http://www.pathtoasia.com/jobs/

  • Chicago Don

    Here is a sobering fact…the private debt for US citizens exceeds the US National Debt by 2 Trillion. Yes, that is correct, the private debt in America is around $16 Trillion according to Debt Clock USA. With State and Municipal debt, we are somewhere south of $30T. Put that in your pipe and smoke it awhile; it taste pretty foul.

  • Outsider

    People that believe in taxation are spitting on the constitution. You fought a war against this people. Serfs pay tribute.

    The answers are quite simple but difficult to implement. Educate all, especially the cops and low ranking military.

    ban all political aspirants from holding office who are currently or previously held membership in all secret societies and psuedo political organisations/think tanks such as the CFR, trilateral commission and bilderbergers. Stop revolving door postings between government and business where there is a conflict of interest.

    Abolish the federal reserve and redeem all notes in a 1 for 1 swap with debt free US treasury notes. The interest can be paid the same way they made it, just print it… “out of thin air”

    However this would make the crimminals that perpetrated this long con filthy rich.

    The best way is to default on monies owed the fed or better still just nationalize it and bring crimminal court proceedings against the perpetrators for fraud. It can always be proven that the fed was never brought into law legally. Redeem and swap all other fed notes for a new US treasury notes and the best of all refund all taxes paid since 1913 with the new US treasury notes. This alone would see such a cash injection to the citizens that people would instanly be financially afloat again and could kickstart business. If u are worried about a banking system collapse nationalise all the banks and refloat them GM style. Make it a licencing condition that they must use the new notes. The usury system does not have to change much, if at all if that’s what you have a hard on for and will merely be transfered from private to the hands of congress and you will never have to pay Taxes again. The treasury lends to banks and banks lend to people with a free market for interest rates to promote competition.

    This will be difficult seeing as thousands of bureaucrats allowed this to happen and that lawyers, the courts and judiciary are “protection” for the system.

    In any case these processes can’t even begin until EVERYONE realises the fed is private and foreign owned and pork barrelling pollies and lawyers (secret lawyers oath my ass) are in on it.

    Finally you could get paulson, geitner bernanke and all the rest of the ponzi gang and put them in a new televised gameshow called “the running man”

    Who’s gonna stop you America? You have the most powerful millitary in the world and you’re still the city of Londons’ bitch.

  • http://www.nocreditcheckloansbadcreditmortgages.co.uk/ Ferdinand Brevitz

    I am tired and sick of hearing about the “US economic recovery”. The Federal government borrowed and spent $6.1 trillion during the last 4 years to generate a cumulative $700 billion rise in the nation’s Gross domestic product. This means we’ve borrowed and spent $8.70 for every $1 of nominal “growth” in Gross domestic product. In constant dollars, Gross domestic product is flat, we’ve got no “economic growth” at all for our $6.1T. In constant dollars, the GDP in 2011 might go back to the 2007 level, if the economy continues “growing” at the same pace reached inside the first ninety days of 2011. If not, then the GDP will actually be below pre-recession levels. There is no economic recovery, the numbers prove it.

  • http://www.brightsmilestexas.com Pflugerville Dentists

    Yes, the debt is a huge problem and our economy has many other problems. The biggest problem we have are politicians that can take care of the big issues, they put them off until the next election cycle. Somehow, Clinton had a surplus but I bet it will not happen again at least in my life.