US economy – Deep down in about $15 trillion debts

Submitted by Rick Murphy on Thu, 03/29/2012 - 23:22.

US economy is deep down in mammoth federal debts. The total amount of debt has already exceeded $15 trillion; the number is supposed to grow in coming days. Almost 2/3rd of the total amount is owed to public, foreign governments and companies through notes, bonds and Treasury bills. The Federal government has hardly any option to pay off the debts and become ;;;;;

The US debt level

 

Debt level is calculated as a percent of a country’s Gross Domestic Product or GDP. The GDP was almost $15.33 trillion during Q4 of 2011. Present US debt to GDP ratio is over 100%. In spite of low interest rates, the country has paid $450 billion as interest on the debt in FY2011.

 

The reasons behind huge US debt and poor US economy

 

There are a number of reasons that contribute to mounting amount of US Federal debt.

 

  • Budget deficit - The main reason for this huge debt is budget deficit. Since the time of President Ronald Reagan, the Federal government has been reducing taxes, but imposing no control over government spending. The spending may include military spending, 2008 bailout measures, and Medicare spending, and economy stimulant packages. Less income during recession and several tax cuts also have severe effects on US economy.

 

  • Debt ceiling – The debt ceiling aims to limit the amount of debt. However, the government with approval of Congress keeps raising the ceiling to prevent the depressing effects of debt default.

 

Poor credit rating; Bad patch on US economy

 

In 2011, for the first time, the United States has received poor credit rating from Standard and Poor’s. The bureau has made it clear that Whitehouse’s unwillingness to implement effective deficit reduction measures is the main reason for this downturn.

 

US economy - Boosting factors

 

US economy, however, gets benefits from two major factors; the Social Security Trust Fund and foreign holdings of US Treasury Bonds. Nevertheless, these factors are not going to work effectively in coming days.

 

How huge debt affects US economy

 

Over next 2 decades, the Social Security Trust Fund and foreign holdings of US Treasury Bonds may not help US economy as before. The Social Security Fund is likely to be short of funds to provide Baby Boomers with adequate retirement benefits. It would result in higher taxes as the country may stop taking further loans from foreign countries. Even if the amount of retirement benefits is curtailed, then also the country may not be able to become debt free.

 

Foreign investors may not invest in US Treasury Bonds anymore. They may invest in their own countries instead of investing in US Treasury Bonds in future. Reduced demands for US Treasury Bonds may add to interest rates and thereby slow down the economy. It would also result in reduced value of dollars as well as less attractive US economy.

 

In conclusion, it can be said that current US Federal debt amount is really alarming for the nation’s overall economy. If Whitehouse fails to find out effective ways to support the economy, the amount will grow even more and the country will lose chance to become debt free.

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Spam post from Debt "consolidation" out fit

 Admin removed the spam link (to a particular debt consolidation outfit's web site) .   The discussion of national debt may be of interest.

That's why Obama bowed so low.

China can tell us what to do, as they have so much of our debt. More than one financial writer (independent ones) has said that our government is inflating the dollar is to make the debt cheaper. However, inflation makes us citizens poorer.

I've seen charts showing a big, sharp fall off in the purchase of Treasuries by foreigners. And other governments are calling for other currencies to be used to purchase oil. Kuwai stopped pegging its dinar to the dollar several years ago. India recently bought oil from Iran, paying in gold.

When the US dollar is no longer the required currency to purchase oil, gasoline will cost us much more than $5 a gallon. Trucks may stop delivering items because gasoline costs so much. When groceries' shelves are empty and not restocked, citizens will have no access to food, the few urban gardens we now have won't be enough. They may be raided, looted by people desperate for food. Homes may be invades by such people, as well as criminals, looking for food.

In Athens, people are already living in the streets, and they are putting up tent cities, a Greek friend tells me his relatives there report. They are retired and their pensions were just cut.

We may well become like Greece. The dollar hasn't totally collapsed because in the flight from the euro, some are buying dollars. But the collapse of the dollar is getting near.

Several states, knowing that disastrous hyperinflation may be near, have or soon will have laws making gold and silver acceptable legal tender. http://www.alt-market.com/articles/752-states-to-use-gold-and-silver-as-legal-tender

Our state, county, city is doing nothing to prepare for what one  of these states' politicans called “an economic crisis of severe magnitude.” I haven't even read of churches doing any preparation.

The middle class is disappearing. That is because they are now poor. Millionaires are disappearing, but that is because they are moving out of the U.S. So what can we now-poor and the previous poor, now even poorer, to do?

Well, besides growing your own vegetables, keeping a rabbit hutch (which my father did during WWII), a goat and/or chickens (now allowed in Cleveland I believe), you can buy "junk silver." "Junk" because it is dimes and quarters (dollars and half dollars also, but they are more expensive to buy) that have been circulated and are worn. They have value because they were minted in 1994 or earlier and so are legal tender already and are 90% silver. Yes, we used to have silver in our coins, but stopped. Our dollar used to be backed by gold, too.

You can buy at least one of these coins a month. Unlike the dollar, these coins will hold their value and probably increase in value greatly.

Mr. Murphy, thank you for discussing this important problem.