When I wrote about the US Debt Bomb back in August 2009, it was only(!) about $12 trillion. Since then it has grown to $19 trillion. If it’s difficult to comprehend such a large figure, consider it breaks down to $159,000 per taxpayer!
US Debt Keeps Growing
Unfortunately, this is only a small part of the country’s unfunded liabilities. When you add Medicare and Social Security, the total is about $100 trillion. Many people believe that this is too much for the country to pay off, and that we will never be able to pay it.
How did this happen?
As I have mentioned before, most of the politicians that have run this country for the last 50+ years have not been fiscally responsible. They treat budget spending the same way a teenager uses a credit card. Am I saying that they are bad people?
No. I am just saying that they do not have the skills or inclination to fix the budget problem. They don’t know how to manage money or a business. Even if they did promise to fix the problem, they would never be voted into office. They would have to make massive cuts to Social Security, Medicare, military spending and every other area that people are not willing to cut. The people who depend on all this excessive spending would have to vote for the politician, and they would never do it.
Enter Donald Trump. Although there are many things that are not great about Trump’s proposals, I think that he has the potential to fix problems like this. He’s not a politician. He has so much money and power that he doesn’t have to play politics. And, his confrontational personality seems to be the incompatible with the political process of trading favors.
It has been quite interesting to watch Bitcoin as it has gone through one bubble, and consistently risen since. Many people thought that Bitcoin was finished after its stratospheric rise in 2011, and it’s subsequent collapse to $3. Can Bitcoin survive such a massive devaluation?
Image courtesy Bitcoin Charts
Recently Bitcoin has achieved quite a bit of attention, because of WordPress.com announcing that they will accept payment in Bitcoin. More recently, Reddit has decided to accept Bitcoin. The more interesting (and perhaps) exciting development is that you can now buy pizza with bitcoins.
Unfortunately for the American people, the U.S. national debt is approaching $14 trillion, and growing at a record pace. In fact, this works out to about $45,000 per citizen. This is far greater than the average savings of each citizen!
Are we bankrupt yet?
After ignoring the problem for decades, the media has finally begun to publicize the problem. And, the congress is actually considering doing something about fixing it. People say that democracy moves slowly, but if they take action within the next two years that would be great.
As you probably know, France is having strikes because they are changing the retirement age from 60 to 62. Here’s an article on Yahoo Finance about the problems happening throughout the country because of the strikes. What does this mean for the United States?
Is the U.S. Next?
It may seem trivial to change the retirement age from 60 to 62, especially for Americans. For us, the norm is 65. However, I think that there will be massive problems for the U.S. due to the fact that there is no money to pay Social Security benefits. As I mentioned recently, the government has just spent all the money. Who will pay?
The new record breaking budget deficit of $1.8 trillion could have massive repercussions for the economies of this country and for the entire world. The future deficits are expected to rise. This deficit might be the straw that breaks the dollar’s back.
Image courtesy of The Heritage Foundation
There have been many factors that have been putting pressure on the dollar, going back nearly 100 years when the government started running a deficit. It’s been a free ride for the last century because the dollar was the default currency for the world. America was the most powerful economic superpower, and the only country that was a military threat was the USSR. It was like having an infinite line of credit; we could print as much money as we wanted.
In the olden days (circa 1970), people expected the government and other institutions to take care of them. They depended on the government to educate them through the school system. The depended on Social Security and their company’s pension plan for retirement income. And they depended on Medicare and Medicaid to handle their medical expenses.
How times have changed. Since those good old days, the dollar was taken off the gold standard. That means that the government could print as much money as it wanted. It could pay its own deficit with the money that it printed. This means that there is no limit to the amount of money that the government can spend. And that’s why it is spending money faster and faster. It is spending money that it doesn’t even have.
Many people were horrified by Bernie’s Madoff theft of over $50 billion of investor money. They thought that the SEC and the government would protect them from such a massive and obvious scam. It’s true that he will probably spend the rest of his life in jail. However, that won’t help the people who lost all the money.
What many people don’t know (or choose to ignore) is that the Medicare and Medicaid liabilities are 1,000 times greater than the Madoff scam. These liabilities are currently estimated at $62 trillion. It’s gotten to the point that these sums are so big that we can’t even imagine them.
As I wrote about in a previous post, Obama has taken massive action in the first few days of his administration. That is really outstanding. He has already distinguished himself as being different from most politicians, and is already starting to follow through on his hundreds of campaign promises in a big way.
All that is wonderful. The problem is that America is in financial trouble far deeper than most people imagine. So far, the government is spending about $800 billion to help the economy. Consider this: Social Security has $10 trillion in liabilities. That is over 10 times as much as the recent economic stimulus package. What radical changes is Obama going to make to solve this huge problem?
Besides Social Security, we have an even bigger problem: Medicare. Medicare has liabilities of $62 trillion! So, adding these two liabilities together, we need 100 times as much money as the government is spending already! How is Obama going to solve this unbelievably challenging problem?
Unfortunately, most Americans are not even aware of the problems of Social Security and Medicare. They blissfully assume that the government will take care of them in the future. But I suggest you, that ignorance is not bliss. There will come a day in the near future when these benefits will be significantly reduced or disappear altogether.
Most people don’t want to deal with the fact that our government has put the country hopelessly in debt. We are soon coming to the point where we will not be able to make payments on the national debt, and the entire structure of the American economy will change radically. I just hope that Obama can find some way to solve these daunting problems.