Hard to believe but there was a time when most people actually opted not to buy things that they couldn’t afford and, for those that did get themselves into debt, they got themselves out of it. Interesting enough, that was back before 1974 when the intragovernmental debt was around $6 million (excluding the Vietnam war period) and the total national debt was less than $500 million
The Outstanding Public Debt as of today is $11.2 trillion. Of that, about $6 trillion is held by the public and another $5.2 trillion is held by government accounts. From January 2000 to January 2008 , the national debt grew about $4.9 trillion or about $1.7 billion every day. From January 2009, the national debt has grown about $5.8 billion per day. Though there’s a legal limit to the national debt, every time Congress needs more it just votes to raise the limit.
Despite the Treasury’s purported goal of a strong dollar, and the Fed’s goal of low inflation, the enormous burden of federal debt is making those goals increasingly difficult to achieve. Heavy borrowing by Uncle Sam on both sides of the isle has exacerbated the dollar's decline. This has created concern among investors who pay with other currencies as they worry that they may not get all their money back. Freddie Mac and Fannie Mae notwithstanding, this usually results in investors demanding higher interest rates to compensate for the loss in value from the weakening currency. As Uncle Sam’s creditors demand higher interest or decide to stop lending, the US Treasury will need to print more money. This will inevitably cause inflation as the economy improves. Of course, there is a silver lining for the government as, oddly enough, higher inflation and/or a weaker dollar may allow the U.S. Treasury to pay back borrowed money with cheaper funds. Unfortunately, however, higher inflation also destroys domestic savings for Americans.
At the end of the day, this is really not completely in the hands of the Fed…..though they generally act like it is. As our economy is driven by consumer spending, all that they can do is adjust interest rates to try to manipulate spending. This presupposes that everyone is spending on credit which is, of course, a good presupposition.The real solution is for Americans to get back to saving and investing. There’s no need to stop buying. It just means saving up and paying as they go instead of leveraging their futures by buying now and paying later…..or never and then expecting the government to save them from the imminent consequences. But then, what do we expect? The push for massive government has successfully advanced the illusion that the government is our parents and that they are to solve all of our problems. All I can say is, if they are going to play this role then they should do what every good parent should do and start setting a good example.
The nation is addicted to debt and as long as Americans and the government rely on others to subsidize their spending, it’s going to be tough to even slow this runaway debt, let alone reverse it. History tells us that there will be a day or reckoning and until the U.S. gets its financial act together, we’re living on both borrowed money and borrowed time
The Outstanding Public Debt as of today is $11.2 trillion. Of that, about $6 trillion is held by the public and another $5.2 trillion is held by government accounts. From January 2000 to January 2008 , the national debt grew about $4.9 trillion or about $1.7 billion every day. From January 2009, the national debt has grown about $5.8 billion per day. Though there’s a legal limit to the national debt, every time Congress needs more it just votes to raise the limit.
Despite the Treasury’s purported goal of a strong dollar, and the Fed’s goal of low inflation, the enormous burden of federal debt is making those goals increasingly difficult to achieve. Heavy borrowing by Uncle Sam on both sides of the isle has exacerbated the dollar's decline. This has created concern among investors who pay with other currencies as they worry that they may not get all their money back. Freddie Mac and Fannie Mae notwithstanding, this usually results in investors demanding higher interest rates to compensate for the loss in value from the weakening currency. As Uncle Sam’s creditors demand higher interest or decide to stop lending, the US Treasury will need to print more money. This will inevitably cause inflation as the economy improves. Of course, there is a silver lining for the government as, oddly enough, higher inflation and/or a weaker dollar may allow the U.S. Treasury to pay back borrowed money with cheaper funds. Unfortunately, however, higher inflation also destroys domestic savings for Americans.
At the end of the day, this is really not completely in the hands of the Fed…..though they generally act like it is. As our economy is driven by consumer spending, all that they can do is adjust interest rates to try to manipulate spending. This presupposes that everyone is spending on credit which is, of course, a good presupposition.The real solution is for Americans to get back to saving and investing. There’s no need to stop buying. It just means saving up and paying as they go instead of leveraging their futures by buying now and paying later…..or never and then expecting the government to save them from the imminent consequences. But then, what do we expect? The push for massive government has successfully advanced the illusion that the government is our parents and that they are to solve all of our problems. All I can say is, if they are going to play this role then they should do what every good parent should do and start setting a good example.
The nation is addicted to debt and as long as Americans and the government rely on others to subsidize their spending, it’s going to be tough to even slow this runaway debt, let alone reverse it. History tells us that there will be a day or reckoning and until the U.S. gets its financial act together, we’re living on both borrowed money and borrowed time
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