National debt is the biggest threat to our national security. Most people’s eyes glaze over when discussion turns to business and economics. Americans know we have a huge debt with lots of zeroes but have no idea how it grew so exponentially large, where it came from, who owes it, who owns it, or how many zeroes a trillion has.
Do Americans care who is responsible for this debt, whether we can or should reduce it? Should they just change the channel when the business news flashes across the screen? Few people bother to look at the national debt clock.com, running at nano speed, showing second by second the total indebtedness of each taxpayer, man, woman, and child based on U.S. Congress’ policies and current spending of the U.S. government.
The national debt is like a disaster in a faraway place that does not affect or concern us; we can just turn off the news. Even fewer Americans realize that today’s economics is the continuation of politics by other means. Our politics and our economy are inexorably intertwined – to understand one, you must examine the other. The Federal Reserve System, our central bank, is never divorced from politics as they pretend. Its Chairman, Ben Bernanke, is a very powerful player as a monetary policy maker.
National debt or public debt is federal government’s indebtedness at a moment in time. It is the accumulation of previous budget deficits, the amount by which the government’s expenditures exceed its receipts during a specified period of time, usually a year. The government accumulates debt by running deficits because of exorbitant spending. Our government borrows money from U.S. taxpayers via Treasury bills, notes, bonds, foreign investors, and other countries.
We are borrowing billions we do not have from China in order to fund the Muslim Brotherhood’s so called “Arab Spring.”
We accumulated such huge national debt through wars, recessions, and borrowing to overspend or give away to third world nations. We are borrowing billions we do not have from China in order to fund the Muslim Brotherhood’s so called “Arab Spring.” This is at a time when our country is broke, several states have suffered devastating tornadoes, floods, fires and FEMA is running out of money. The Middle Eastern budding “democracy seekers,” financed and coached by the New World Order proponents, are not so peaceful and friendly to our culture after all and are not really looking for democracy in their countries.
“Since 1971, U.S. borrowed $50 trillion to produce only $13 trillion of goods and services in a 40 year period.” Egon von Greyerz, a financial analyst with Matterhorn Asset Management AG in Zurich, Switzerland, said, “From 1971 when President Nixon ended the gold-backing of the dollar, virtually all of the growth in the Western world has come from the massive increase in credit rather than from real growth in the economy.”
Until the 1980s, the U.S. government had acquired most of its debt either to finance wars or from losses of tax revenues that accompany recessions. Lately, a huge debt was acquired through out-of-control spending and interest payments on borrowing.
After WW II, the national debt briefly reached 100% of Gross Domestic Product, meaning that the money value of all goods and services produced in a year equaled total spending. In 2009, the national debt was 83.4% of GDP. President Bush increased the debt by 20% during his presidency and fighting two wars. The current president exacerbated the problem by adding to the debt burden various giveaways, stimulus I and II, unemployment benefits, the war in Libya, and other financial schemes aimed at deliberately wasting the taxpayer dollars. Economists argue that the current debt, including unfunded liabilities, is anywhere from $110-150 trillion dollars, ten times the predicted amount of the current administration.
Who owns the debt? Domestic citizens, who selfishly wish to have it all right now in order to live well, transfer debt from one generation of Americans to another, to their children and grandchildren. One branch of the U.S. government owes money to another branch and no budget is sacred from dipping into it to take from Peter in order to pay Paul, including Social Security. Their lock box was tampered with a long time ago and the key was lost.
The share of the national debt owned by foreign nationals, businesses, and governments is more worrisome as it has been rising rapidly since 2006 when it was over 52% of the total public debt. The top ten holders of American national debt are China, Japan, Caribbean Banking Center, oil exporters (OPEC), Russia, United Kingdom, Brazil, Luxemburg, Hong Kong, and Taiwan.
It is true, our national debt is measured in dollars, which we can always print in order to meet our payments. This is called monetizing the deficit. Doing so, however, creates inflation, as too much money is chasing too few goods. A responsible government should never print money in outlandish excess of the amount of goods and services produced in a year. If they do, hyperinflation will occur, and severe devaluation of the currency.
The U.S. Consumer Price Index (CPI), also known as inflation, has been stable for 200 years until the early 1900s. From 1971 to 2010, this price index has gone up 500%. Money printing and uncontrolled credit creation are the culprits. Lately, this administration’s economists have left out food and gasoline in their measurement of CPI in order to skew reality. This is disingenuous since all Americans are affected by the price of food and gas. According to professors Lawrence H. Officer and Samuel H. Williamson, it took $5.31 to buy in 2008 what it cost $1 in 1971, the year President Nixon ended the backing of the U.S. dollar by gold. Just to keep up with inflation, Americans would have to earn 5.31 times more income today than they did in 1971. Today’s dollar is only worth 19 cents when compared to 1971.
Uncontrolled national debt can lead to many national security issues: retarded economic growth, lack of capital formation, monetizing deficits
Uncontrolled national debt can lead to many national security issues: retarded economic growth, lack of capital formation, monetizing deficits (overprinting of money in excess of goods and services thus creating inflation), social turmoil, bankruptcy, revolutions, famine, and war.
The P.I.G.S., Portugal, Italy, Greece, and Spain were reluctantly admitted into the European Union in spite of their high levels of national debt, inflation, and disastrous handling of the economy. Greece, for example, has a 120% ratio of national debt to GDP. You saw the turmoil and mayhem in Greece when the administration tried to cut the generous social benefits as their only option to curb overspending. None of the European nations who accepted the euro as their national currency could print money to come out of debt, they are dependent on Brussels’ EU monetary policy.
Our current policy seems to be putting pressure on the U.S. dollar until two options remain - default on the U.S. debt, or monetizing it by printing more than $100 trillion to pay it.
If we default, as in any case of bankruptcy, creditor nations would demand payment in American assets – our oil fields, mines, land, parks, monuments, buildings, military bases, and even the indentured servitude of generations of taxpayers, similar to the reparations imposed on Germany after World War I. If we default, the dollar would crash.
If we print money ad nauseam, we would trigger a hyperinflation like the Weimar Republic that would also crash the dollar to zero.
We would recover as a society but we would be a former super-power like Greece, Rome, Spain, France, or Britain. Since we are operating in a global trade environment, we would drag the rest of the western world with us as their currencies and economies would crash as well. Famine would ensue in weaker countries and wars in others.
The current administration seems to be heading in the direction of national economy and currency obsolescence, forgiving all debts in the process, except global taxes and reparations to America’s “victims.”
