Star Parker: Don't let America become like Italy

Spero News ^ | 11/11/2011 | Star Parker

[AstralisLux]

The Wall Street Journal calls the economic implosion now taking place in Europe "a crisis of the welfare state."

The latest European nation to hit the wall is Italy, where national debt is 120 percent of GDP. That is, for every dollar their national economy produces, they owe $1.20.

The Journal calls this a crisis of the welfare state because the Italian national debt is well in excess of the ability of Italians to pay its obligations and is the direct result of excessive government spending.

[ChildOfThe60s]

I hope that the candidates are right and you are wrong....no offense at all towards you.

No offense taken, of course. I would prefer to be wrong.

I didn't watch it, so I missed the context. But the standard way this is defined and used makes us at 100% of GDP. If they actually said that our debt was 24% of GDP then there was some serious lying going on. Or we have a real collection of dunces. It's simply our total federal debt figured as a percentage of 1 year's total output of goods and services. A 15 trillion debt compared to 15 trillion output equals 100%.

Now, figuring that our annual growth is nearly flat & our debt is growing at $1.5 trillion EACH YEAR, then it's pretty easy to see that in 3 years we will be at about 120-125%. Like a snowball rolling down a very long hill.

That is assuming that the economy grows at a modest rate and doesn't shrink. No guarantee there. A 1 point increase in interest rates will seriously jack up the cost of servicing the debt & with that the deficit. And that is pretty much inevitable unless the fed begins to print 100% of our debt. Then it's hello Weimar Republic, which is already moving from possible into the realm of probable.

No one can guess the scenario if (when) that happens in the US. The US is a *much* bigger domino than Germany or Zimbabwe were. The repercussions of our crash would (will) be so great that we really can't guess how it will play out.