Posted on 03/05/2021 8:42:09 AM PST by Kaslin
Did you know America is going bankrupt? Most people don't. Maybe the saddest part about our country's state of affairs is that all our vitriol and dysfunction has come at a time when we aren't even addressing our biggest problems. It would be one thing if America collectively decided we have to be honest about where we are as a country and we were in the middle of a charged debate about how to fix it. Instead, we are fighting about trivial things while pretty much everyone in the country, on all sides of the political spectrum, has decided our real problems are so bad we may as well ignore them. Have you ever had a friend who's had some horrible, embarrassing event in their life? The last thing you want to do is mention it. That's America and our debt problem. It's so bad that we don't talk about it anymore.
It was a full 10 years ago that we were so focused on our debt that then-President Barack Obama was forced to set up a national commission to deal with it. The bipartisan commission led by former Bill Clinton Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson came up with a series of recommendations, including tax hikes and reforms to our entitlement programs. They were attacked by both the right and left, and none of the solutions were enacted into law, but at least we were trying.
When the Bowles-Simpson commission was formed, America was about $13 trillion in debt. Today, we owe more than double that, more than $26 trillion. Those numbers are so big nobody understands them. To put it in perspective, our entire economic output in 2020 was $21 trillion. If America could magically not spend a dime -- nobody bought anything, including food or other staples -- and we put it all toward paying off our federal debt for an entire year, we still wouldn't pay it off. In more personal terms, our federal debt now amounts to more than $81,000 for every single person in the country, or over $227,000 for the average household in America.
If the problem is twice as bad as it was 10 years ago, why don't we even discuss it anymore? It's as if we are so close to the iceberg that it's too late to avoid it. Let's just keep the band playing and enjoy things while we can. It's all going to be our kids' problem. This is, of course, a fundamentally anti-American sentiment. The goal of leaving things better for your kids is as American as apple pie. We are certainly not doing that any more.
Our national desire to wish our problems away is so severe that we have even come up with an intellectual framework for it. Modern Monetary Theory, or MMT, is the belief that deficits and debt don't really matter for a sovereign country that can print its own currency. Need more money? You just keep printing more. It's like magic. The bill never comes due.
MMT proponents ignore or explain away the downside to the constant printing of money and issuance of debt, including our creditors losing faith and no longer buying our bonds, hyperinflation and the consequences for the dollar as an exchange traded currency. Despite these huge flaws, it's amazing the extent to which MMT has caught on as a convenient political excuse to continue ignoring our imminent debt disaster.
What will happen in a debt crisis; why are we ignoring this obvious and impending catastrophe; and what should we do about it?
At some point, as we continue to borrow money, the interest we pay on our debt will be so high we will not be able to afford the rest of our budget. The solution will be to borrow more. As the borrowing binge grows, those buying our bonds will grow worried and demand a higher return. This, in turn, will create a vicious debt cycle, which has already happened in many countries around the world. The result is catastrophic reductions in spending and increases in taxes to try to satisfy creditors to keep the money flowing. The only reason we haven't seen it yet in America is we are such an economically powerful country that our creditors have not yet lost faith in our ability to pay it off. If that day comes -- and unless we make changes, it eventually will -- the crisis is going to hurt all Americans.
We are ignoring our looming debt crisis because it's not a winner politically. Both parties contributed to the problem. The Bush, Obama, Trump and Biden administrations will all be to blame. Republicans, traditionally the party of fiscal responsibility, have lost all credibility on the issue. After shutting down the government over spending under Obama, they spent happily at record levels under Trump.
It's attractive for politicians to keep taxes low and spending high. Each of our last four presidential administrations has benefited from this dynamic. Wall Street and global business, which dominates Washington policymaking, has also benefited greatly. These corporate actors care about their next financial quarter a lot more than our country's state of affairs 10 or more years down the road. This period will be looked upon by historians as the saddest time in our history: a once-great country behaving so selfishly and with such short-term interests that they sold their children's futures away with barely any debate.
The biggest cop-out in Washington is the presidential commission. It rarely accomplishes anything. Yet our situation is so bad that another bipartisan commission may be our best bet. The commission should include both corporatists and populists. As much of a cop-out as this is, we are not prepared to begin debating real solutions (which will involve some pain). Shining a light back on the problem may be all we can accomplish today. We should start.
For later.
L
I stopped worrying about the debt when I realized it wasn’t going to be our country much longer.
Anyone believe that the national debt will ever be paid? Or even the interest? Maybe pedo joe’s pals the ccp can bail us out.
Just WIPE the debt.
Problem solved.
This is all true. However, all Western industrialized countries are in the same boat — which is what is saving our bacon. Japan is worse than we are. Germany is probably in the best shape.
Like with a cloth.....?
If the U.S. goes bankrupt, won’t China go bankrupt?
The communist takeover of America is trivial?
Anyone believe that the national debt will ever be paid? Or even the interest? Maybe pedo joe’s pals the ccp can bail us out.
Yeah.... if you have loaned a lot of money to someone, the last thing you want is for them to go bankrupt.
I agree.
On the one hand, there is no way we can pay off the debt.
On the other hand, there is “no way” we would ever just default on our debt.
We have to choose between those two and I think the choice is pretty obvious.
Defaulting on the debt will cause pain, but mostly pain for bankers. And they deserve the pain.
We need an Article V convention and we need a balanced budget amendment. Then wipe the debt.
“Wipe the debt”
And with it, banks fail, insurance companies fail, pension funds fail, all kinds of companies fail, mutual funds are massacred, and that is just a start.
Hard to comprehend all that would happen.
What, there is a downside to spending two trillion dollars a year in imaginary money?
“The debt” and the “dafficit”. I’ve been hearing the doom and gloom predictions for DECADES!
What economic disaster has befallen us? NONE!
Inflation (near zero). Interest rates (near zero or negative)
Stocks, 401Ks soaring during a pandemic.
“THE SKY IS FALLING, THE SKY IS FALLING!”
Still waiting, Chicken Little.
No. If we could fast forward 100 years, I think the debt will be a million quadrillion bitcoin.
comparing debt to gdp is nonsensical.
tax revenue v debt: debt is 7x tax revenue
Not all will be paid. The Fed will keep printing money to pay it until there is hyperinflation.
Time to Start Talking About America’s Coming Bankruptcy
The writing was on the wall in Spring of 2008 when they started QE. We’ve been living on borrowed time ever since.
And this ain’t just the US. It’s the entire world’s economy that is on the brink. It just needs that one event to reach critical mass. We won’t know it ‘till we see it.
Frankly, the lockdown may have been it. This hints at the reason for my tag line.
That depends on which side of the "debt" you hold. If you owe, you're happy to have the debt wiped. If your "owed" i.e. the creditor, wiping the debt is stealing your asset. Do you have mortgage debt? The collateral for the debt is the land and property. Wipe the mortgage and expect instant eviction from the collateral. Debt and equity erased along with instant homelessness.
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