US lurching towards 'debt explosion'

The Telegraph reports:

The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank.
...
The study is damning because Mr Laubach was the Fed’s economist at the time, going on to become its senior economist between 2005 and 2008, when he stepped down. As a result, the doubling in rates is the US central bank’s own prediction.

Mr Congdon said the study illustrated the “horrifying” consequences for leading western economies of bailing out their banks and attempting to stimulate markets by cutting taxes and boosting public spending. He said the markets had failed to digest fully the scale of fiscal largesse and said “current gilt yields [public debt] are extraordinary low given the size of deficits”.

Should the cost of raising or refinancing public debt in the markets double, “the debt could just explode”, he said, adding that it would come to a head in “five to 10 years”.

Now he's predicting total chaos in 5 to 10 years, I'm saying this whole thing will come apart well before that.

At the rate we are rolling, I give us two years tops.

For those of you not familiar with what is called "unfunded debt", it is debt the US government is obligated to pay in the future, but has not budgeted for.

This includes things such as social security, medicare, and other welfare state spending programs.

Its vital that you take a few minutes out of your life to understand the situation.

Socialist security is currently funded by people who are currently in the work force. The way the system was originally set up, congress wasn't supposed to be able to touch the money that was getting paid in by the people. However congress saw the huge stock pile of cash reserves just sitting in the socialist security trust untouched and it couldn't help itself, so it began spending the money in the socialist security trust that was left over each year after the people collecting socialist security had been paid.

This system of new customers paying the investors who originally put into the system rather than paying the original investors with investment profits is called a Ponzi scheme, and its highly illegal. Any private investment firm that attempted to do what the federal government does with socialist security would be shut down and its executives imprisoned - just like Bernie Madoff.

So what we are facing now is, because so many people are due to retire, there will not be enough existing customers paying into socialist security to fund the retirements of all the baby boomers. Along with everyone retiring and beginning to collect socialist security, Medicare costs will explode as well because most medical expenses are incurred in the last 10 years of life. This budget gap is called unfunded debt.

and it is enormous.

On the order of tens of trillions of dollars, easily enough to wipe out the country and put the US into default. The way the countries default on their debt is not by declaring bankruptcy and wiping the debts clean, they do it by printing all the money they need to pay the debts causing hyper-inflation and destroying what remains of the economy.

This is something that WILL happen here in America, it is only a matter of time.

Michael Hodges has put together a site highlighting the debt owed by the country taken from official CBO reports, you can see the total debt report here.

As of 1/2009

$56.9 trillion outstanding debt.

$13.6 trillion owed to foreign banks.

Since then, the Federal Reserve has issued banker bailout loans in excess of 15 trillion dollars backed by tax payer dollars and the government has issued in excess of a trillion dollars in stimulus.



Its game over for America folks, there is no turning this around.



[edit on 8-7-2009 by mnemeth1]

Oh, and for those of you who think we will get out of this by raising taxes and interest rates, I leave you with this.

MSN Money reports

your real tax rate is already at 40%


Given that you already work more than a 1/3rd of the year for the federal government without pay, at what point do you consider yourself a slave?

Originally posted by mnemeth1
Oh, and for those of you who think we will get out of this by raising taxes and interest rates, I leave you with this.

MSN Money reports

your real tax rate is already at 40%


Given that you already work more than a 1/3rd of the year for the federal government without pay, at what point do you consider yourself a slave?

Good point.

Bread and circuses keep everyone distracted, unfocused, divided and dependent on the powers that be.

Even if the governments were to completely cut spending and raise taxes we would never get out of debt.

We are past the point of no return. No amount of taxes and spending cuts is going to matter. Usually when something like this happens in Business and personal finance they end up filing bankruptcy.

Now I know if a government declares itself into bankruptcy then that is a bad thing, but I really don't see anyway out of this. With all the bailouts it starting to shape up like the lost decade over in Japan.

Originally posted by Hastobemoretolife
Even if the governments were to completely cut spending and raise taxes we would never get out of debt.

We are past the point of no return. No amount of taxes and spending cuts is going to matter. Usually when something like this happens in Business and personal finance they end up filing bankruptcy.

Now I know if a government declares itself into bankruptcy then that is a bad thing, but I really don't see anyway out of this. With all the bailouts it starting to shape up like the lost decade over in Japan.

I wish I could agree with you.

This is not going to be like the "lost decade" in Japan.

This is going to be mass starvation, social unrest, and total upheaval.

This is Rome burning.

reply to post by mnemeth1


Well, yea but if we didn't have 8 years of a horrible president to put everybody on the edge then it would be.

But you are correct, I was just taking into account the debt levels of the US there is noway out of it. But when you add in the social aspect there are going to be riots and food rationing and all kinds of things.

Perhaps we will see something along the lines of states splitting away (ceding) from the nation, becoming self ruling/regulated fiefdoms. Now the question would be, who or what is going to rule those states? Corporations, a person or groups of people? Along the lines of Jericho

Food for thought

Originally posted by warrenb
Perhaps we will see something along the lines of states splitting away (ceding) from the nation, becoming self ruling/regulated fiefdoms. Now the question would be, who or what is going to rule those states? Corporations, a person or groups of people? Along the lines of Jericho

Food for thought

I have come to see state secession as the only way the nation will be able to retain its constitutional values.

The federal government needs to be abolished, its debts liquidated, and reconstituted under the same constitution.

This action needs to be taken by the states, however I view this as remote a possibility as congress cutting its spending, which is basically a snowballs chance in hell.

reply to post by warrenb


I think we will see a mixture of both. I can't see our current situation going on for any sustained amount of time.

What I think will ultimately happen is that the corporations will rule for a short while until the people take over and force the corps to dissolve. These are corps that have operations in multiple states.

Lots and lots of people are saying we need market correction, but honestly I think we are going through a world correction. I think society has gotten so complex to a point to where things have to correct in order to keep advancing.

I really don't see WWIII ever happening how people expect a world war to happen. I believe it will be a economic war, China is hoping to come out as the world super power, but I think the coming correction we will be living in a world where there will be no super power.

When the technology gets developed to where we can power our homes and be off the grid, it will be a major paradigm shift in things.

That is what I think at least.

Wait a minute. So, we're completely screwed no matter what we do right? We've gone beyond the point of no return right? So, I have to ask, why don't we just go FULL RETARD!?? lol

I mean, I know this won't work really, but since nothing is going to work why not one last retarded try?

Money is just paper right? What causes hyperinflation is when they print too much and so the money supply becomes so great the money isn't really even worth anything right? I mean there's just money all over but a case of beer costs a million dollars so it doesn't even matter how much you have. You still can't afford it. That's hyperinflation right?

Well, we still have our hard work to offer so we do have something of value that can be represented by a currency system. People that want hard work from you still need tokens to buy it and exchange.

So, the money never really was worth anything. It was just tokens we use to exchange withourselves to pay each other for our hard work, but in the end it's just paper. We can create it, we can destroy it.

So, let's just print a crap load of money, enough to pay off all our bills. Then we have the hyper inflation because now there's too much money out there. The money isn't worth anything and our loaners and private bond holders get paid back in worthless cash. So, what do we do now?

Now, we create a new private organization called the Federal Reserve 2. We give them bonds that we "promise" to pay back someday just like we do now with our current bond holders.

Then we print a new currency called the U.S. Dollar 2. By law we force this Federal Reserve 2 to accept our bonds even if they don't want to, but since it's set up by the gov it shouldn't be too hard to convince them. Just like today's currency, we promise, I mean absolutely promise that "one day" we'll pay back the bonds.

So, we print the US 2 bill. But one US 2 bill is worth say... 10,000 regular dollars and so on and so on. It may need to be larger than 10,000, but this is just an example. So, to get a 1 dollar US2 bill you have to pay 10,000 US1 dollars right?

So, we just don't print as many of the US 2 bills lol. Okay okay, I'm not really serious here, but just here me out for fun.

It's fiat currency anyway right? It's only worth something because the government orders it to be worth something by law. So, we just tell the people that okay, you've got one year to convert all your US 1 dollars into US 2 dollars and then the US 1 dollars won't be worth anything and will be destroyed. Now we just bulldoze the Federal Reserve 1 because who needs it? All the money is US 2 bills now!

However, since a US 2 dollar is worth 10,000 times as much for example as a US 1 dollar you'll be able to buy as much as you could before because prices marked in US 2 dollars will be 10,000 times lower. However, the entire money supply just shrank 10,000 times right?

This will cause the money supply to shrink back again making the US 2 dollars worth something again. And now all the debts are paid because we paid them all off with the inflated currency, but since the loaners get to exchange their money for US 2 dollars now it's not really worthless. They can go their merry way buying stuff with it again or loan it back to the US gov to distribute more US 2 dollars through bonds lol.
lol

Now that the money supply has been shrunken again the people we owed debts too don't really get screwed with a bunch of worthless hyperinflated money because they have a certain time period to shrink their inflated cash back down to something that's actually worth something.

Okay I know that's the dumbest thing ever and doesn't really work that way, but I was really really bored today. FULL RETARD! lol.


[edit on 9-7-2009 by tinfoilman]

[edit on 9-7-2009 by tinfoilman]

I would argue we are already going into "full retard" mode haha.

Operating in such a fashion is what got us into this mess to begin with.

As Jackson said:

“The mischief springs from the power which the monied interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining...and unless you become more watchful in your states and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of government have been given or bartered away…."

The private Federal Reserve needs to go away.

Period.

The entire point of its creation was to smooth out the market swings and create a stable economy. It was also supposed to protect the value of our dollar.

As measured against its mission statement, it has been a total and complete failure since nearly day one.

If you really want to learn about how the fed operates and why it is the primary reason for our country's decline, watch the Money Masters.




[edit on 9-7-2009 by mnemeth1]

reply to post by mnemeth1


Yeah I've seen that video before and I agree, but we're really screwed now.

I don't even have a solution and I don't think there is one. Even if we get rid of the fed, we still have no real money. We went bankrupt a long time ago. That's why we left the gold standard to begin with and started up a fiat currency. Because we didn't have enough real money left. So, we started paying people in worthless paper, but it was okay. They were really just trading labor. The paper was just used to keep track of who owes who labor. It works fine as long as people think it works fine.

That's the whole point of my full retard plan. Just something to make people think the money is actually worth something. As long as they do the wheels keep spinning.

But in the end I don't think there is a real solution. I think at some point there's just going to be a total collapse and the money lenders yet again will take all our stuff from us like they've done over and over and over.