The United States Debt Crisis was a financial crisis that started as a debate in the United States Congress about increasing debt ceiling. The crisis ended when a complex deal was reached that raised the debt ceiling and reduced proposed increases to future government spending.
What is the biggest economic problem that the United States is facing? Very simply, the biggest problem is that the United States has way too much debt. Over the past 30 years, household debt, corporate debt and government debt have all grown much faster than the GDP has. But no nation on earth has ever been able to expand debt much faster than national output indefinitely. All debt bubbles eventually burst. Right now, Americans are living in the greatest debt bubble in the history of the world. All of this debt has fueled a ‘false prosperity’ which has enabled many Americans to live like kings and queens. But no nation (or household) can pile on more debt forever. At some point the weight of the debt becomes just too great. It is amazing that the United States has been able to pile up as much debt as it has. Over the years, many authors have predicted that US government finances would collapse long before the US national debt ever got to this level. So the mountain of debt that we have accumulated is quite an ‘achievement’ if you want to look at it that way. But the clock is ticking on this debt bubble and when it collapses Americans will have to say ‘bye bye’ to their vastly inflated standard of living, and they will discover that we have destroyed the economy for all future generations of Americans.
Sometimes a picture is worth a thousand words. When most Americans think of the ‘debt problem’, they think of the debt of the federal government. But that is not the only debt bubble that the United States is facing. Thirty years ago, household debt in the United States was approaching the $2 trillion mark. Today, it is sitting at about $13 trillion.
Americans have been trained to pay for everything with debt. They pay for their homes with debt, and mortgage debt as a percentage of GDP has more than tripled since 1955. They pay for their cars with debt, and at this point about 70 per cent of all auto purchases in the United States involve an auto loan. Americans pay for higher education with debt, and the total amount of student loan debt in America recently surpassed the $1 trillion mark. Wherever they go they pay with plastic. If anybody wants a heated cat bed and a cute little cat sweater for his/her little kitty then he/she just put it on his/her Visa or MasterCard. Amazingly, consumer debt in America has risen by a whopping 1700 per cent since 1971, and if one can believe it, 46 per cent of all Americans carry a credit card balance from month to month. Americans are absolutely addicted to debt and they do not know how to get rid of it.
State and local governments are also addicted to debt. Thirty years ago, state and local government debt was approaching the $400 million mark. Today, state and local government debt is hovering around the $3trillion mark.
In the United States today, the government has not just one ‘debt problem’ – the fact is that there are hundreds of them. Too much debt has brought state and local governments on the verge of bankruptcy. For example, according a news report the city of Stockton, California, is right on the verge of declaring itself bankrupt. In fact, an announcement in this regard could come very soon.
Of course the biggest offender of all is the federal government. Thirty years ago, Ronald Reagan was running around proclaiming what a nightmare it was that the United States national debt was reaching the $1trillion mark.
Well, now we are about to blast through the $16 trillion mark with no end in sight.
Running up debt at a much faster rate than our GDP is rising is a recipe for national financial suicide. The decision makers in the country continue to steal about $150 million an hour from future generations and everybody just acts like this is perfectly normal.
The United States is going down the same path that Greece, Portugal, Italy, Ireland and Spain have gone. In fact, the country already has more government debt per capita than all the above-mentioned nations do. Both political parties in the United States, the Republicans and the Democrats, have been doing this to the country, and it just keeps getting worse and worse.
Over the past 30 years, household debt, corporate debt and government debt have all grown much fast than the GDP has. But no nation on earth has ever been able to expand debt much faster than national output indefinitely. All debt bubbles eventually burst. Right now, Americans are living in the greatest debt bubble in the history of the world.
Incredibly, the national debt has grown more under Barack Obama in less than 4 years than it did under George W. Bush during his entire 8 year term. Since Obama entered the White House, more than $5 trillion of additional debt has been accumulated by the United States. The country is on the road to national financial oblivion, and most Americans do not seem to care.
Debt From Sea To Shining Sea
If all household debt, business debt and government debt are totaled up, it comes to more than 300 per cent of the United States GDP.
In fact, if current trends continue the debt will hit 400 per cent of GDP before too long.
As it is shown in the chart, there was a little ‘hiccup’ during the last recession, but now the debt bubble is growing again. So how high can it go before the entire system collapses? Total credit market debt owed is roughly 10 times larger than it was about 30 years ago. How in the world did the United States accumulate 10 times more debt in just 30 years? If this trend continues for the next 30 years, the total debt of the country will be more than $500 trillion in the 2040s.
Unfortunately, that is the way that debt spirals work. They either have to keep expanding or they have to collapse. So will the United States debt spiral continue to expand? Or will the world soon see a collapse?
Sadly, exactly the same thing is happening all over the world. The government debt to GDP ratio in Japan (the third largest economy in the world) blew past the 200 per cent mark quite a while ago, and almost every country in the EU is absolutely drowning in debt.
The world has never faced anything quite like this. There is way, way too much debt in the world, but the only way Americans can continue to enjoy this level of prosperity under the current system is to pile up a lot more debt. The western world is like a debt addict in a deep state of denial. Some debt addicts end up with dozens of credit card accounts. They will keep opening more accounts as long as someone will let them. Most debt addicts actually believe that they will be able to get out of the hole at some point, but most never do.
Most Americans still believe that they are experiencing ‘temporary’ economic problems that will eventually go away. They still believe that even greater prosperity is ahead. Sadly, what the mainstream media and the two major political parties are telling them is a bunch of lies.
We have enjoyed the greatest prosperity that we will ever see in the United States, and when the debt bubble bursts there is going to be an immense amount of pain.
That is a very painful truth, but it is better to come to grips with it now than be blindsided by it later. n
– (IMack Group)