Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

We Are Being Spent Into Oblivion 

Politics / Government Spending Mar 02, 2010 - 09:32 AM GMT

By: Roy_F_Grieder

Politics

As we continue to ponder and debate, with way too much focus, on the mundane and inane, the perfect storm grows and rapidly approaches. It brings with it a financial tsunami and a societal train wreck. October 2008 was the outer wall of the storm, we have been living in the eye since then. Now the inner wall approaches: the global debt crisis.


We know  about the recent and ongoing financial crisis on a micro basis. Our own finances, that of our towns, cities and state. That some states, Social Security, Medicare, Medicaid, the US Postal Service, Fannie Mae and Freddie Mac, The Pension Benefit Guarantee Corporation, the Federal Deposit Insurance Corporation , to name a few, are approaching insolvency or are already technically bankrupt. What is starting to appear is how close the U.S.A. may be to approaching insolvency. Let’s run some numbers. 

We have to think in trillions, hard numbers  to put one’s head around. Let’s see:
If a million dollars were spent each day it would take about 2,740 years to spend a trillion. At a million dollars an hour, it takes 114 years. At a million dollars a minute, it takes 1.9 years. At a  million dollars a second, it takes 11 ½ days to spend the trillion. Or, a trillion dollars is about 3,250 dollars for each U.S. citizen.

Our projected Federal deficit (outlays minus receipts) for this year is $ 1.6 Trillion. (T.) Our national debt, (cumulative  deficits, 1776 to present) is $ 12.395T, and is growing 4 to 5 billion dollars per day due to the deficit. Our Gross Domestic Product (the market value of all goods and services that have been bought for final use, yearly), GDP, is $14.463T. Therefore, our debt to GDP ratio (debt divided by GDP) is 85.70%. If we add this year’s projected deficit of $1.6T to the current debt, and assume a 3.5% annual growth rate in GDP, ($13.995T/$14.969T) our debt to GDP ratio will climb to 93.5% by year’s end, and  will exceed 100% next year. Why is this relevant?

Once we go over about the 90% level we start to enter an economic “twilight zone” where economic growth becomes difficult to achieve. Over the 100% level, there is risk of no growth,  currency devaluation, default, hyperinflation, or a lowering of our credit rating, which would spike up interest rates on our debt. This in turn balloons the deficit, further exacerbating the problem. Our debt is growing more than two times faster than our GDP, so the ratio will continue to climb. Our debt is projected to be $20T by 2018. Assuming interest rates climb  only to 5%, interest on the national debt would $1T per year. 2002 was the year our entire federal budget crossed the $2T threshold.

How did we get here? Profligate federal spending. Spending increases of 2 or 3 or 4 times the rate of inflation. Year after year after year. It has got to stop. Raise taxes now? Not on your life. That would kill this already weak economy. The era of “we will grow our way out of this” is over. Not when our debt grows faster than our GDP. No, this must stop now or we risk devaluation or default, or worse, oblivion.  Now let’s look macro. Let’s go global.

The growing debt time bomb just described has been occurring on a global basis for some time. Big trouble is brewing in the Eurozone countries. These countries are most all highly socialistic states. Their people rely on their governments to such an extent that just the talk of cutting spending, and therefore services and wages, elicits a widespread angered response, strikes by unions and chaos in general.

Greece, which may be the first to fail, has a debt to GDP ratio of 112% and is near default on its’ debt. There is talk of a bailout, or expulsion from the Eurozone alliance. But, Greece is just the canary in the fiscal coal mine. And that is the crux of the problem- it is global. Portugal, Italy, Ireland, Spain (unemployment rate 20%),The U.K., Belgium and France have all spent themselves towards oblivion and are teetering on the edge. Their ratios are at or in the “twilight zone”. The dominos are stacked up neatly in line.

The acronym P.I.G.S. ( Portugal, Italy, Greece, Spain) is used to describe the countries in the worst peril. Will the U.S.A. join them? Are we already there? Is it really PIGS are us? We can spend more than we take in for only so long before the Piper must be paid. There still may be time to correct this madness in the U.S.A. if we act now, but time is running out.

We can and we must make these cuts. We can. We are the U.S.A.. We are not a socialistic state. At least not yet.

By Roy F. Grieder

royonthehill@tds.net

Roy F. Grieder is a 58 year old retired airline captain and part time land developer and economic analyst.

© 2009 Copyright Roy F. Grieder - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules