Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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