The US Treasury Department tells us that our federal debt is currently sitting at $13.8 trillion. On its most basic level the federal deficit is the difference between current government spending (including interest payments) and total current revenue from all types of taxes.
In 2001, when President George Bush took office, our debt was around $6.5 trillion. Combined with President Obama’s spending packages and commitments, our public and gross debt over the last 10 years has more than doubled.
But that’s not the scary part. What’s scary is how much money we owe when we look at current and future liabilities over the course of the next three decades. Officially, this figure is estimated to be around $150 trillion. Unofficially, according to Boston University economist Laurence Kotlikoff, our future liabilities exceed some $200 trillion. Considering that the tax revenue of the United States is around $4 trillion per year, anyone who’s ever held a balance and made a credit card payment can understand the near impossibility of paying off such a debt.
Senator Tom Coburn is one of many who warns of dire consequences if we can’t get our finances under control:
I think you’ll see a 15 to 18 percent unemployment rate . I think you will see an 8 to 9 percent decline in GDP. I think you’ll see the middle class just destroyed if we don’t do this. And the people that it will harm the most will be the poorest of the poor, because we’ll print money to try to debase our currency and get out of it and what you will see is hyperinflation.
If we don’t take some pain now, we’re going to experience apocalyptic pain, and it’s going to be out of our control. The idea should be that we control it.
We share Senator Coburn’s sentiment. Unfortunately, we’re not as optimistic as he is that any of Congress’ placations will be sufficient enough to help us get out of this hole.
With $4 trillion in annual tax revenue, at today’s debt levels it would literally take 50 years just to pay off the debt that we’ve already committed to - that’s if we stopped all additional spending right now - today. The odds of that are zero - thus our debt liability will continue to grow, as will the interest payments required to service our debt.
The end result of our pulling forward 25 - 50 years of debt is not going to be pretty. As we’ve outlined before, we are on the brink of a catastrophic collapse in the credit of the United States of America. This means that at some point our national credit card is going to be maxed out.
When that will be is difficult to predict. According to Senator Coburn, we’re looking at about 3 - 4 years - which sounds like a viable time line. Really, it all depends on China, because they are the largest buyer of US debt.
But the Chinese are not going to stand by while their US currency reserves become worthless. They are already taking action to counter the effects of a soon-to-be suicided US dollar.
We recently learned that the Chinese have signed agreements with the Russians to drop the dollar as a settlement vehicle, essentially replacing the world’s reserve currency with the Yuan when dealing with each other. We’ve heard many people suggest that this is just a drop in the bucket because of the widespread use of the US dollar - and we agree. However, China is working with other trade partners to do the same thing. And eventually all of those drops in the bucket will fill it up.
Once the Chinese pull the plug there will be only one entity left to support the US dollar - The Federal Reserve. They’ll digitally print trillions of dollars for as long as they can, but sooner rather than later the US dollar will collapse.
And when it does, the end result can only be described as an economic apocalypse.
If the dollar gets to the point it is equivalent to Monopoly money it will be impossible for holders of the bills, as well as our government, to settle transactions with the currency. This means that commerce on a global scale, for all of those expecting to fulfill transactions in US dollars, will come to a standstill.
How will individuals and governments buy food, gas, and other essential goods when the very currency being used to settle the transaction is no longer a viable trade instrument?
Really, it can get that bad. We have no confidence that Congress, the President, the Federal Reserve or US Treasury can fix this problem.
Over the course of the next decade we will see a new US monetary system introduced - just like we saw in 1971, 1944, 1913 and 1785.
This time it will be very disorderly. We can expect trillions in wealth to be wiped out and the many complications that come along with such an event - violence, protests, riots, breakdown in the rule of law and potentially even large-scale war.
If you haven’t done so already, take action to protect your wealth and preserve your well being now, before it hits the fan. Follow the investment strategies of the Chinese and you might have a chance of coming out with something when the chickens come home to roost.
Take possession of hard assets whenever you can, including precious metals, long-term food stores, tools & equipment, and anything else that will retain value when the US dollar loses it.
Author: Mac Slavo
Date: December 27th, 2010
Visit the Author's Website: http://www.SHTFplan.com/
Visit the New Mexico Forum at www.NewMexicoPreppersNetwork.net
