This year, the US government will spend more than twice what it earns. It’s taking in $1.6 Trillion in tax revenue and spending $4 Trillion. Again, how long could you spend more than twice what you make before your creditors stopped lending to you?
Our government admits to owing close to $12 Trillion, but there is much reason to believe it’s a couple Trillion more than this. You’ve probably seen the humorous and frightening videos of top government officials admitting that they have no idea what happened to a trillion dollars which seems to be missing.
And this does not count the unfunded liabilities that the government has promised (such as Social Security, Medicare, and Medicaid, etc.) that they have no money to pay for. This number is probably closer to $50 Trillion.
Using the first number, the government owes $38,675 on your behalf (from the tools section of this website). Using the second number, it is $162,540. Could you send the government a check for this to pay off this debt that we’ve made on your behalf? Could your wife? Your kids? If every American, could simply do this, we’d be in good shape. But most families don’t have a million dollars to pay off this debt. How do you think it’s going to get paid?
The real truth of the matter is the government plans on inflating it away. There is no other way it can get paid. Of course, they’re hoping it’s an orderly gradual inflation that nobody really notices so they can still get elected and keep spending lots of money that doesn’t exist. One problem with this is that it destroys the value of everything you’ve worked for.
Another big problem is that there always has to be someone willing to buy this newly issued debt. For a long time, Americans would buy this debt. In the last couple decades it has become absolutely necessary that foreigners step in and lend us this money and they have been willing to do so because they viewed it as a very safe place. Today they own $7 Trillion of US Dollar denominated instruments. So we owe them $7,000,000,000,000.
People no longer want to buy long term US debt. They obviously see that the US Dollar will be worth a lot less in the future and so they prefer to take a lower interest rate and lend the US money for shorter terms rather than longer ones. This is a big warning sign that they might not want to hold these debts at all going forward.
What would happen if they don’t want to hold our Dollars anymore? We’ll get into that tomorrow.
You’re invited to a free event this November 18th in Austin to discuss these things in greater detail. If you would like more ideas on how to prepare for this coming storm, please sign up for our free newsletter here. If you’d like to read more about the spiritual realities behind what’s happening, read the series we just finished on Daniel.
This post is Part 5 in the series Financial Outlook of the United States. To continue with this series, click on Pt 6. To gain more insight, you can read about the coming storm here, in Pt 1, Pt 2, Pt 3 and Pt 4.