You are here: Home / Articles / Can The US Economy Keep Up With The Exponential Debt Spiral ?

Can The US Economy Keep Up With The Exponential Debt Spiral ?

Wall ST US

 

      Anyone that thinks that the U.S. economy can keep going along like this is absolutely crazy.  The US is in the terminal phase of an unprecedented debt spiral which has allowed it to live far, far beyond its means for the last several decades.  Unfortunately, all debt spirals eventually end, and they usually do so in a very disorderly manner. 
The attached chart compares the growth of U.S. GDP to the growth of total debt. Yes, U.S. GDP has certainly grown at a decent pace over the years, but the total debt has absolutely exploded.  40 years ago, the total amount of debt in the system (government debt + corporate debt + consumer debt, etc.) was about 2 trillion dollars. 
Today it has grown to more than 56 trillion dollars.  The debt has grown at a much, much faster rate than the economy has, and there is no way in the world that this will be able to continue for a long time.
In the attached chart the blue line is total debt, and the red line is GDP.  As you can see, this chart kind of speaks for itself…

forex

 

So how did the US get into this crippling debt?
Well, of course the federal government has been the biggest offender.  It would be a tremendous understatement to say that the politicians in Washington D.C. have been reckless.  Since the year 2000, the size of the U.S. national debt has grown by more than 11 trillion dollars.
The other chart attached demonstrates the dramatic growth of the national debt as a percentage of GDP.  In particular, the debt has absolutely exploded as a percentage of GDP since the financial crisis of 2008…

Does that look sustainable to you?
Of course it isn’t.
In case you are missing the point. The debt of the U.S. government is still growing much, much faster than the economy is, and the United States already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
During Obama’s first term the federal government accumulated more debt than it did under the first 42 US presidents combined.  And now the US is entering a time period when demographic forces are going to put a tremendous amount of pressure on the finances of the federal government.
The Baby Boomers have started to retire, and they are going to want to start collecting on all of the financial promises that has been made to them.
The number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.
The number of Americans collecting Social Security benefits is projected to grow from about 56 million today to 91 million 2035.
Where is the US going to get the money to pay for all of that?
Boston University economist Laurence Kotlikoff has calculated that the US government is facing unfunded liabilities of 222 trillion dollars in the years ahead.
There is simply no way that the US government is going to be able to meet those obligations without wildly printing money.
And of course the federal government is not the only one with massive debt problems.  There are lots of other communities all over the nation that could soon follow.
The total amount of state and local government debt has grown from about 1.2 trillion dollars in the year 2000 to about 3 trillion dollars today…
It is also important to take into account the massive unfunded pension obligations that state and local governments are facing. State governments are facing unfunded pension obligations of nearly a trillion and a half dollars…
From Baltimore to Los Angeles, and many points in between, municipalities are increasingly confronted with how to pay for these massive promises. The Pew Center for the States, in Washington, estimated states’ public pension plans across the U.S. were underfunded by a whopping $1.4 trillion in 2010.
So where will all of that money come from?
That is a good question, and nobody has an easy answer at this point.
Meanwhile, U.S. consumers have been racking up staggering amounts of debt over the past several decades.  Just consider the following numbers…
-Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
 
-Car loans just keep getting longer and longer, and approximately 70 percent of all car purchases in the United States now involve an auto loan.
 
-The total amount of student loan debt in America recently surpassed the one trillion dollar mark.
 
-One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt, and according to a report published in The American Journal of Medicine medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.
 
-Consumer debt in the United States has risen by a whopping 1700% since 1971, and 46% of all Americans carry a credit card balance from month to month.
Sadly, most people don’t realize how damaging credit card debt can be.  If you just carry an “average balance” on your credit cards each month, and those credit cards have just an “average” interest rate, you could end up paying millions of dollars to the credit card companies by the end of your life…
Let’s say you are an average American household, and you carry an average balance of $15,956 in credit card debt.
 
Also, as an average American household, let’s assume you pay an average current rate of 12.83%.
 
Finally, let’s assume you carry this average balance for 40 years, between ages 25 and 65. 
How much did your credit card company make off of you and your extreme averageness?
 
Answer: $2,629,618.64
Incredibly, a large percentage of the population does not seem to understand these things. 
An astounding 43 percent of all American families spend more than they earn each year.
Are you starting to understand why approximately half of all Americans die broke?
The US is a nation that is completely and addicted to debt.
If you do not believe that it will ever catch up with the US, you are being delusional.
The US has piled up the biggest mountain of debt in the history of the planet, and a day of reckoning is fast approaching.

 

Collected by /
Mr Peter Sørensen from Denmark.

0.00 avg. rating (0% score) - 0 votes

Comments

comments