Do you believe in your heart of hearts that DC leaders intended to pay off most national debt and if no, what do you think will happen? –@Lanacmyk
The answer is YES and… NO.
50% of the US debt is owed to…the US Federal Reserve. It’s debatable whether the Federal Reserve can forgive the debt that the US owes it.
Then we have this implicit debt coming in the future: the 65 trillion needed for Social Security and Medicare. How will we afford that?
There’s no way we can afford that. The US has about 45 trillion in physical assets so we can’t even sell everything to pay for all that we owe. But assume we can, assume the Federal Reserve forgives all the US’s debts, and assume tax revenues go up.
We will still not pay down the debt. Here’s why.
A) The US government can’t help itself. It’s corrupt. It spends more money all the time. Only the over-inflated incomes created by the internet bubble allowed us to have a surplus for a short time. Every other year, the US government spends more and more. We bomb people, for instance. That’s very expensive. Three trillion a year just to support our ever-increasing military. So even if we could pay down debt we’ll actually spend more so we’ll need to borrow more.
B) The US will slowly and gradually inflate the dollar. If $1 now is worth 10 cents later, then it’s easy to not only pay down old debt but its actually easier to NOT pay the debt but roll it over and let the debt ride forever, because the interest payments will be easier to pay (since $10 is now worth $3 in real dollars).
C) You can say, “What if we have hyperinflation” so we can’t even keep up with the inflation. Well, that’s the risk. The US is slightly risking it by keeping interest rates at zero, printing money for stimulus, and ignoring the fact that inflation is rearing it’s ugly head.
Why are they doing that? Because all prior cases of hyperinflation involved civil war and other conditions that don’t currently exist in the US.
But we already saw with Occupy Wall Street a tiny tiny micro mini-Civil War. Hoses were used. Brother hosed brother. And the OWS guys gave up. They didn’t even know what they were doing.
But that might change.
And I hope I’m living in Canada when it does.
I’m very bullish at the moment on the US economy BECAUSE I think the government is deliberately allowing inflation combined with stimulus. This will flood dollars into everyone’s pocket. Hopefully. But then, ten or twenty years down the road. There could be trouble when everyone realizes at the same time that we got in over our head. And then we drown.