07 Jan How Much Debt Can The United States Handle?
This morning I woke up and the first thing that I heard was that the Federal Government has started purchasing troubled mortgages to ease the credit crisis. Well, if it were that easy, we should have did it several months ago. Now I feel much better that the Federal Government is going to start helping people. Wait a minute, are they really helping people or helping financial institutions again? The blank checks just keep on getting issued. I believe that the Federal Government has either spent or guaranteed over seven (7) trillion dollars of debt already. Of course, that number will never be shown to the American public.
My biggest fear is not what the Federal Government is doing, it is how are we going to pay all of this back? Unless you have been living under a rock, you should remember that the United States already maintained a nine (9) trillion dollar debt. At nine (9) trillion dollars, we couldn’t pay this debt back in 30 years. Let’s do the math. Assuming you had nine (9) trillion dollars owed on your credit card and your credit card company said: “we will waive the interest (Hopefully, the Asian countries that carry our debts will waive the interest one day), just pay us back a billion dollars a day.” At first you think, that’s great, we can have an interest free loan, and then you wake up and realize that neither your credit card company or any Asian country is going to waive the interest. So, for our example only, let’s waive the interest. At a billion dollars a day, how long would it take to pay back nine (9) trillion dollars. Hmmm, at 365 days a year, that would be 365 billion dollars a year. So, it would take two and one-half years to pay back a trillion. So, for nine (9) trillion dollars that would take approximately 27 years. Ok, now I am concerned.
This analysis comes with some assumptions. First, that the United States doesn’t borrow any more money. Second, that we can pay it back at the rate of one billion dollars a day. Third, that the Asian countries will waive any and all interest. This last assumption is clearly a fallacy.
Now, if we add an additional nine (9) trillion dollars to that debt load, we are going to either default on the debt or do some fancy work on the books. I wish they made a calculator for numbers that big. Then I could figure out what my fair share is. So, without going into too much detail, we are going to be in debt for a very long time. So my questions are: Can the United States survive without foreign capital? Can the United States service the debt we already have? Can we service twice that amount? If we incur an additional 9 trillion dollars in debt to deal with this recession, will it be worth it when all is said and done? How can you justify bankrupting our Country to deal with a recession?
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