America’s Predicament
Our government is like a drug addict who cannot quit, because the dope is too easy to get. Bonds are the dope of the American government. But the price of the dope will eventually rise, since low bond yields will not persist forever. When this happens the addict will go into seizures.
By Vasko Kohlmayer at American Thinker
America’s public debt recently exceeded 13 trillion. This is more than 90 percent of the country’s GDP.
Public debts of more than 60 percent of GDP are considered unhealthy. Public debts above 90 percent of GDP cause severe disruptions in the country’s financial framework and the economy at large.
According to the Obama administration America’s public debt will exceed 100 percent of GDP in the next fiscal year. History shows that most countries whose debt exceeds this mark are rarely able to control it. This level of indebtedness usually leads to currency debasement.
There are a few historical examples whereby countries were able to contain debts of more than 100 percent of GDP. But in those instances the debts were almost always contracted as a result of extraordinary one-time expenditures, usually war.
America’s debt, on the other hand, is a result of decades of structural deficits. This means that we have grown accustomed to spending more than we can afford. If we want to solve our debt problem we must slash spending and start running surpluses. The problem is that it may prove impossible to break the spending habit.
Our government is like a drug addict who cannot quit, because the dope is too easy to get. Bonds are the dope of the American government. But the price of the dope will eventually rise, since low bond yields will not persist forever. When this happens the addict will go into seizures. But he will not lie down and sweat it out. He will go on a rampage to get his fix. He will loot people’s retirement accounts, he will confiscate their gold. Things will turn ugly.
Help Make A Difference By Sharing These Articles On Facebook, Twitter And Elsewhere:
