US Financial Crisis Unlikey to be Addressed by Politicians
United States politicians act as if the unsustainable can be sustained forever. The outstanding public debt has reached levels that are incomprehensible and that clearly are going to present tremendous challenges over the next few years to most Americans.
The outstanding public debt as of 11 March 2012 at 12.47.35 PM GMT is $15,528,289,396,430.29 This amazing but depressing trillion dollar figure changes second by second on the US National Debt Clock.
Since September 28, 2007 national debt continues to increase at an average of $4.01 billion per day. With the estimated current population of the United States at 312,379,335 citizens each citizen’s share of the debt is $49709.72.
As 2012 is a presidential election year politicians on both sides of the isle make a big deal out of cutting spending and reducing this debt burden. Unfortunately, when our current crop of politicians speak of reducing debt they are actually speaking of reducing the rate of increase or at best reducing debt by a tiny amount, say one percent.
On March 20, 2009 the Congressional Budget Office projected that the US deficit for the year would balloon by a record $1.7 trillion during the fiscal year. Since then politicians speak of a great achievement in reducing the deficit to only $1.6 trillion. That is the federal government is currently spending $1.6 trillion annually more than it collects in revenues.
Is this level of deficit spending sustainable? I think not as we rely on the generosity and perhaps stupidity of foreign nations like China to purchase our treasury bonds and notes to make up the difference between revenues and expenses.
Through our Federal Reserve Bank we have and still are misallocating capital by keeping interest rates artificially low for extended time periods. An increase of interest rates to more normal long-term levels, say five percent, which eventually will occur as traits return to a long-term baseline, will cause tremendous funding problems for the United States. The increased interest costs will consume the entire present budget of the United States. Clearly not even clever politicians can kick this can down the road.
The financial crises is such a difficult problem that it is unlikely politicians will be able to find a way out. Eventually, the United States will default on this debt burden for who will be there to bailout the United States? Politicians may be able to extend and pretend for another few years but eventually a default will occur.
It is very unlikely that the US financial crises will be seriously addressed by politicians. This means a permanent sub par performance by the economy as available capital continues to be sucked up by the federal government. Under such conditions living standards of Americans will decline. Unfortunately, for many Americans this decline is already underway.
