The Global Ticking Time Bomb: Government Debt - We Must TAKE ACTION

 

From the Tea Parties in Boston back before our country began, to the tea parties now, we Americans have shown we are a hearty, patriotic bunch who will rise up when our leaders take us down a path that jeopardizes our lives and those of our children and grandchildren.  I believe we have reached that time once again in our history, not just on healthcare, but also on our whole economy.  This post gives us the story along with - I hope - sufficiently scary graphics that should cause us to rally and RISE UP.

 

This paper scared me very badly, so as a form of therapy I figured I’d share it with you. Misery loves company, after all.

Governments around the world are already drowning in debt, and many countries face a high certainty of debt levels that will exceed their GDP (100 in the graphs below means that GDP = the debt amount). Think about that for a second, and imagine it for your own household. GDP is the amount of all goods and services produced in the total economy – it’s sort of like your total personal income in a year. Now imagine if you make $100,000 a year and you owe $450,000 (note that the USA graph says 450 in 2040 which means the US government will owe 4.5x our total GDP by that year). How could you ever get out from under that debt burden? You can’t. And look at how high the interest payments on that debt will be – 25% of GDP by 2040. (Imagine you personally had a 5% interest rate on your $450,000 in debt – that would mean $22,500 in annual interest expense, or 22.5% of your pre-tax income. At least governments don’t have to pay taxes on their own revenue!)

In addition, unstoppable demographic trends (namely the ageing of the population in most industrialized countries) present a future in which we face a runaway train of additional government expenses.

Further exacerbating the debt crisis, the evidence shows that EVENTUALLY having more debt leads to high interest rates (for the government as well as for businesses and individuals), which only makes matter worse.

And basically the only way out of this global crisis is for governments to inflate their way out of the debt loads by printing money to pay down the debt (and to lower the real amount of the debt). Inflation is a pernicious tax on everyone, as it erodes the value of individuals’ savings and incomes. Inflation is very very bad. Basically, this paper says that the whole world is screwed. Uplifting.

 

 

Debt

 

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Lisa Delzompo (951-704-4559)

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Comment balloon 2 commentsLisa Delzompo 951-704-4559 • March 06 2010 11:15AM

Comments

This is a serious matter that needs to be corrected. We cannot ignore debt

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (Real Estate and Beyond, LLC) almost 8 years ago

Make your vote count this Nov. and let the politicians know we can't afford any more debt.

Posted by Cynthia (Cindy) Vogt (Long & Foster Real Estate) almost 8 years ago

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