Sunday, January 04, 2009

America's ticking time bomb: our national debt

From MSNBCs Lori Montgomery:

With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world's appetite for financing U.S. government spending...

about 40 percent of the debt held by private investors will mature in a year or less...

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come...

"There's a time bomb in there somewhere," Crandall said, "but we don't know exactly where on the calendar it's planted..."

As of yesterday, the debt stood at nearly $10.7 trillion*...

foreign investors held about $3 trillion in U.S. debt at the end of October. China, which in October replaced Japan as the United States' largest creditor, has increased its holdings by 42 percent over the past year...

some analysts are concerned that the deepening global recession will force some of the largest U.S. creditors to divert cash to domestic needs, such as investing in their own banks and economies...

"There's going to come a time when we can't even pay the interest on the money we've borrowed. That's default..." (said G. William Hoagland, a longtime Republican budget analyst).

Though some argue that other developed nations are in the same predicament (or worse) than America, a critical question among the developed countries is "Who defaults first?" And also, forget about the developed nations... "are all the developed nations about to have their living standards equalized with the developing nations?"

From a global perspective, that's not necessarily a bad thing... if the developing nations improve their standards of living. But I think our elected officials (D & R) have been selling us a bill of goods for years now... on credit. And now the piper is coming to collect.

Obama wants to print trillions of dollars in "free money." He appears poised to flip a coin on the American Dollar. Heads - the dollar wins. Tails - the dollar loses.

Printing more money and incurring new debt will not solve our problems. It will only delay the inevitable pain.

I suggest a return to sound money as a long term solution.

Tim White

* This doesn't include the additional $45 trillion in long term SS and Medicare debt.

h/t to VF!

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