debt

just a quick reminder for anyone who think the US economy has a bright future in the near term:

we have a $9,000,000,000,000 national debt, mostly held overseas

that is $30,000 per citizen (man, woman, child), roughly enough to buy a new house in Ohio for every family in the country, or a 350z for every person, or five wars in Iraq. it is larger than the entire economic output of the 200 poorest countries in the world combined.

this debt, it will crush us.

because, like any debt, we pay interest on it. traditionally, it has been a safe investment in the safest currency, so our lenders were willing to give us good rates. if people start to reevaluate how safe of a currency it is, this rate will increase.

let's pretend the current rate is 4% annually (minus the current 3% inflation rate, this gives our lenders a 1% return), that means (only!) $360,000,000,000 of our annual national budget is spent servicing debt. in other words, only $1,200 worth of taxes per citizen (call it $3600 per household) goes straight down the toilet every year to pay for interest on past expenses.

if people start to expect that the US dollar will inflate at an average 4% instead of 3%, they will expect a 5% interest rate on their loans to the US just to maintain their 1% return. additionally, lets say that some of them start to wonder if the US will ever actually pay this money back. so the market demands 6% interest to loan money to the US to account for the increased risk. now, servicing the same debt costs us $540,000,000,000; $1800/person; $5400/family.

and that is just to keep the current debt level, with no effort to reduce debt balance whatsoever.

and keep in mind, the baby boomers can be counted on to make matters worse as they retire, stop paying taxes, and start taking money out of the system through social security and medicare.

much of this debt is owned by China and Saudi Arabia, btw

just another thing to keep in mind if you're worried about depreciated houses killing retirement funds, record high levels of credit card debt, low consumer confidence levels, negative saving rates, increased inflation, rising energy prices, increasing jobless claims, and decaying infrastructure.