The Dollar Meltdown

The National Debt is approaching $14.6 trillion and will reach 100% of GDP. The Federal Budget is projecting a $20 trillion National Debt in 10 years. We have nothing in our history to match this level of fiscal irresponsibility. The last time we had high debt in the 1970s, we paid for the Vietnam War and the War on Poverty with inflation; we printed the money, all prices went up and all moms entered the workforce to pay the bills. We came out of the inflation with the Reagan tax cuts and the computer / electronics manufacturing surge in the 1980s. We had more manufacturing in the U.S. then and we were able to computerize and automate our businesses. This made productivity increase and tax revenue increased, so we grew our way out of that recession. Before 1990, our National debt was under $1 trillion. By 2000 our National Debt was $3 trillion. Now, in 2010 our National Debt has reached $12.8 trillion. Federal Revenue is $2.6 trillion and spending is $3.9 trillion. It’s like assuming a million dollar home loan, thinking we can pay for it with a $20,000 annual income. Now, most of our manufacturing is in no tax, low cost countries and there is nothing to pull us out of this.

Our unfunded liabilities for Social Security, Medicare and Medicaid total $55 trillion, so together with the $20 trillion National Debt, our total debt will be $75 trillion and could reach $100 trillion. Our entire wealth as a country, counting all private and public land, resources and cash don’t equal $50 trillion and we’re heading for a government debt-load of twice that much. As U.S. Bonds lose their AAA rating, interest on this debt will increase to $1 trillion a year.

The 1913 U.S. dollar is now worth 3 cents, so it’s easy to see how, in 2030, a household income of $100,000 a year could be just above the poverty level. It took decades after World War II to monetize the debt from that war. Overall, inflation has averaged 4% a year for the past 40 years and our current government spending is dramatically increasing that rate.

We are not in a good place. The current Recession, with 10-20% unemployment is likely to last for several more years. The Federal Budget planned through 2020 includes $1 trillion deficits in each year. Government is making no effort to curtail spending and is spending an extra $1 trillion a year on more government. This expansion of government will have to be reversed to save the private economy. It’s time to cut government spending now to prevent a “banana republic” style meltdown of the U.S. economy. We are all aboard the Titanic, an “unsinkable” ship with a delusional captain; we are at full throttle heading for an iceberg. The balloon payment on the socialist policies we’ve put in place since the 1930s is coming due.