Saturday, July 21, 2012
USA Sovereign Debt Exceeds GDP: Spendthrift Nation
The USA public debt continues greater than the annual GDP. That is, the debt ratio has exceeded 100%. Egan-Jones warned about this in their downgrade of United States sovereign debt to AA. Fitch Ratings reiterated it would cut the USA sovereign credit rating from AAA next year if a credible fiscal consolidation plan, deficit reduction, is not implemented. This is disturbing plus foolhardy as Americans enjoy the free ride while they can. Your share of the United States public debt is $50,281 and add another $1,300 for your share of this year's interest expense if we prefer not to roll the interest into the debt.
The two-party corporate political system kicks this debt bomb down the road with the blessings of their constituency and financial supporters. This is because a majority of Americans have bought into the fallacy that the government works for them and should be in charge of their lives in the name of the public good, safety, health, protection against the latest terrorists/enemies, and/or (insert your rationale here). Never mind this extravagant spending and ever-increasing government infrastructure must be charged to the sovereign credit card and not paid for in cash.
Of course, the government is actually for the benefit of the lobbyists, maximizing their profits, and keeping you under control. But just enough morsels are tossed out to the masses so they buy into the myth: "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else" (Frederic Bastiat). The problem is this fiction cannot sustain itself and ultimately a Day of Reckoning cometh for the USA. The morsels will stop at that Day for American citizens. The government domestic security infrastructure and matrix that is being built up will sure come in handy to keep you subdued, obedient, and compliant when the American Dream stops.
This fiscal lunacy doesn't stop the federal spending on wars & military budgets, Homeland Security, TSA, NSA, CIA, & police state infrastructure, federal employee & military pensions & benefits, corporate welfare & subsidies, individual tax breaks & credits, social benefits & care, now the Affordable Health Care Act, and all the other free stuff and handouts every last American wants. A significant portion of this spending has to be funded by borrowing (30%+ of every dollar spent) and this keeps the fiction alive that you live in the Land of the Free. The major media, the corporate advertising delivery system, will continue to affirm this make-believe world for you and will act just as surprised as you when the Day of Reckoning arrives.
To perpetuate these unsustainable fiscal and monetary policies as long as possible, Chairman Ben Bernanke and the Bankster-controlled Federal Reserve must keep interest rates crammed down in a zero-interest rate environment, buy U.S. Treasury securities, and print money. He doesn't get one bit of assistance from the President or Congress to stop this madness as they dance to the tune of the lobbyists and show no inclination to balance the budget even for one year. If the Fed doesn't perpetuate this Ponzi scheme, the entire American Dream would blow up.
The interest expense on the USA's ever-increasing debt could skyrocket easily to $1 trillion annually if the interest rates got loose from Bernanke! Not only that, some of the Too Big To Fail banks might actually become insolvent from interest rate shock and counter party panic. The entire frigging financial system might meltdown! It's hard out here for the Wall Street Banksters! Ask JPMorgan CEO Jamie Dimon and his accomplices about that!
Charts consist of the latest data available from the Bureau of Economic Analysis (GDP at 3-31-12), U.S. Treasury (Public Debt at 6-28-12), and U.S. Census Bureau (Population at 7-1-12):
Public Debt $15.781 trillion
GDP $15.468 trillion
Population 313.857 million
Annualized Interest Expense $407.971 billion
Effective Interest Rate 2.67%
USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother
$SPY $DIA $QQQ $IWM