Zeroes And Ones
One of my last classes at ********* College focused exclusively on US-China trade, currency, interest rates, inflation, deficits and debt.
It’s a dense topic to teach in any meaningful way in under two hours, but the reaction of the class afterwards reassured me that what I was trying to get across had been absorbed: they were, to a person, horrified.
The long and short of it, as you know, is this: the US economy is worth around $14 trillion. The budget deficit (the difference each year between what the government collects and what it spends) will be almost $2 trillion by the end of this year. The national debt (the accumulated annual deficits) is $11 trillion, nearly 80 percent of US GDP.
Last year, the federal government spent $412 billion on servicing the debt. This, in effect, is interest payments to creditors of the US and, needless to say, but debt service payments do nothing to reduce the size of the national debt. They only seek to ensure that owners of US debt will continue to hold it.
This $412 billion dwarfs every 2009 federal budget line except two: those for Social Security and the Department of Defense. The amount spent on servicing the debt is larger than every single other federal outlay, which, of course, includes education, transportation, energy, agriculture, NASA, DHS and many others.
Just to make things better, China holds almost $2 trillion in foreign reserves. This is unthinkable to China at the moment, but if things deteriorate really, really badly, China has the capacity to destroy the US economy in one fell swoop by releasing all of these dollars into the global markets. China, to be sure, would pay a ruinous price too, but this would only occur during a period of imminent or actual warfare, in which scenario any loss that is heavier on your opponent would be endured domestically.
And this is without even going into the pants-wettingly terrifying thought of the US’ unfunded liabilities, which some calculate to mean that the real national debt is somewhere around $50-60 trillion.
We have come to expect government to provide us with a vast range of services which are unaffordable, but which no politician dares cut. Each of our nations is bankrupt and our “leaders” refuse to acknowledge this or do anything to redress it. We are living on borrowed time with absolutely no thought for tomorrow or the day after. And still our politicians encourage us to continue in this way, just so long as we vote for them.
Now that’s leadership.
August 28th, 2009 at 18:10
Am surprised to see no comments on this. Does everyone know all this or are we all stunned into silence by the sheer scale of it all??