There’s No Dodging the Debt Crisis

Once the United States government starts falling down the “fiscal cliff”, we are all going to feel the impact, even though most of us have already. Meanwhile, we can all hope the government will start handing out enough parachutes to save us all. With the amount of debt that our country is in, we are in store for a pretty long trip down the rabbit hole.

Under United States law, the government is only allowed to spend money as long as there are sufficient funds to support it. Usually these funds come from the United States Treasury or tax receipts. Borrowing Laws under the Treasury come with a set debt ceiling which limits the amount that can be borrowed. However, once these financial limits have been pushed, money is being spent which cannot be put back and this is what causes debt.

National Debt-Drowning in Numbers

The United States is has gone overboard. Literally, the U.S. is currently over its head in about $16 trillion dollars of debt. While China is the largest foreign owner of our debt, two-thirds of our nation’s debt is owed to the U.S Government, American investors, Health Care and Social Security and Pension Funds. It is estimated that $5 trillion of our nations dollars is owed to Social Security and Pension systems. That is a massive amount of money owed to the people that they may never be able to see. More than $11 trillion is owed to investors as well as the Federal Reserve. Private investors hold about $1 trillion dollars in federal debt, while insurance companies and state and local governments hold nearly double that.

International Debt-Fasten Your Seat belt

We are sure in for a bumpy ride. According to the Treasury Department, in 2011 even though China has decreased its holdings of U.S. debt from $1.31 trillion to $1.16 trillion, they are still helping the U.S. finance its deficit spending. In addition to China’s holdings, Japan holds $1.12 trillion. These countries are definitely the biggest foreign holders, but other nations around the globe are also involved like Brazil, Russia, Taiwan, Switzerland ,United Kingdom etc. The United States is one big Energizer Bunny of Debt. We just keep owing and owing and owing….

Will we Land on Steady Ground?

Our country is spending at least $1 billion a day on interest alone to even its debts- national and international. If the economy does recover from this, the unemployment rate will hopefully ease up, more people will have jobs and less of their own personal debts. Less people will need government assistance like Medicaid and food stamps, and the foreclosure crisis would start lifting. Inflation will become a thing of the past and the U.S. economy will thrive again or at least be back to normal. What we do know is the Debt Crisis has been here a while and may only get worse before it gets better.

 

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