U.S. National Debt Now Surpasses $22 Trillion

United States National Debt

The U.S. national debt has been spiraling out of control for some time now, at an accelerating pace. We may not need to worry too much about this, but someone will.

Many Americans are concerned to various degrees about the size of the country’s national debt load, and this is certainly well worthy of our attention, even though we may not think about this all that much.

People love to work out how much each and every American owes, and we’re up around $68,000 for every man, woman, and child, and that is a large amount of money. A family of four owes, if we can use such a word here, over a quarter of a million dollars.

We don’t really owe the money though, and as these things play out over time, it would be more accurate to say that future Americans owe it, as this is just all carried forward until we get to, we could call, the time of reckoning. This really doesn’t have to be owned up to for many years in fact, as we can just keep adding to the debt until we can simply not borrow enough anymore to make the interest payments.

The way we pay this back is either through taxes or government spending being slashed, and governments and people are both not crazy about too much of either. As well, both have a contracting effect upon the economy, as if you raise taxes, this reduces production, and if you cut spending, this also affects the economy in a not so good way, which also reduces the tax base.

So, we could say that these solutions are really not that efficient, and also do not appear to have the potential to affect all that much change over a given period of time, even enough to slow down very much the spiraling interest payments from the debt we already have.

This Is Costing a Billion Dollars a Day and Growing

We can gain some real perspective though when we look at the cost of maintaining the debt these days. We’re now up to a billion dollars a day, which is a number that should indeed concern us, even though we can continue to print the treasuries to cover all this.

Trump’s Mexican wall, the wall that brought the government to its knees for a month, only is supposed to cost $5.7 billion. That’s less than 6 days of interest on the national debt, and while things of far lesser cost garner all the attention, this sheer monster hardly wrinkles our brows.

When we project this out, this is where things start getting even hairier. Our debt is not growing in a linear fashion, it is accelerating. We’re at a point where things have accelerated enough to have us add an extra trillion in just 11 months, and they will come at us faster and faster with each trillion.

This also eats up more and more of what we could call the market’s borrowing capacity, and when you have an object that is not only in motion but is accelerating, it’s just a matter of time before you reach the limitation and truly see a situation where the bills can’t be paid, and that never ends well.

We know what that looks like, but we have never seen anything on a scale close to what a bankrupt United States would present. The U.S. is certainly not unique in having such a grim debt situation, and countries like Japan have a much higher debt to GDP ratio and would see such a collapse sooner.

Runaway national debt is a lot like global warming, where there is a point of no return that you can reach, where even your best efforts will no longer be able to forestall the worst.

The more our debt grows, the more effort is required to reverse its explosion. We can only do so much and if we reach the point where the decline rate exceeds this capacity, meaning things are worsening even with all we can do, we’re toast.

Just Printing Money Isn’t a Solution Either

There is always the option of drastically devaluing the dollar to cope with this, but this is really the nuclear option and dropping nukes may win a war, but at a horrendous price. Moreover, this would crush the credit rating of treasuries, as this is really a de facto partial default, and default risk and interest rates go up together.

Without an effective means to borrow, and a debt problem that has just been watered down by a devaluation and still is a huge threat and burden, this will serve to reduce the capacity to make interest payments. This cuts off a piece of the debt but increases the acceleration of the remaining amount, and without the ability to borrow to pay back interest, this will bring down the house, the same place we would end up if we just let things play out without these tactics.

Currency devaluation may even bring on the end sooner, depending on how early this was used. We can’t really get away with just making small changes though, as the cat would be out of the bag here, and this is plenty enough to make prospective lenders not just concerned, but panicked.

This all really does come down to how much we discount the future, but we’re not discounting our own futures here, as we normally do, we’re discounting the future of the economic survival of our country.

Just about all of us understand that our government owing a certain amount of money in debt and our owing debts are completely different things. What separates the two though is the ability to just push everything forward and not have to worry about it at all now. Down the road, well it’s now again, and we still don’t have to worry much.

The unthinkable may not only be possible, it may even be inevitable. We need to work on decelerating our national debt, to the point where goes down each year instead of up a lot, or at least to the point where we reach equilibrium and a sustainable situation.

This is a very difficult task at best, but it will never happen as long as we look at this number and do not see either it or what it may become. Perhaps many of us will not be alive to see the U.S. government defaulting, perhaps no one today will, but someone will, unless we change our course drastically.

This really is a lot like global warming, other than national debt warming has the potential to do far more damage.

John Miller

Editor, MarketReview.com

John’s sensible advice on all matters related to personal finance will have you examining your own life and tweaking it to achieve your financial goals better.

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