When one member of a family looses their job, the household cuts down on expenditures to accommodate for the loss of income. Or they could decide that since it is only temporary; maintain the current lifestyle using the credit card. Using the credit card only allows you to continue the current lifestyle for an undefined time limit. It doesn’t solve the family’s problems. In fact, it makes them worse if the employment situation deteriorates.
Our government works the same way. There is a limit to the amount of debt a nation can carry, just like a family. The government cannot put these failed disasters on a credit card for long. You need real money to do anything. Real money is proof that something was produced for consumption. Savings are the surrender of present gratification for future consumption.
Our government has spent one trillion dollars (that no one earned yet) and is expecting someone in the future to forgo that large amount of consumption (savings) so they can spend it. It’s not very likely. The suggestion that the increase in the national debt will be passed on to our kids is ridiculous. We didn’t pay what was passed on to us, so don’t figure that human nature is going to undergo some metamorphic change.
We have to look at is the total amount of the national debt. The issue we need to be concerned with is the interest rate on that debt that we have to service. As long as the rate is 3%, there is not much of a problem. If the interest rates were to increase to say 10 or 15 percent, things could become very awkward. The total debt is a known; the service on the debt (interest) could get to a level where the government revenues would not be enough to cover it.
The interesting issue here is that interest rates relate to risk. The government spends what it doesn’t have and then expects us to fund it. This will be done by taxing everyone’s savings through a government program called inflation. The catch here is that you may want more of a return on your money since it is losing value. This would mean that interest rates would have to rise.
The other thing to consider, people might want gold and silver and would be dumping currency. The only solution to that is to ban gold ownership by individuals. FDR did it, to save the currency. I don’t see anyone wanting a currency where the incoming President claims that we may have trillion dollar deficits for many years in the future.
The net result is the government (by way of inflation) will confiscate personal savings to pay off the national debt. You get to keep your house, your car, your gold and silver and the government goes broke and issues a new currency to replace the old one. If you worked hard all of your life and saved for retirement, it will be comforting to know that it’s all gone, you have lost everything. You are at a point in life where you are too old to kick ass and make someone pay. Kind of sucks doesn’t it!
Obama is going to save us? Not to put the guy down, but to look at things a little more realistically. Printing money is not going to solve the problem. Congress is in charge of spending. The thought that this new President can somehow keep this spending orgy going is just a wish of the Hoi Polloi. It’s a little like pimping your wife and daughter to make the house payment. It shows that you gave serious thought to the situation and concluded that using your family “very pragmatically” was your salvation. The neat thing about this is that their customers will provide free “On the job training.” What a deal! It has government stamped all over it.