A former journalism colleague of mine has posed a theory that I found interesting.
He said that the United States is now more than $23 trillion in debt, about $17 trillion of that technically owned by the citizenry and another $6 trillion “borrowed” from the Social Security Trust Fund.
More coming up because of unemployment payments and business loans.
As the personal finance website The Balance points out “It’s unlikely America will ever pay off its national debt. It doesn’t need to while creditors remain confident they will be repaid. Most creditors don’t worry until the sovereign debt is more than 77% of GDP, according to the World Bank.”
So my ex-colleague posits that at some point our money system really faces collapse because payoff on the debt becomes impossible.
He’s into crypto-currencies like Bitcoin, which I consider to be an impossible option in the real word, but it does raise some questions about our personal indebtedness and creditors who may become not confident that they will be repaid.
About 190 million of us have at least one credit card carrying an average of $8,800 in debt. So as individuals, not as a government, we’re about $1.7 or $1.8 trillion in debt we hope we can slowly repay with interest.
I was reading an ad for a local financial consulting firm that promises you can be taught how to generate income that will free you from your debt and even from the necessity of continuing to work. I was thinking “yes, that might be possible if I started a for-a-fee financial consulting firm.”
Debt seems to be an American birthright. Especially now in a low interest environment. But NerdWallet warns that if your debt exceeds 40 percent of your after-tax income, you’re headed for big trouble.
Washington Post columnist Michelle Singletary says “When deciding to buy on credit, repeat to yourself, ‘Is this a need or a want?’ It’s a question that will give pause before a purchase and slow down spending.
“And when you’re thinking about getting a loan, live by the mantra, ‘Cash is better than credit.’”
Let’s talk that bad word default.
The Consumer Federation of America released a study reporting that $137 billion in federal student loans is in default, up 14 percent from 2015.
If the U.S. were similarly to default, it would essentially stop paying the money it owes Treasury bond holders. The likelihood is that markets around the world would plunge and global interest rates would rise. Taxes would have to be jacked up at a time of a huge recession. Goldman Sachs estimates that $175 billion would immediately be withdrawn from the US economy.
Think of today’s debt situation this way:
If the total U.S. debt were a stack of $1,000 bills, it would be more than 1400 miles high. In just $1 bills, it would extend past the moon.