If you want to understand just how much trouble the US is in right now, take a look at two key figures (besides unemployment and food stamp use):
1. The national debt
2. The money supply
Today, on December 12, 2010, the US national debt ($13.86 trillion) exceeds the total money supply (M3) which is roughly $13.7 trillion.
To put this into perspective, in 1980 the US debt was just HALF of the money supply at the time.
Basically, the US government debt alone is $150 billion MORE than dollars available to pay off that debt.
What does this mean?
It means that with each new budget deficit, the US will have to print that equivalent amount of money. And that does not include interest which will be compounding on the existing debt. The budget deficit is expected to exceed $1 trillion for at least a decade, as long as the economy remains stagnant. This means we’re pretty much guaranteed at least 7% inflation for the next 10 years.
In one word: INFLATION. Lots and lots of it.
This is what will be necessary in order to cover the payments on the debt. There just isn’t enough money in the US now to even cover the national debt, let alone other obligations like mortgages and other private sector debt.
All in all, the US will need to print some $50 trillion to cover those liabilities. When you add in other unfunded liabilities like social security, that number easily grows to $100 trillion.
So the possibility of monetary inflation on the order of 20% per year should not be discounted.
Taxed Beyond Death
US citizens will be taxed beyond death (TBD) in the next decade, just to cover the interest payments on the gigantic public debt.
Keeping in mind that the Federal Reserve is independent and not accountable to elected officials, it seems that paying any public money to it would constitute taxation without representation and would thus be perfect cause for revolution. As soon as Americans realize this (probably never, given their stupidity), there will be an uprising not seen since the days of Thomas Jefferson.
The tea party is onto something. The only problem is the vast majority of its members have no freakin’ clue (NFR) how the system works. And how can you change something if you don’t even know how it works?
In the next article, I will be writing about how the system works in gory detail. Gory, gory, gory… detail.