Sunday, December 26, 2010

Debt and Debt

http://www.reuters.com/article/idUSTRE6BK6WC20101221 Last year the US Government added two trillion dollars of liabilities to its already massive debt brining their total liabilities to thirteen trillion dollars. Yes, the Federal Government owes liabilities of $13,000,000,000,000.00! That’s a lot of zeros. Those are zeros that your children and your grandchildren are likely to have to pay for, perhaps even your great-grandchildren. Keep in mind that the total sum of goods and services produced in the United States in 2009 was only about $14 trillion. We are almost to the point where the government would have to take everything, 100% tax for a year to pay off all their debts. There are several ways for this to be resolved. The first way and most likely under this liberal administration, is to keep adding debt and hoping that nothing bad will happen for as long as they are in power. They can also default on loans and bonds, which means that no one will loan them any more money, not a good option for liberals who like to spend money they don’t have. They can also reduce spending, stimulate production by lowering taxes and put everyone who is unemployed back to work doing infrastructure projects that would actually help the private economy to expand. A liberal administration is not going to do this either, they want government to have the money, not the private sector. The final option is to simply create inflation and the value of the money falls away so that $13 trillion dollars becomes worthless. I suspect that this is the method that will be chosen to eliminate our debt. It also increases taxes automatically. Since many taxes are a percentage of money spent, like sales taxes, or a percentage of money earned, like income taxes, the government always does well during inflationary times. More people are pushed into higher tax brackets and therefore have to pay a higher percentage of their income as taxes. So eventually we all end up paying the same taxes as the rich as inflation pushes us into higher tax brackets. Inflation also wipes out the value of money in the bank and the value of money out on loan. It’s that money out on loan that the government is interested in, inflation has the result of devaluing the dollars they owe to private banks and foreign governments. I think that we will be in double digit inflation by 2014, thanks to the policies of President Obama and his administration; that’s the view from the Hysterical Right Wing.

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