Three Reasons Why the U.S. Government Should Default on Its Debt Today, by Doug Casey

From Doug Casey at theburningplatform.com:

The overleveraging of the U.S. federal, state, and local governments, some corporations, and consumers is well known.

This has long been the case, and most people are bored by the topic. If debt is a problem, it has been manageable for so long that it no longer seems like a problem. U.S. government debt has become an abstraction; it has no more meaning to the average investor than the prospect of a comet smacking into the earth in the next hundred millennia.

Many financial commentators believe that debt doesn’t matter. We still hear ridiculous sound bites, like “We owe it to ourselves,” that trivialize the topic. Actually, some people owe it to other people. There will be big transfers of wealth depending on what happens. More exactly, since Americans don’t save anymore, that dishonest phrase about how we owe it to ourselves isn’t even true in a manner of speaking; we owe most of it to the Chinese and Japanese.

Another chestnut is “We’ll grow out of it.” That’s impossible unless real growth is greater than the interest on the debt, which is questionable. And at this point, government deficits are likely to balloon, not contract. Even with artificially low interest rates.

One way of putting an annual deficit of, say, $700 billion into perspective is to compare it to the value of all publicly traded stocks in the U.S., which are worth roughly $20 trillion. The current U.S. government debt of $18 trillion is rapidly approaching the stock value of all public corporations — and that’s true even with stocks at bubble-like highs. If the annual deficit continues at the $700 billion rate — in fact it is likely to accelerate — the government will borrow the equivalent of the entire equity capital base of the country, which has taken more than 200 years to accumulate, in only 29 years.

You should keep all this in the context of the nature of debt; it can be insidious.

The only way a society (or an individual) can grow in wealth is by producing more than it consumes; the difference is called “saving.” It creates capital, making possible future investments or future consumption. Conversely, “borrowing” involves consuming more than is produced; it’s the process of living out of capital or mortgaging future production. Saving increases one’s future standard of living; debt reduces it.

If you were to borrow a million dollars today, you could artificially enhance your standard of living for the next decade. But, when you have to repay that money, you will sustain a very real decline in your standard of living. Even worse, since the interest clock continues ticking, the decline will be greater than the earlier gain. If you don’t repay your debt, your creditor (and possibly his creditors, and theirs in turn) will suffer a similar drop. Until that moment comes, debt can look like the key to prosperity, even though it’s more commonly the forerunner of disaster.

To continue reading: Why the U.S. Government Should Default

One response to “Three Reasons Why the U.S. Government Should Default on Its Debt Today, by Doug Casey

  1. 11. Cana – The First Sign

    Mary, Mother of Jesus speaks:

    No time to waste. Do not delay. Do not say, “Let us see if all of this happens as Our Lady has said”. Is not my word firm? Do I not speak to prepare my children? Others might question but my children must believe.
    The weeks ahead are very important. They are not to be wasted in idle speculation. In the coming days, I will tell you exactly what you need to know. These will be very special words. Set your wild imaginings aside and ponder my words.
    First, you must walk very closely with me, much closer than you have ever been. These weeks are filled with my greatest favors, especially for those who understand and believe. Do not omit your rosary. In those moments I will come, meet you and give you light.
    Second, the collapse will not come out of the blue. The signs of economic difficulties have already appeared. The experts study the trends and try to explain the causes. However, although the collapse will certainly be due to human causes, what will happen cannot be forecasted by human experts. Their minds do not see the extent to which the economic structures have been weakened nor can they predict the responses to the initial difficulties. All that you need to know is that an economic collapse will take place while the Holy Father is in the United States.
    Third, I have deliberately brought him to these shores so that the events will be associated with his visit. This is my clear sign of the role of the Holy Father and of the Catholic Church in the reconstruction of society and of God’s saving actions for the human race.
    Fourth, this collapse and the presence of the Holy Father are only the beginning of the events. The collapse is Satan’s action and the Holy Father’s presence is my action. These actual events will show what I have been saying during these years of the locutions. The present world events are just the manifestations of the unseen battle being waged by Satan against the kingdom of Jesus. Because the world has lost faith in Jesus’ kingdom, it cannot understand or explain what is going on. Even worse, the world aids and abets Satan and, by past decisions, has brought on this collapse.
    Even when the events happen exactly as I have said, many will still not believe my words. However, millions of people (of all faiths) will begin to believe. The events will be like Cana of Galilee, the first of Jesus’ signs which helped his disciples to believe in him. Such will be the events when the Holy Father is in America. I have deliberately brought the Holy Father to America so all the world will see my sign.

    If you are so inclined, go to locutions.org and read all of the “Recent Messages” listed in the column on the right. These provide the full context for this subject

    Like

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