The coming American collapse, the most indebted people on earth just took on more debt

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The coming American collapse, the most indebted people on earth just took on more debt

This article looks at the current state of the American economy and provides some very unsettling figures. The light at the end of the tunnel in Obama's stimulus package, is just another train coming towards you. For the most indebted people on earth the party is over and cleaning up is horrendous.

Although we are sick of doom and gloom economic articles, the data in this article is frightening.... (extracts below)

 http://www.thecuttingedgene...

You would like to close your eyes and make it go away. Not only is the news not going away, it is going to get worse and last longer than most people can comprehend.

The U.S. National Debt was $930 billion in 1980, or 33 percent of GDP. Today it is $10.7 trillion, or 76 percent of GDP.

The National Debt has grown by 1,150 percent in 28 years. With the planned fiscal stimulus (taxing future generations), the National Debt will reach 100 percent of GDP during the Obama administration.

When Argentina’s economy collapsed in 1998, their National Debt as a percentage of GDP was 65 percent.

The Great Deniers say we are not Argentina. They say we are safe because the U.S. dollar is the reserve currency of the world. This is like jumping off a 20 story building and as you pass the 10th floor someone yells out the window asking how you are doing. You answer, "Good, so far".

The only logical way to resolve this quandary is to reduce spending, pay down the debt, and increase savings.

This is what consumers have begun to do. With consumer spending accounting for 72 percent of GDP, we are experiencing a serious recession due to the decrease in consumer spending. The excesses are being painfully wrung out of the system.

The government and Federal Reserve have already committed $8 trillion of taxpayer funds to bailing out criminally negligent insolvent banks. Now the Obama administration is going to spend in excess of $1 trillion in an effort to stimulate the economy. They insist that it must be bold and swift. How about also being well-thought out, deliberative, and effective?

Every single dime of the next $1 trillion will be borrowed from foreign countries and then handed out to constituents, this while encouraging them to resume borrowing and spending.

"Hope" will not get the United States out of our current predicament. It took decades to get to this point and it will take decades to extract ourselves from this debt induced disaster.

American consumers enter this economic downturn as the most indebted people on earth. The materialistic frenzy of the last two decades has left the American consumer saddled with $2.6 trillion of credit card and auto loan debt. The American savings rate, which was 12 percent in 1980, fell below zero in 2006. It has since inched up to 2 percent in recent months.

More than 300 million credit cards are in use today in the U.S. The average American with a credit card is carrying debt of $16,635, according to Experian.

With unemployment skyrocketing, wage growth stagnant, and home equity extraction a thing of the past, some American consumers are now rationally paying down debt. The result is devastating the economy.

When 72 percent of the economy is dependent upon consumers borrowing and spending, deleveraging by consumers will bring the economy to its knees.

The single biggest dilemma facing President Obama is something he has absolutely no control over. The American public has been traumatized over the last year. They have been misled by the government, lied to by Wall Street, and now they are losing their jobs by the millions.
Their homes are worth 20 percent to 50 percent less.
Their retirement funds are worth 30 percent to 50 percent less.

Consumer spending has made up 72 percent of GDP for the last few years. Based on the trauma they have experienced, after the shattered illusion that home price appreciation could fund their retirement and stocks will go up 10 percent per year, they have wisely begun to pay down debt for the first time in history.

The combination of devastating losses to their net worth, miniscule retirement savings, and rapidly aging population will change the entire dynamic of U.S. society.

Baby-boomers have been hit over the head with a heavy briefcase and it has knocked some sense into them. Fear is a great motivator. The government cannot influence this dynamic in any way. Americans will pay down debt for the next decade and increase their savings rate to 10 percent because they have to.
They have no choice.
They either reduce consumption and increase savings, or go hungry in their old age.
By netchicken: posted on 8-2-2009

It doesn't take a mathematician to simplify this problem.

We've lost too many job to overseas. All one has to do is look at the labels on most everything purchased to see that what we consume is made overseas. Of course we are headed for disaster.

The liberal-controlled Democrat party is in control of both houses of our bicameral congress, the executive office and a majority of the federal courts and not much stands in the way of the "secular-progressive" agenda. Rahm Emanuel put it nicely when he said not to let a crisis go to waste and Nancy Pelosi took that advice when she crafted the nearly one trillion dollar liberal money grab-bag that is being disguised as a stimulus package. Their is little in the way of stimulus in that package, only an incredible increase to the national debt that cannot be repaid.

The national credit crisis was the creation of the Democrat party during the Clinton years. The man the ignorant American public elected to solve the problem, Barack Obama, was part of the problem and has no idea how to be part of the solution. He is having problems simply filling his cabinet with Democrats who pay taxes properly!

That we are buying fewer cars and less discretionary BS that is imported anyway is not the only problem. An American society that saves is a bad thing for the government as it means lower state and local tax revenues, and less travel means less fuel tax being collected by them and the federal government. Couple that with this humongous "stimulus" package of the liberal Democrat party (not to mention the previous one tossed together by the last congress and passed by G.W. Bush) and you have a government in default.

What money the Americans save today will not go to their retirement but to food, clothing, electric and heating in the near future when inflation hits hard.

Times are about to get interesting.
By Thomas_Crowne: posted on 9-2-2009








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