Till the convergence of today's deficit spending with the retirement of Boomers and with the tumble of other national economies.
True.. and that will be a problem when all the SSTF IOUs come due 10 or so years from now, since all the surplus FICA funds are being added to the governmental budgets bottom line. But even then, the total US national debt, public and private combined, amounts to about 58% of the total US $10 Trillion annual GDP. Imagine if the US national debt amounted to 140% of annual GDP, as in the case of Japan? Taking those FICA revenues out of the hands of the pork barrel politicians and making some of it available to private IRA's was the proposal that Bush was advising during the election(which given the 2% return on SSTF revenues, could easily be exceeded just by holding 10 year T-bills in private IRAs).
publicdebt.treas.gov
Btw, remember that the US private debt, also called intergovernmental holdings, represents SSTF surplus FICA revenues applied to the governmental budget as mentioned above, which is essentially money the government owes to itself to cover unfunded liabilities from SS pensions down the road). The actual publicly held debt, including foreign owned debt (through T-bills), amounts to only 34% of GDP, thus leaving the US substantial room to apply fiscal stimulus should it opt to do so.
Thus, you're right that we'll be the last one left standing if other nations can't get their act together, but that could still be a couple of years into the future, and those nation's will likely continue to depend upon the US consumer to buy their goods.
And when the USD can no longer sustain it's upward momentum, who will be left holding US debt? Foreigners whom the US consumer has subsidized for these many years. They will sell their USD, but where will go? Gold (bwaack!). And the financial system as we currently know it, will regress to the period when a nation's economic strength is determined by who holds the largest stores of gold...
And who currently is the largest holder of gold?
Yep.. the US.
One other thing. The US has those unfunded liabilities represented by the US private debt (intergovernmental holdings) which will require either future increased tax revenues, and/or deficit spending to meet. But European countries are in far greater straits.. You see, due to their socialized pension plans, and the expectation by their citizens that the government will be there to take care of them in their retirement, there are considerable unfunded liabilities they will have to deal with as their populations age... much more than the US, since we reformed of social security programs to make them self funding back in 1986, as well as developing 401K and IRA private retirement plans, two areas that Europe has, for the most part, not reformed.
I recall reading about 1/2 year ago that France's unfunded liabilities either 10 or 20 years from now equate to 200% of current GDP. So if they don't have sufficient economic growth, they will have to run those printing presses overtime to pay those expenses. I believe the same situation exists in Germany, but data in English has been hard to come by.
Japan, on the other hand, relies heavily on a corporate pension program, as well as personal savings. But unfortunately many Japanese companies are so financially destitute and in debt that they may not be able to finance these pension plans and remain solvent. And given the ominous national debt situation faced by Japan, should they be forced to devalue the Yen, it will amount to also devaluing the yen denominated JGB and postal savings (some $12 Trillion worth) by a similar amount thereby increasing the cost of living through induced inflation, while devaluing their savings. And the end result has been to constantly put off the day of reckoning with regard to the fundamental restructuring required in their financial system.
So with regard to foreign relations and how economics apply, all roads "lead to Rome" when it comes to political ramifications of these economic trends. And just as Hitler took advantage of hyper inflation in the Wiemar republic, it's quite possible that some reactionary political faction, promising the world, could one day permeate Japanese and European politics.
Just a few of my "ramblings" on the issue... :0)
Hawk
Thus, those people |
