I’m not big on libertarians over all (I am a fiscal and moral conservative), but here’s a libertarian who seems to have a detailed and accurate take on fiscal and economic issues. After looking over a few of his posts, I checked his “about” section – and wasn’t surprised to find out that he’s a professor of finance at a fine university.
Anyway, he caught something about our debt clock that will keep you awake at night if you’re smart enough to worry about impending future reality:
The rhetoric in the U.S. from politicians, economists and the media over S&P’s downgrade of the U.S. Treasury debt has gotten vicious with most opining that it was undeserved. True, the U.S. can pay its interest payments for the foreseeable future. But can the U.S. actually pay off the PRINCIPAL? With housing, a borrow can qualify if the lender is satisfied that they are able to meet monthly mortgage payments. But with a mortgage, one of the assumptions made by lenders is that the principal can be paid in full upon sale of the house (the due-on-sale clause). In addition, mortgage debt is amortized so that the principal is gradually paid off.
But with Treasury bonds, the debt is interest-only. And the principal that is owed is $10 trillion to investors (and over $14 trillion to investors and other government entities). Can we pay off the $10 trillion? In theory we could pay it off. But it would be hard work. Take a look at usdebtclock.org. Now look at the bottom of the chart where it shows the taxpayer liability for entitlements: over $1 million per taxpayer!
The line above shows that Assets Per Citizen is just under $250,000 per citizen. Roughly, we have $250,000 per citizen in assets and $1,000,000 per taxpayer in liabilities. Stated differently, we are more underwater than the housing market in Arizona and Nevada.
Now, look at The Federal Government Savings chart (government receipts less government expenditures). Notice any alarming change in government indebtedness starting in 2007 and spiking in 2009 and 2010?
Admit it, wouldn’t YOU be scared about the ability of the U.S. Federal government (or taxpayers) being able to pay the interest AND the principal?
Hell yeah, I’m scared.
I’ve got $250,000 in assets that of course I’ll never be able to profit from, versus a million dollars in debt that I’m actually on the hook for. And when it all comes crashing down somebody’s going to want their money back - and I don’t got it.
And I’m afraid I won’t have the wheelbarrow full of money I’ll need to buy a loaf of bread, either.