The Deficit Monster:

So now we hear that the Deficit will be more than a trillion Dollars. Huge amount by any measure. Although we should have been expecting this since will all this stimulus money and bailout money created out of thin air by the Treasury had to be accounted for somewhere and somehow. How is this going to affect the average citizenry? First of all this deficit (and all the debt) will have accumulated enough interest that we will be issuing more money just to be able to afford to pay the interest. And if there is more money to issue there will certainly be more debt and then more interest. It is a vicious cycle indeed.

Second if we don’t have the money, we will have to issue Government securities. And in order to attract the largest pool of investors, we will have to give them higher interest rates. This will generally increase the interest rates all across the board. In the long term if we are not able to handle our debt, we will have to suffer lower ratings which will mean more interest rates on the securities in order to pay for the daily running of the government.

And all these deficits are the only one that is reported. We have promised people so much that we don’t have the eventual money to pay for it. It is not reported in the official data how much money we owe in terms of various required funding like Medicare and Medicaid and social security and pension to government employees.