More Federal Deficit and Debt

We are now in an era of having trillion dollar deficits as opposed to hundreds of billions of dollars and the effect of these big zeros have started to make us numb. It has been constantly two years in a row that we are in the trillion dollar zone and I don’t know how many years we will be in that territory. We have been accumulating debt at a faster rate than anytime in our history and this is because of this recession. But in order to ride out our recession, we are essentially spending our way out of it which I believe is not the answer. The economists who are saying that we should be spending more right now and when the economy booms we can pay out our debt are at a loss to how are we going to reduce our current debt and can we able to sustain consistently high levels of debt.

We are just paying hundreds of billions of dollars in interest alone on our more than 13 trillion dollars of debt without even putting a dent into the principal we owe. It is like the household budget that we keep on accumulating debt and interest without paying off any principal. In the government’s case, although it can print money and issue debt but how long are the investors going to keep on buying it without thinking that maybe the debt is never going to get repaid (which sure seems like that). Although technically and theoretically the U.S. government cannot or will not declare itself insolvent but the specter of not paying our debt or even rescheduling it will completely wreck the world economy, not to mention the financial markets of the U.S. and the investors. Stay tuned for more on this.