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US Crosses Over the $15 TRILLION Debt Line!!!
Yesterday, November 16th, 2011, the United States finally crossed over the $15 Trillion debt mark. More importantly, on Halloween night, the U.S. crossed over the 100% debt/GDP ratio!
For most Americans, this brought little alarm because they have become so used to the United States tolerance of debt. However, the significance of this event cannot be underestimated. For those who don’t know, the debt to GDP ratio is a measurement of total government debt compared to the overall size of the economy. So when we say the U.S. has a 100% debt to GDP ratio, we are saying that the US had a $15 trillion economy and a $15 trillion debt. So what? That truly is the question. What most investors don’t understand is that if we look over the past 1000 years of economic history, we will find that there has been only one country that has ever crossed the 160% debt to GDP ratio and actually been able to take their debt back to a manageable level. This country was Great Britain during its imperial might in the 1700s and 1800s and the circumstances surrounding their return were extremely unique and not likely to be repeated. With the U.S. government crossing over the 100% mark, that puts us well over half way there and with no sign of stopping.
In addition to our government debt, the U.S. citizens and businesses have large amounts of debt. When you combine the debt of the individual, business, and government, it amounts to an astounding $55 trillion! The United States cannot continue to go down this path.
Unfunded Social Security and Medicare
Unfortunately, the information only gets worse. The United States also has large unfunded obligation stretching out over the next 50 years to Social Security and Medicare. When we combine these debts and adjust them for inflation, the US has an additional $163 Trillion in debt coming down the pipe! This, added to our current debt load gives us a whopping $177 Trillion in debt or 1180% debt to GDP! Obviously, our economy will grow over the next 50 years and so the percentage of debt to GDP will not be this high, but the point still remains we are talking about mathematically unsustainable debt loads.
In the end, unless radical change begins, soon there will be no hope for the United States. The only reason such recklessness has been sustainable up to this point is the U.S. dollar remaining as the world’s reserve currency. However, year after year, more and more countries talk about dropping the U.S. dollar as the reserve currency, and eventually they will make good on their threats. Inevitably, unless the U.S. changes its course, it will follow the path of every other major indebted nation before it. It will print vast quantities of money to the point that it brings on hyperinflation and the complete destruction of the dollar. In a situation like this, the only investors who win are holding hard assets. Gold and Silver have historically been the preferred choice and have stood the test of time. Investors have to consider the debt crisis in their investment philosophy.
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Josh Renfro
President & Founder
Lone Star Bullion LLC
