Will 2014 Be The Year Of All-Out Economic Collapse?

So here we are again, another Christmas season, another rampage of zombie-consumers, sleeping outside stores for $100 T.V.’s and the latest gadget that will most likely be obsolete by next Christmas. Everything is fine and dandy in the good ‘ol U.S.-of-A., right?

Well, maybe not so great, once you dive into the details –

Lets examine just a FEW of the issues going on at the moment (if we looked at them all this article would be a good bit longer) that may end up having disastrous effects on our economy within in the next year or so.

First of all, as most of you probably know by now, our national debt is the main problem that our economy needs to overcome, but at this point it seems that it has reached a point of no return, and a feedback loop may already have us in it death-grip (where now we simply can’t pay it down because we have to borrow more just to cover the interest payments, unless we want to stop sending checks to people who get them here and pay interest to other countries instead)We have been spending way more than we have been producing for several decades now, and at this point the debt is reaching astronomical levels.If you have ever wondered just how much our national debt is, you can track it on a daily basis right here at www.usdebtclock.org.

To be in too much debt may not seem like that dire of a circumstance, but the problem is that we are still racking up about a million dollars per minute, and we aren’t stopping this trend any time soon. With each passing day that the debt continues to rise, it’s looking more and more likely that there will be no escape, and it will eventually bankrupt our economy and possibly even bring the systems that we depend on for everyday survival to a screeching halt.

At the time of this writing, it currently stands at $17.25 trillion… yes, trillionwith a “T”. According to US Debt clock.org, that equates to more than $50,000 for every man, woman, and child, over $150,000 for every taxpayer, and a staggering $750,000 for each and every family at the moment.

Yes, this has been going on for quite sometime, as this article illustrates nicely, but recently it has reached the point of all out ridiculousness. Eventually, the debt reaches a “hockey stick” level where new debt has to be added to refinance the old debt so quickly, that the rate at which new debt is added increases exponentially. From the looks of the chart below, it seems as if we are getting very close to reaching that point.

US Debt Q3 2013

What’s interesting to note, as well, is that this chart doesn’t include Q4 of 2013, which after the debt ceiling was raised (actually temporarily suspended, which gave legislators a blank check to write as much new debt as they like until February 2014), congress spent $328 billion dollars in a single day. That will make the preceding chart look even worse.

But the debt isn’t so bad as long as you can afford the interest payments. But that’s the problem. Right now interest rates are starting to rise. Not so much that we are actually anywhere close to not being able to afford our interest payments. Right now we still are bringing roughly five and a half times what the interest on our debt costs us, but the problem is, if interest rates rise much more, we are just going to racking up that much more debt. At some point, other nations are going to start to realize that we are in an inflationary debt death-spiral, and we are eventually going to bring anybody that is holding our worthless fiat pieces of paper (or one’s and zero’s in most cases), down with us, to the bottom of the deep-blue.

And right now interest rates are still at historically significant lows. If they start creeping up at any reasonable pace, and get closer where they used to be just a decade or two ago (which is really where they belong) then our debt service is going to cost us much more than it does right now. And at what point are we going to have to start cutting benefits? Right now we’re spending over 1.5 Trillion dollars per year on Medicare and Medicaid alone. Do you think that the government is going to let us default on our debt before they stop sending your grandma a check? You’re dreaming. A default on US debt would be an absolutely nightmare scenario and they are going to avoid it at all costs. They will let every single retiree go homeless before they default on the US debt.

But the problem is that that won’t stop it, either. It will only drive us deeper into that feedback loop where more people would have to rely on public assistance of some sort, which would add even more to the debt, and the cycle will continue until the economy eventually collapses and all the debt is hyperinflated away.

But yet another problem is how the debt is actually reported. The United States Government likes to pull a sneaky trick where is doesn’t include some of its future expenses in it’s current debt – mainly medicare, medicaid, and social security. If any actual business or corporation did this it could possibly be charged with fraud. But the government gets to do it every day. If they did come to grips with the current situation and calculated the debt the way an actual business would, we would arrive at a mind-numbing 120 trillion dollars. This is due to the massive wave of baby boomers that are now starting to retire, and they’re collecting all the social security checks and medical treatments that have been promised to them. But the unfortunate reality is, that there is no way we are ever going to be able to pay all of them. We either have to cut back on the benefits drastically, or go into so much debt that eventually we cause hyperinflation and the whole system collapses and they stop getting their checks anyway. Not a very good scenario, is it?

If you want to see where all of this is most likely heading, just take a look at Europe.

Right now the economy in Europe is in shambles and things just seem to be getting worse by the day.

And even though our current unemployment level is supposedly sitting at 6.7%, but if the government hadn’t counted millions of people out of the workforce, it would actually be much higher than that.

In fact, if you look at the chart below of what percentage of people in the U.S. are actually in the workforce, it seems like we never even recovered from the economic crisis of 2008-2009.

employment population ratio

So 2014 is going to be an interesting year. Will the baby boomers put enough of a strain on our economy to finally give it a knockout blow? Will interest rates rise to where we have to start cutting benefits significantly? Are the unemployment levels going to keep getting worse? Or are these things blown out of proportion, and is it possible that 2014 might be a year for recovery?

Your thoughts and opinions are appreciated.

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