|World Debt Has Grown Faster Than Wealth|
These so-called paper promises include holdings in currencies, bonds, future income based on a pension payout, and much, much more. A place that displays how debt has exploded and gives credence that a storm is coming is a visit to the National Debt Clock. For those who have never experienced its enlightening and sometimes ugly secrets, this is a site well worth taking the time to study and explore. Especially intriguing are the much-underused features across the top that allow a viewer to move around in time as well as from country to country which gives a viewer a great deal of insight as to just how rapidly the debt of countries has grown during the last few decades.
|American Debt Has Soared|
This thought has been echoed many times by Peter Schiff a well known financial commentator. Schiff says printing money is to the economy what taking drugs is to a drug addict. In the short term it makes the economy feel good, but in the long run, it is much worse off. Schiff contends what was once the "long run" or "distant future" may be getting very near. Such warnings have been heard for decades, in his book "A Time For Action" written in 1980 William Simon, a former Secretary of the Treasury tells how he was "frightened and angry" sighting the growing national debt as a major problem and sounded the trumpet about how he saw that the country was heading down the wrong path. Back then it was about billions of dollars of debt, today it is about trillions of dollars.
Looking back, it is hard to imagine how we have made it this long without addressing the concerns that Simon wrote about so many years ago. Had it not been for the sky-high interest rate environment ushered in by Fed chairman Paul Volcker at the start of 1980 that crushed inflation the story might have unfolded quite differently. The high interest rates acted as a reset of the global economic system that lasted for decades. That barrier to spending has now been brushed aside. By manipulating interest rates lower and expanding the money supply central banks have fostered an environment that has encouraged people to pursue riskier assets and investments while bringing forward future purchases. As interest rates rise, as they are, will, and must, the value of these risky investments will decline, and these investors will be hurt. Making things worse is the fact that interest payments on the public debt will rise increasing the already massive budget. This is already playing out in some sectors of the economy where prices have been rising rapidly and major distortions exist within the marketplace.
|Growth In Tangible Assets Has Not Kept Pace|
Footnote; Below are the links to part one and two of this series.
Footnote #2; This post dovetails with many of my writings, for more on some of the subjects mentioned above see the articles below.