At the time of this writing, the United States national debt is more than $16 trillion, while the budget deficit stands at more than $1 trillion. Meanwhile, the total interest paid on the national debt is nearly $4 trillion and unfunded liabilities and expenditures are projected to be $121 trillion.
When accounting on a per person basis, each citizen owns close to $52,000 of the debt and each taxpayer has more than $142,000. On the interest alone, every U.S. citizen is responsible for $12,492.
Indeed, it can be rather difficult to put these numbers into perspective. It should also be prudent to ask as to how the U.S. got to this level and when it will stop – the U.S. debt is expected to hit $20.3 trillion by the end of President Barack Obama’s second term.
However, this debt crisis – and soon to be dollar crisis – isn’t only affecting the nation’s finances, but also the personal financial situation of Americans across the country (yes, even the millionaires and billionaires in America).
It seems as if this money will never be paid back. Peter Schiff, president of Euro Pacific Capital, and retiring Texas Republican Congressman Ron Paul believe there is no hope for the U.S. and its debt because it is rather difficult to pay off such a monstrous debt. In fact, there are only two things the U.S. can do: inflate the money supply or admit that the debt will never be paid off to its creditors.
How does this affect you? Here are the three major aspects that the federal government takes just to finance (not tackle) this enormous debt burden as well as the interest on it.
A person’s wealth determines their personal financial situation. The tax rates are important determining factors to conclude if you can increase the money in your bank account or just maintain the present wealth.
It seems taxation is rampant across the U.S. at all three levels of government. No matter what one citizen does, there is a tax: sales taxes, tire taxes, property taxes, pet taxes, self-employment taxes, alcohol taxes and so on.
In Canada, for instance, taxes are so high that the average middle-class family pays 47 percent of their income in taxes. In France, millionaires are being forced to pay 75 percent of their income to the federal government.
The tax levels will definitely be a major aspect in how healthy your finances are.
The total amount of foreign holdings of the national debt is approximately $5.4 trillion with China and Japan each holding more than $1 trillion. There are other creditors, such as Russia, Saudi Arabia and Brazil.
Eventually, these countries will be asking for their money back. Once they do, that could spell the end of the U.S. economy and for the dollar. Despite the actions of the Republicans and Democrats in Washington, both a debt and dollar crisis is imminent and this will severely hurt the finances of Americans in all income groups.
The Federal Reserve continues to print money on a daily basis. It’s as if Fed Chairman Ben Bernanke is throwing money onto the streets of the U.S. in his black helicopter!
Since the inception of the Fed, the U.S. dollar has lost 90 percent of its value. As Peter Finch in “Network” said, “A dollar buys a nickel’s worth.” This is in fact true because the purchasing power isn’t as strong and credulous as it once was.
Inflation, which is the act of expanding the money supply, is dangerous because it devalues a currency while also raising the prices of goods and services. Some economic experts believe the U.S. is in a deflationary environment, but the American people can only wish.
Next time your congressman puts forward an initiative to spend more taxpayers’ dollars, be cautious, be wary and be concerned over the money in your pocket.
“The main problem for the past several years, what we’ve done as Americans, we spent a lot of money we didn’t have, to buy foreign products we couldn’t afford. We’ve run up an enormous debt to the rest of the world and we’ve got nothing to show for it,” said Schiff in a television interview years ago.
“It’s analogous to an individual who loses his job and instead of getting another job, he simply buys everything on a credit card and then he shows his life his credit card bills and says, “Look, honey! Look how great we’re doing.”