How will the raised debt ceiling affect economies?on August 8, 2011 at 20:35
The National Inflation Association (NIA) is of the firm belief that the subject of the debt ceiling has no relevance whatsoever. It claims that the media and politicians have spent umpteen man-hours and hundreds of millions of dollars arguing about something that has no meaning. With the exception of a few politicians such as Ron Paul, most of the decision makers have only pretended to care about curbing spending. Most of the other politicians are lying to their constituents so that they will believe that the Democrats and Republicans have different proposals on this subject.
The media has reported that there are differences between the two proposals. However there is no substantial difference according to NIA. In both cases, it has been put forward that the American budget deficit will be reduced to about $900 billion over the next decade. Of this $750 billion will be proper spending cuts and the balance will be in the form of less interest being paid on the debt. This will happen regardless of which bill is passed.
In truth it is impossible to make these promises when working with a fiat currency system that is currently failing. Purchasing power is diminishing all the time and it is only a matter of time before the currency crashes. Making these kinds of predictions over the next 5-6 years is impossible so how can the same predictions be made over the next decade?
Both proposals predict that in 2012 and 2013 there will only be spending cuts totalling $70 billion. Back in 2007, the then President George Bush stated that spending would be reduced in the next four years, however this was not the case as in 2008 spending tripled and in 2009 spending was even higher. Bush’s budget contained figures that indicated that there would a $61 billion surplus in 2013. The latest budget figures reveal that America will have $1.1 trillion budget deficit even though it is unrealistically expected that GDP growth would be at 4.86 percent.
While the American government has voted in favor of raising the debt ceiling, many feel that this is only going to prolong the inevitable. While the U.S Treasury had $51.6 trillion in cash, the state coffers were declining at a rate of $15.2 billion just 24 hours earlier. It is anticipated that $172 billion will increase the state coffers during the month of August by way of tax income. The problem is that the Treasury has to pay out $306.7 billion in the same period. On August 15th, $30 billion is due just for repayment of the interest on the loans. In less than 1 year, America has paid out $385.9 billion on interest alone. At this rate by the end of the year America will have made payments to cover interest totalling $514.5 billion.
Should there be the slightest adjustment to the interest rate due on the debt, all of the deficit proposals that were submitted would become meaningless. America is now going to have to choose who they pay first when payment becomes due. Unless a miracle takes place quickly, the future looks rather bleak for this once economically sound nation.