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Why the United States May go Bankrupt

By Edited Jun 2, 2015 0 0

US Faces Mounting Debt Crisis

China calls the US a Debtor Nation

President Obama recently spoke to congress about raising the national debt ceiling.  These are perilous times in the world's financial markets and the U.S. is in the precarious position of fighting wars on three fronts on borrowed money.  If the United States were an individual like you and me, they'd be considered broke.  Iraq, Afghanistan and the War on Drugs, are costing the U.S billions and billions of dollars, at a time when the U.S. has already maxed out it's "metaphorical" credit card.  Unlike the government, we cannot print money, but as the United States does print money, the value coming off the press at the Federal Reserve Bank will continue to decline against world currencies, particularly China.  This is a scary time for the United States, with China only carrying a fraction of the national debt that we have, (370 billion versus 13 trillion). My calculator doesn't go that high, but the U.S. has roughly 30 times the debt that China carries. That's because China isn't fighting any wars.

Sure the United States will eventually raise the debt ceiling again, but it's just borrowed money.  It's a good thing their creditor isn't JP Morgan Chase who can raise the interest rate from say 6 percent to over 30 percent if a payment is late 10 days. If the U.S. government was treated the same way by its creditors as Chase treats it's customers we'd be in a world of hurt. Let's not forget that the U.S. has bailed out Chase to the tune of $23 billion dollars.

If China were to stop buying U.S. government securities or jump ship and see their holding we'd be worse off than a homeowner who bought a home in Southern California in 2006.  We'd be so upside down, you could drop pineapple slices over Washington and people would mistake it for a lovely sweet cake.

It's Time to Wake Up!

We are in a crisis that is being swept under a really big rug. It's getting near election time and bad economies look terrible on a politicians resume. The powers in office will tell us we're doing fine and we're winning the wars on all fronts and that the financial system is sound and secure. You'll hear another party denounce the economy and promise huge changes that will miraculously solve our problems. It is all smoke and mirrors. We are simply spending more money than we have. Obama didn't creat the problem, nor did George W. Bush. It was Wall Street and their glutton for quick, huge returns; forged from paper-thin investments known as derivatives; like hedge funds, collateralized debt obligations, and credit card default swaps.

Warren Buffet called them "weapons of mass financial destruction", because they were based on securities thinner than the toilet paper found in the trading floor bathrooms.

He was right. If we are not careful, China is gonna smack us in the bottom and send us to the time-out corner.

So now, here we sit, our credit maxed out and us still wanting to party like it is 1994. We're in a world of hurt and no one seems to be taking it seriously. 




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