Gary Christenson – Assume you have annual income of $60,000 and credit card debt of $10,000.  No problem.

Assume you have the same income but credit card debt of $360,000.  Big problem!

The US government has annual income of approximately $3 Trillion and official debt in excess of $18 Trillion.  This does not count other liabilities such as Fannie and Freddie, and massive unfunded liabilities.  But assuming “only” $18 Trillion in debt (optimistic) the US has the same ratio as a family with $60K income and $360K in credit card debt.

But this is not recognized as a problem because the Treasury sells bonds and the Fed “prints” the currency to buy the bonds.  Debt increases and the US government spends.  Life is good for politicians and bankers.

When does massive debt become a problem?

The US government “rolls over” the debt, pays the interest, and borrows more.  This works as long as global confidence in the dollar remains solid.

But as the world increasingly shuns the dollar, chooses to transact business in other currencies, and uses the dollar less, those dollars held in foreign reserves probably will flood home and create a tidal wave of domestic inflation. Continue reading →