It has been widely cited that the U.S., soon, will not be eligable to join the European Union, due to its debt-GDP ratio. (Not that we would ever want to join, but you get the point).
Many people wonder why we are so concerned with Pres. Obama's massive spending. The answer is simple: we cannot keep doing what we are doing.
Pres. Obama campaigned on the platform that there were massive fundamental problems in the way we do business, and that he was the one who could bring everyone together to change it.
However, the walk and the talk have not coincided.
The problem was in the balance sheets. A balance sheet usually has two halves: liabilities and assets. In the liability column, the U.S. has extraordinary obligations, including health care, retirement accounts, welfare accounts, and straight money borrowing. Obama has already come close to doubling our liabilities. Currently, each child born in the U.S. has an over $11,000 mortgage placed on their income at birth. The asset column continues to shrink, as we produce less value, instead relying on phony financial schemes to produce money.
Obama attacked this problem by adding more spending than any president ever has. His theory is that this will create returns high enough to pay for the spending. Maybe this will work. But even if it does, it is a massive gamble to take with our economy. It has failed time and time again throughout history. To believe that it will work, is to believe that the U.S. can practically double its income producing assets in the next decade. This will take a lot more than "hope." Keep in mind a factor (which Obama has tried to refute): that most (but not all) government jobs are liabilities, not assets.
As this article helps explain, at some point, the chickens have to come home to roost. I especially like the comments in the above article on the so called "tax cuts," which should really be called spending increases.
The main savior for the U.S. is its ability to create its own paper money, and pay debts in its own currency. The Federal Reserve is, by far, the U.S.'s largest creditor. This quasi-governmental organization allows the U.S. government to lend to itself, and therefore forgive its own debt.
However, this send us down a slippery slope where we may lose the one thing that really holds it all together: faith in the U.S. system. If we lose this, we lose everything. The rest of the world largely keeps this faith because of its own stake in the stability of the system. However, many nations have begun to hedge against the U.S.
It would be impossible for any entity to run the way the U.S. has for so long. We have done the impossible for a long time in creating money and relying on our internal credibility. How long can we go till the levee breaks?
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