As it stands, the U.S. national debt has skyrocketed to above $17.4 trillion. With this year’s budget deficit expected to be around $500 billion, we’ll be at a national debt of $18.0 trillion in no time. In fact, a $30.0-trillion national debt is not out of the question by the end of the next decade.
Any way you look at these very big numbers, it is the American taxpayer who is on the hook for the years the government mismanaged finances.
If we look at the Greek example, that country’s government, too, rigorously spent money, registering massive budget deficits year after year. This caused Greece’s national debt to get to a point where it was unable to make payments on what it borrowed. Those who bailed out the Greek government asked for changes. This resulted in the lowering of pension payments to Greek citizens and austerity measures across the board.
The U.S. has more national debt than any other country in the global economy. At some point—and I don’t know when, as the can just keeps getting kicked down the road—either taxes will need to go up or austerity measures will need to be introduced to deal with the debt mess.
And since we now have so many people in this country dependent on government handouts and support, I think we’ll see higher taxes before we see austerity in the U.S.
Consider this: New York City’s mayor, Bill de Blasio, is considering a “mansion tax.” This is essentially an extra tax on homes valued at more than $1.0 million. He wants the proceeds from the tax to go towards adding 200,000 affordable housing units. This is despite the fact the state already has a similar tax on these properties. (Source: New York Post, May 1, 2014.)
To deal with its national debt problem, the government of Japan introduced a sales tax on consumption. And that sales tax has risen from five percent to eight percent and will hit 10% by 2015. According to the government, the tax was raised due to increasing social and welfare costs. (Source: BBC News, April 1, 2014.)
Small countries are dealing with their national debt by simply taking money from the bank accounts of their citizens. In Cyprus, individuals who had savings above a certain amount had their money confiscated for national debt reduction. In Poland, private pension assets were taken away by the government to reduce the national debt burden.
Each day, as the U.S. government continues to spend and register a budget deficit without remorse, our increasing national debt brings our country closer to insolvency.
It’s very likely that those who have lent us money will one day say, “We need our money back.” And if they do want their money back, that means the Fed will need to get back into the money printing business big-time. Of course, this will be terrible for the greenback and good for gold. Have patience, dear reader; if you are making this bet, it will happen. It’s just a matter of time.