Debt Collapse: The Decline and Fall of the United States of America

Debt - Public Domain

There’s going to be a collapse in the United States of America. Again. This collapse around, there’s nothing the United States (US) government can do to ‘rescue’ the US economy because the Federal Reserve Bank’s interest rate is 0%. They cannot lower interest rates. The only thing the US government can do is print more money. Printing too much money causes hyper-inflation which in turn causes things worse than hyper-inflation.

In the 1900’s, there were stock market crashes, like in 1929 and 1987, because stocks were overpriced. The cause of the October 2008 financial collapse was different. The cause was too much debt. The Fed’s lending rate was 5.25% in 2008, so the Federal Reserve Bank (“Fed”) lowered their interest rate to 0% to encourage money lending to large banks to in turn encourage spending, hiring and re-lending. Simultaneous with ZIRP (i.e. the Fed’s Zero Interest Rate Policy), the US Treasury Department printed 4.5 trillion dollars in exchange for $4.5 trillion in US Treasury Bonds (IOU’s), so that there would be $4.5 trillion more money for large banks to borrow. This $4.5 trillion in money printing was called Quantitative Easing (QE) and occurred in 3 rounds, QE1, QE2 and QE3, from December 2008 to October 2014. The Fed Funds interest rate has been 0% since December 2008.

The US Federal government kicked the debt collapse can down the road with ZIRP & QE. The 7 years of plenty (plenty of no interest loans & plenty of freshly printed money) that began in December 2008 will end shortly.

Debt is money that has to be paid. The amount of money that the government in the USA has to pay is larger than the $18.5 trillion Federal government debt figure mentioned in the corporate media, just as the US Gross Domestic Product (GDP) is lower than the $16.98 trillion figure also cited in the corporate media.

The $18.5 trillion government debt figure often cited is $13.5 trillion in US Treasury Bonds (IOU’s) plus $5 trillion in money borrowed by the US Federal government from US Federal government trust funds like the Social Security trust fund. The 50 US states owe $0.7 trillion for state bonds they issued. The US municipal (e.g. cities, counties) bond market is $3.7 trillion. Fannie Mae and Freddie Mac, two government authorities, still owe $1.97 trillion, mostly for bad mortgages from years gone by. Other debts listed in the March 2015 Financial Accounts of the US report (www.federalreserve.gov/releases/z1/current/z1.pdf) include $6.23 trillion owed by government authorities (aka “government sponsored entities “) other than Fannie Mae and Freddie Mac, $1.04 trillion in loans taken out by the US Federal government (e.g. government credit card balances, short term loans) and $0.63 trillion in loans owed by government authorities (e.g. their credit card balances, short term loans). The total of these debts owed by government in the USA is $32.77 trillion, as of March 2015.

When US government people claim $18.5 trillion in government debt, they are neglecting to tell us about their loans, their government credit card balances, the debts of the 50 states, the debts of 3,033 US counties, thousands of towns and cities plus thousands of government authorities like the Tennessee Valley Authority and the New York City Metropolitan Transit Authority.

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