Will America Go Bankrupt? We Already Are

The days of American economic hegemony are numbered. We are a nation living on borrowed time, thanks to borrowed money.

by Jerry Robinson

America’s debt limit was reached on May 17. Since then, Americans have been forced to listen to our dysfunctional, and completely out-of-touch, political leaders wrangle over the economic monstrosity of their own making.

America’s derelict corporate-owned media outlets make good money exploiting the neverending blame game that plagues Washington.

It’s the blue team vs. the red team. Who’s your team?

You can have them both because, to me, they have never looked more like two sides of the same coin.

And now we are being told by those who hold the nation’s purse strings at the Treasury Department, that unless America’s debt dilemma is solved no later than October 17, the nation will officially enter a state of default upon its debt. No doubt, this would cause the U.S. economy to descend into a state of chaos.

According to U.S. Treasury Secretary Jack Lew:

“The United States has never defaulted on its obligations, and the U.S. dollar and Treasury securities are at the center of the international financial system… A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.”

Lew isn’t the only key figure in America’s budget battle that has been ramping up his media appearances. On Sunday, House Speaker John Boehner made such an appearance to defend the official GOP position on ABC’s This Week with George Stephanopoulos. You can watch the interview below and read the transcript here.

While Boehner publicly gripes about rampant government overspending, he and his allies have been enabling America’s fiscal crisis for years. They approved every debt ceiling increase throughout the last decade under President Bush Jr. When Bush Jr. spent trillions on war, enacted the gargantuan Medicare Prescription Drug benefit, and doubled the national debt from $5 trillion to $10 trillion, the Republicans were silent.

In 2008, Republicans told American voters that the fundamentals of the nation’s economy were “strong.”

And in the very month that the U.S. stock market crashed, in September 2008, Republican apologists, like television entertainer Sean Hannity, profusely denied that there was anything wrong with the economy.

However, all of that changed in 2009 when President Barack Obama entered office.

The sudden “conversion” to fiscal sanity by the GOP is welcome, but highly suspect considering that both parties have spent more money than the government has taken in for 55 of the last 60 years.

In a show of complete hypocrisy, the Republican controlled House voted over the weekend to provide back pay to furloughed federal workers (deemed “non-essential”) once the partial government shutdown ends. That’s right, America’s “fiscal conservative” heroes in Washington want to use your tax dollars to pay non-essential federal workers while they sit at home during the shutdown.

Why? For one of two reasons. Either 1) the GOP doesn’t want to lose key votes in the 2014 elections from disgruntled federal workers, or 2) they know that if Federal workers go one week without a paycheck, there will be rioting in the streets.

Either way, you’ve gotta love those “fiscal conservatives.”

But, all this begs the question: With a national debt of $17 trillion and $100+ trillion in unfunded liabilities, should America’s overburdened taxpayers be forced to finance the federal government’s desire for hundreds of thousands of “non-essential” workers?

Apparently, asking such questions is below the American taxpayer’s pay-grade. You and I just pay the bills. (Click here to see how the Federal government really works)

Will America Go Bankrupt?

These are truly historic times.

So, too, the stress levels in our culture have reached the boiling point. This can be seen by the growth of America’s pharmaceutical-industrial complex, which has succeeded in drugging a large portion of the nation, as have their peers across Europe.

Once again, the spirit of revolution seems to bubbling forth in the United States.

With Congressional approval ratings at all time lows, Americans are clearly unhappy with Washington.

So, what if October 17th arrives with no debt ceiling deal? Put simply, America will officially be delinquent on its debts for the first time in its history. In government terms, its called a default.

Since America has never experienced a default, we have no precedent on what the initial impact would look like. (Some experts have given their predictions of what a default would look like here.) But given the economic uncertainty facing nations and corporations around the globe, a default would likely cause a run on the U.S. dollar. This would lead to skyrocketing interest rates, followed by a dramatic economic contraction.

Higher interest rates will mean higher mortgage rates, higher minimum payments on credit cards, along with any other debts with variable interest rates.

Our national credit rating, which was lowered by S&P from a stellar AAA to AA+ amid Washington’s 2011 debt ceiling debacle, would be in jeopardy of being reduced again. The stock market didn’t like S&P’s 2011 decision and reacted by falling more than 600 points in one trading session.

If U.S. stocks get hit, as they inevitably will, this will send 401(k) and IRA values plummeting. As retirement accounts evaporate, Americans will tighten the purse strings leading to a dramatic slow down in consumption.

Social security payments would stop, as would disability payments and a whole host of other government benefits.

And what about other countries? How would they react?

The Bank of Japan (Japan’s version of the “Federal Reserve”) has already warned that if Washington fails to solve its internal debt issues it would cause a “severe” blow to the global financial markets. The BOJ has stated it would likely raise its current stimulus levels to inconceivably high levels in the event of a U.S. default.

And other U.S. creditors, including nations like China, would have yet another reason to reconsider their loans to a bankrupt U.S. government.

But, even if America avoids the worst case scenario, its reputation has been soiled. Much of the world is coming to the realization that America is, indeed, nothing more than an economic house of cards. In a nation of just over 300 million citizens, the Federal government sends out 80 million checks every month. This number is only set to increase as each day, 10,000 Americans are reaching retirement age, and all are eligible for government benefits.

The days of American economic hegemony are numbered. We are a nation living on borrowed time, thanks to borrowed money.

It’s time for an overhaul of Washington. But don’t expect that overhaul to come from the Republicans or the Democrats. They are both part of the problem, not the solution.

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Scripture of the Day

“A false balance is an abomination to the LORD, but a just weight is His delight.”
Proverbs 11:1

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