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We’re Beyond Deficit Reduction

Posted by David A. Peterson on 8. August 2014 in Economics |

There is a lot going on, externally there is Ebola, ISIS, Stranded Refugees on an Iraqi Mountain, Syrian Civil War, The Israel & Hamas War, Afghanistan, and we can’t forget about the Nigerian girls that have been kidnapped.

Internally there’s the IRS Scandal, Fast & Furious Scandal, Children Crossing the Southern Border, Obamacare, the Benghazi Scandal, the CIA Spying on the US Senate.

Locally School is Back in Session, and we have Traffic, Work, etc..

I get it – there is a lot going on but if there is one topic that has somehow dropped off our radar – it’s

DEBT REDUCTION!

 

Notice that I didn’t say deficit reduction, as a country we are way, way beyond that discussion.

Look at the chart below. This is the rate of growth of our total US debt.

Chart Total US Debt

Source: Treasury Direct

I’m a business major and it appears to me that the total US debt is rising at an increasing rate. I’m pretty sure we could apply the exponential function to this chart where “x” = date and “Y” = total debt. Using this function we will see that debt is increasing faster and faster as we move forward in time.

Chart – View of the Exponential Function

Exponetial Function - Commons. WikimediaSource Wikimedia Commons

Now before we all start screaming about who’s fault it is let me point to the graph below, even in the recent best years for “deficit reduction” under Bill Clinton’s Presidency the total debt went way up.

It’s worth mentioning, I believe we even had a revenue surplus during his Presidency yet the debt still went way up.

I’m not picking on any President, I’m not promoting any politician, I’m just saying we are very close to the Uh-Oh point. Once the tangent of the soon to occur exponential slope is hit I don’t believe there will be a way to turn back.

Uh-Oh Point Debt Rising Exponentially

Source: Me, hand drawn, not scientific, not to scale!

We hear politicians talking about putting the national debt on the backs of our children but if we hit the Uh-Oh Point the only way out of the debt will be A: Default or B: Inflate our way out.

Now being a 53 year old male getting close to the retirement age, neither of those two options are great but “B,” B will absolutely kill the Baby Boom generation. The hyper inflation it will take to get the debt in line (i.e.: back to a 1950’s, 60’s, and 70’s trend line ) will hit smack in the middle of the Baby Boom Retirement.

Stop thinking about placing the debt on the backs of our children’s, children and start thinking about old people on the street begging for bread – IN ABOUT 20 SHORT YEARS!

As a small business owner, an arm chair economist, I’m sure the politicians will shrug this away with “debt as a percentage of GDP,” or even funnier President Obama telling us how fast the deficit has declined during his watch.

The American Public needs to be aware that the Uh-Oh Point is very close, I’m not sure how the graph can be reversed or if it can even slow down at this point. The graph is clear… Debt is rising and in a few years it will be rising at an exponential rate.

The time to ask our politicians what their DEFICIT REDUCTION PLAN is over, way over; today it’s time to demand they lay out their DEBT REDUCTION PLAN!

 (Not being a conspiracy theorist but is it possible Quantitative Easing was created to cause the hyper-inflation? )

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