As a result of the overspending and overcommitting of this Ponzi scheme, the U.S. Government is essentially bankrupt. The only thing that can possibly save us is radical reform of our entitlements and Government spending OR cranking up the printing press.
It is my belief that the coming U.S. bankruptcy could create a situation even more serious than the Great Depression of the 1930’s. As I show in the U.S. "Real" GDP page of this website we currently have Total U.S. debt that is more than twice the level we had in 1929 PLUS we have unfunded liabilites that are also more than twice the level of debt that we had in 1929. Since we as a country have financial commitments that are more than 4X the level at the start of the Great Depression it could well be that the resulting downward spiral in the economy would be more severe than what we experienced in the 1930s.
During the Great Depression we did not have the overhang of Social Security, Medicare, Medicaid, government pensions, and similar items which now make up these unfunded liabilities. In fact it was the aftermath of Great Depression that started this litany of Government entitlements with the Social Security Act of 1935. I fully support the need and desirability of the Social Security and Medicare safety net but the sum of all our entitlements must be funded at a rate consistent with our ability to pay. But we must also pay for the primary purpose of the Federal Government as well: defense, security, safety, infrastructure, etc. but right now it is taking all of our revenues to pay for mandatory spending (entitlements and interest on debt) and we are borrowing or printing what we need to fund the spending for the Government’s basic purpose.
Author's Note: Since I wrote the September 30, 2012 white paper ("Coming U. S. Bankruptcy-2X the Great Depression?") I have determined that the 300% Total U.S. debt to GDP ratio that I used in this analysis occurred after GDP had dropped by 46% from the start of the Great Depression in 1929. The Total U.S. debt to GDP ratio at the start of the Depression was actually only 170%. Therefore my "2X the Great Depression?" in the title of this paper should have been "4X the Great Depression?". The details of this analysis can be found in the U.S. "Real" GDP page of this website.
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