Are you ready and willing to watch the Republic burn?
The debate in Washington over increasing the debt limit has come to a stand still, but the clock moves ever closer to an August 2nd dead line that will cause the United States federal government to either default on it’s creditors or it’s citizens. This will not be because of the refusal of Republicans to raise the debt ceiling, nor will it be because more income tax revenue is needed. Neither of these options will stop the inflation that is about to hit America… hard.
Ever since U.S. currency was taken off of the gold standard, the United States has enjoyed the privilege of being the world’s reserve currency holder. The U.S. dollar has routinely maintained it’s worth because the United States’ gross domestic product (GDP) output dwarfs the second leading economy in the world by, at least, 4 times. This is the result of businesses and corporations that produce goods in America that are bought in bulk and re-sold in other countries throughout the world using the U.S. dollar.
But things are changing…
On July 15th, 2011, the Standards and Poor’s credit rating agency presented the United States government with a clear and concise message:
“If an agreement is reached, but we do not believe that it likely will stabilize the U.S.’ debt dynamics, we, again all other things unchanged, would expect to lower the long-term ‘AAA’ rating, affirm the ‘A-1+’ short-term rating, and assign a negative outlook on the long-term rating,” said S&P.
Moody’s echoed the same sentiment in regards to the future of American credit worthiness.
Again, I ask. Are you ready and willing to watch the Republic burn?
Why not simply increase tax revenue? Credit rating agencies track things like your past credit and debit history, the timeliness of your payments, whether you are paying principle or interest only on loans, and how long you have maintained credit/debt to determine the risk of creditors loaning you money. New tax revenue will have no reflection on the way a credit rating agency perceives how the United States manages it’s finances.
This is not some kind of knee jerk reaction to the debate over the debt ceiling either. It is to put the United States government on notice that it’s credit worthiness is coming into question because of:
- The sheer dollar amount of mandatory expenditures are causing the U.S. government to borrow 40¢ on every dollar.
- The size of the U.S. debt is reaching a point where interest payments are in jeopardy.
- The length of time that the United States has maintained it’s ever increasing debt.
- The Federal Reserve’s quantitative easing program devalued the U.S. dollar on the world market.
- The lack of private business investment in the U.S. and the jobless rates reduced federal assets.
So again, I ask. Are you ready and willing to watch the Republic burn?
At this point, unless the United States can show credit rating agencies evidence of a change in fiscal policy that leads to solvency, America’s credit will be downgraded and Americans will suffer another round of extensive job losses as the price of everyday goods skyrocket in a snowball effect that will eventually lead to a national bankruptcy.
The United States national debt was accrued, in a bipartisan way, throughout many decades and will take the bipartisanship of the 112th session of Congress to address the issue. While this has turned into a political game of “taxes” vs “entitlement”, Moody’s and the S&P credit rating agencies are NOT playing and they WILL follow through with their warnings. To put things in perspective, if you pay $1 trillion dollars on a $14 trillion dollar debt, you have only paid 7% toward the loan (1 / 14 = 0.07). But this does not count interest, so if the interest rate on the loan is less than 7%, you can put some money toward the principle balance (the $14 trillion debt). If interest rates go to 7% or higher, then $1 trillion in spending cuts is not enough to stop an eventual default.
Are you ready to suffer the consequences of irresponsible lawmakers that are still pandering the tax and spend ideas of the past? Are you ready to suffer the consequences if new tax revenues fail to impress the credit rating agencies? Are you ready for the next wave of layoffs and price hikes if the U.S. dollar continues to plummet? Are you on for the social unrest and that a starving and homeless population can bring? Are you ready to see the example Greece has set to be played out in America?
So again, I ask YOU. Are you ready and willing to watch the Republic burn? If not, get on your phone and contact your representatives and tell them that YOU want to vote on the cut, cap, and balance amendment because without this legislation combined with cuts in the proper areas, the United States WILL suffer a financial meltdown.