THE TRUTH ABOUT DEBT+


Debt_Ceiling

When an individual or small business has too much debt they either enter very hard financial times or declare bankruptcy and start all over from scratch. When a large business has too much debt they frequently undergo a Chapter 11 reorganization bankruptcy proceeding which forgives some debt and refinances other debt and permits them to function as an ongoing business enterprise though sometimes reduced in size.

When the government has too much debt this sometimes leads to hyperinflation and a collapse of the currency and usually a new currency is instituted with new and usually stronger financial rules are instituted which limit the supply of money pumped into the economy by said government.

Money is still not fleeing the United States government but it may once the debt to GDP ratio is to too high which can result in some dire consequences.

Today with money being an international commodity largely backed by the US dollar and with international competition there is no incentive to balance the budget and be a sound currency since this usually means a higher currency value and becoming less competitive in international trade. 

The international money supply and rules encourage governments to go into ever and ever larger debt which inflates the global currency and causes inflation since governments inflate their currencies vainly hoping that their debt obligations will decrease with time.

Monetary discipline is necessary for a long duration healthy world economy and current profligacy of most governments ensures that a day of reckoning will come with a global depression. Will there be a Chapter 11 reorganization for all the governments in the world and who will be in charge of this reorganization?

What the world desperately needs is a sound inflation free worldwide currency which maintains its value over time. Will the nations of the world agree to this? I strongly doubt it because there is not political unity with similar financial rules which is what is necessary for a worldwide currency to be instituted.

Austerity measures are frequently necessary to repay debt and unfortunately this is not a very popular political alternative for most democracies. A financial crisis is what is needed to stop profligate spending and there may be one just around the corner because free or counterfeit money has its limits in the real world.

 

If you liked this evergreen truth blog then read more of them, about 1300 so far, or read one or more of my evergreen truth books, especially COMMON SENSE, rays of truth in a human world filled with myths and deceptions.

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