It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

TraderZones · Feb 5, 2010

Quote from Tauvros:

A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

Well, for one very simple reason.

That is not the way our system works.

You see, for more dollars to enter the system, the U.S. government has to go into more debt.

The U.S. government does not issue U.S. currency - the Federal Reserve does.

The U.S. government cannot simply go out and create new money whenever it wants under our current system.

Instead, it must get it from the Federal Reserve.

So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).

So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.

Are you starting to get the picture?

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.

So how much money actually exists in the United States today?

Well, there are several ways to measure this.

The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.

The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.

The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.

The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.

The truth is that the U.S. government is in much bigger financial trouble than we have been led to believe.

For example, according to the report (which remember is an official U.S. government report) the real U.S. budget deficit for 2008 was not 455 billion dollars. It was actually 5.1 trillion dollars.

So why the difference?

The CBO's 455 billion figure is based on cash accounting, while the 5.1 trillion figure in the 2008 Financial Report of the United States Government is based on GAAP accounting. GAAP accounting is what is used by all the major firms on Wall Street and it is regarded as a much more accurate reflection of financial reality.

So needless to say, the United States is in a financial mess of unprecedented magnitude.

So what should we do? Does anyone have any suggestions?

http://theeconomiccollapseblog.com/...y-impossible-to-pay-off-the-u-s-national-debt
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This post seems to overlook inflation. How much would debt from 1915 be worth? What if there was hyperinflation?

slapshot · Feb 6, 2010

Quote from dewton:

the solution is so simple and mind-numbingly obvious... and i don't know why more people don't talk about it:

get rid of the Federal Reserve = get rid of our debt.

and it can be done in less than an hour.

...or force them to forgive all our debt.
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Sure, we just treat them like the GM bondholders were treated!

slapshot · Feb 6, 2010

Quote from DrPepper:

Great article and website! Thanks.

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Uhhm, you didn't notice that this web page has a pretty obvious scare agenda to peddle gold and seeds?

ken__0 · Feb 6, 2010

No worrys they will just collapse it and start another then repeat then global currency collapsing that is a feat in and of itself ,,,,

fkbsuhites · Feb 6, 2010

it's called the neocon clusterfuck

we should be shooting these maggots instead of letting them mouth off in congressional and local elections

Quote from Tauvros:

So needless to say, the United States is in a financial mess of unprecedented magnitude.

So what should we do? Does anyone have any suggestions?

http://theeconomiccollapseblog.com/...y-impossible-to-pay-off-the-u-s-national-debt
More...

bearice · Feb 6, 2010

Quote from Tauvros:

It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
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Quote from peilthetraveler:

Let me correct your statement. Its mathematically impossible to pay off the US national debt...in our lifetime. All we have to do is have a 1% surplus in the budget every year that can go to paying off our debt and in about 80 years or so, it could be paid off.
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U.S. Debt Totals $133 Trillion, China Prime Beneficiary of Fed Money Printing

Even if the government could somehow pay off that debt at the rate of, say, $100 MILLION PER DAY, EVERY DAY STARTING RIGHT NOW, IT WOULD TAKE 3,663 YEARS BEFORE THE TOTAL GOVERNMENT DEBTS AND OBLIGATIONS ARE PAID OFF.

Even if Washington were to pay off $1 BILLION per day, it would still take about 366 years before theyâre paid off.

The U.S. Federal deficit at $1.6 trillion

The officially recognized national debt at $12.1 trillion

$3.5 trillion owed to foreign investors

Unfunded national obligations of $106.5 trillion

Another $9 trillion in cumulative deficits over the next 10 years

At least another trillion dollars needed for health care reform!

Grand total: $133.7 TRILLION IN DEBT!

http://www.marketoracle.co.uk/Article15977.html

guru-trading · Feb 6, 2010

Rather than being so concerned with the fact that money is being borrowed, people should be more concerned with what it is being spent on.
Of course this means that classroom sizes will have to increase, wars will have to stop and individuals will have to stop spending like there is no tomorrow. Because guess what, America did and now it is tomorrow.

The current economic situation has all the hallmarks of an empire coming to an end. Although very prematurely in this case.

thriftybob · Feb 6, 2010

A large portion of the debt owed is owed to the Social Security and Medicare funds. If the debt were repudiated, almost all retirees would immediately be penniless and unable to buy medical care, medicines, food, shelter or utilities.

Martinghoul · Feb 6, 2010

Quote from wavel:

I disagree, I believe that for the most part people are idiots, due to a broad variety of contributory factors.

I'm sure if you could manage just one more time, many people would like to read what you believe the function of the federal reserve to be, if it isn't the issue of money?

Also, how do you suggest US taxpayers forgive themselves of "debt"?
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When did I ever say that the function of the Federal Reserve isn't the issue of money? If you want to read more about what the Fed does, you will find it on the very first page of this document: http://www.federalreserve.gov/pf/pdf/pf_1.pdf

Likewise, when did I ever suggest that US taxpayers forgive themselves of their debts? After all, decisions that led to the current state of affairs were made by the democratically elected United States government, on behalf of its citizens. Who else but the US taxpayers should be held responsible? No matter how you slice it, the future standard of living in the US has to fall to pay for past excesses. It can be done the easier way (austerity, wage deflation, Chinese de-pegging) or the hard way (sovereign default/restructuring, resulting wealth destruction, increased future borrowing costs).

One thing should be abundantly obvious to people who are not idiots. There's no free lunch. Abolishing the Fed or the US Treasury or the commercial banks or Congress or whatever isn't gonna change the fact that the American taxpayer ultimately has to pay the price.

wavel · Feb 6, 2010

Quote from unretired:

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Thanks, however I already have a thoroughly comprehensive understanding upon this particular topic, although for those that are not aware of the structure of "The system", I'm sure they will find the video reasonably interesting.

I'm merely intrigued as to what percentage of US patriots are still under the belief that "their" Dollar is here to stay for the complete duration that we collectively experience organised society.

It is blatantly obvious that the "mismanagements" of specific global economies are geared towards the destruction of sovereignties underpinned by the philosopical tenet that is the ONE WORLD CURRENCY, or at the very least a complete reduction down to between 3 or 4 global currencies.

Why do you think Britain has created so much debt for herself? It's because the underlying agenda is to eradicate the Pound and exchange it for the Euro and precisely the same event is occuring in the US, and in my humble opinion it is no coincidence that the USD/CAD is alternating around parity at this particular time.

Anybody care to suggest the solution to "US debt" considering you already have the textbook reference occuring in Europe?