It is really unfortunate that when it comes to elections, we have to choose between welfare and warfare. Most people who have the slightest knowledge of economics and politics, now, accept that both of these are ruining our economy and our country, as a whole. We know from history that most great civilizations and empires got destroyed by wars and financial devastation caused by those wars. Most recent example is Soviet Union and its fall after Afghanistan war. Roman, Greece, Persian, Spanish, British and Muslim empires have wars and losses incurred in wars as the major cause of their downfall. Every single one of those thought that they were too big, too powerful, too rich, too resourceful, too knowledgeable and too civilized for that to happen to those empires.
History of our federal debt starts with first Treasury Secretary Alexander Hamilton paying off the debts of Revolutionary War with federal debt in 1790s. American economy was very new and that debt turned out to be about 35% of GDP. This debt was paid off in 1830 when Civil War started and bet climbed back to about 33% of GDP. This debt got paid off by the beginning of twentieth century. At the beginning of twentieth century the net combined local and federal debt was about 20% of GDP. World War one took it up to 32% of GDP.
By mid 1920s federal debt was back down to about 20% of GDP. Great depression brought the net local, state and federal debt up to 70% of GDP. Starting at 15% of GDP in 1941 federal debt went up to 119% of GDP at the end of World War Two in 1945. The biggest increases that we see in the debt burden are related to wars. Another spike came with post 9/11 events and wars. While major depression caused a relatively smaller increase. But, the 2008 recession caused a major rise.
The example the debt due to World War II was about 24% of GDP. On the other hand, the increase in debt in 2009, only, was about 9.8% of GDP. This is only second time in our history that our debt level has passed the over 100% of GDP. First time was after World War II. Net interest burden, right now, is relatively low. It is because the government sponsored enterprise like Fannie Mae and Freddie mac are included in official numbers and Quantitative Easing is keeping interest rates artificially low. Fed is buying government backed securities to keep the interest rates low. It increases the demand for U.S. based securities artificially and keeps interest rates low.
But this cannot go on forever. Fed balance sheet cannot keep extending forever. After all Federal Reserve’s debt is federal government debt and whatever debt Fed buys is literally passed on from one agency to another like a Ponzi scheme. It is like you are paying your mortgage with a credit card. No bank will allow you to do so. It will be illegal. But, Fed and federal government are doing this in trillions and somehow it is still legal. At some point Fed will have to end Quantitative Easing or it will become impossible to continue it for financial reasons.
At that point the interest rates will take a sharp hike and people will forget Jimmy Carter. With over 14 trillion dollar debt already at hand and annual federal budget deficit already over a trillion dollar, federal government will have to sell the securities at very high interest rates. This is exactly what happened in troubled European economies. Their debt levels reached the levels where they has to sell government backed securities at the rates that were not affordable, and economies crashed.
The problem here is that the candidate Democratic Party and major media outlets are already crowning for 2016 elections has been directly involved in pretty much every single one of these serious crises. Hillary Clinton voted for Iraq war. She was not talking to Bill Clinton for eight months after Monica Lewinsky scandal. Finally, broke her silence with a call to Bill Clinton, demanding the bombing of Serbia. She was Secretary of State when we attacked Libya and she over saw the ever intensifying drone attacks on Pakistan. After enormous success with “first black president”, they are now all set to sell “first woman president”.
They targeted black and minority voters in 2008 and 2012 and now they are planning to target the over 50% of our population, women. As far as my conversations with women are concerned many of them seemed to be inclined to fall for this deception, once again. This trend is so troubling that some in Republican Party are suggesting the only way to win next election is to come up with similar and equally destructive slogan like “first Hispanic American president” or “first Indian American president”. Unbelievable! I mean, in the middle of all this crisis, unemployment, expensive and unending wars, welfare programs crashing, our so called major political parties have nothing to offer except the ethnic and dividing slogans.
Selling the another corporate crook to American people, in the disguise of first woman president, American people’s especially American women’s intention to buy it, could become an unaffordable disaster in already ailing and troubled economy. What do you expect from a person who has been involved in almost every foreign policy disaster for over two decades? Someone who still wants to keep increasing the welfare entitlements? Where will she take out over a trillion dollars annual deficit and over 14 trillion dollars annual federal budget deficit?
Truth of the matter is that these problems are not going anywhere, as long as our political system is dominated by two extremely corrupt political parties, and the only source of information for most people is corporate owned and controlled TV. These problems will not be solved until a large proportion of U.S. population will broaden its sources of information and news. Avery good example of this is the nation building we did in Iraq. After sacrificing thousands of U.S. soldiers, spending hundreds of billions of dollars and killing about a million civilians, Obama said that we were leaving Iraq in a very stable condition. Most of the weapons we provided to Iraqi military end up in the hands of extremists and there is an all-out assault on Baghdad is going on right now. Iraqi government is quickly losing to extremist forces while we are still busy in building Afghanistan, Libya, Egypt, Tunisia and other countries. The worst part is that this news is totally blacked out in mainstream media.
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