In the last column we discussed how the national debt affects each of us. The US National Debt currently approaches $40,000 per capita and is rapidly rising.

This is a staggering amount and if applied in personal terms in would bury each of us for years to come. If each of us were to borrow $40,000 at 3.0% and amortize it over 30 years, the monthly payment would exceed $143/month for each US citizen living today. This does not account for future growth of the National Debt and most troubling, it does not account for a higher interest rate. With each uptick in interest the monthly payment will need to be hiked or the term extended, you know the routine.

It is beyond words why the US Government continues to expand spending and borrowing without preparing for the inevitability of rising interest rates. Another critical consideration is that most of the debt is funded by short-term loans from foreign nations who are also dealing with an international recession.

WHY IS NO ONE TALKING ABOUT THIS?

First, the financial and political powers don’t want to awaken the citizenry or chance a panic;

Secondly, there is no simple solution; all of the alternatives will breed discontent. They can’t raise taxes high enough and they won’t cut spending;

Thirdly, if they keep passing it along they don’t have to deal with it, their power and worth is protected and the mess can be left to future generations long after they are gone.

HOW IS THE SUBJECT DEFLECTED? DON’T COMPARE DEBT-TO-INCOME

Measuring the National Debt and Deficit to government revenue is an argument they can’t win. There simply is not enough income to cover spending and debt service.

TO OBSCURE THE ISSUE, COMPARE THE NATIONAL DEBT TO GDP

To understand this we have to recognize that the National Debt and Gross Domestic Produce have little direct relationship to each other.

The issues surrounding the national debt are obscured by the practice of comparing national debt to gross domestic product. This has been the traditional barometer used to evaluate the economic health of individual nations. For example a ratio less than 100% of national debt to GDP is usually considered manageable; i.e. China at 18.20%, US near 90.00% and UK 68.50%. Conversely, a ratio above 100% is considered unmanageable; i.e. Greece 113.40% or Japan whose national debt equals 192.1% of its GDP.

This is not a very reassuring measure, considering the economic condition of either the UK or Greece. But this is how Washington, Academia and Wall Street are addressing the US economy