Dollar collapse inevitable as CBO warns of unsustainable debt levels

The United States national debt has taken a backseat over the past couple of months due to the potential war with Syria. Over the next few weeks, though, it is expected that the federal debt and budget deficit will capture headlines again because of the looming debt ceiling fight between President Obama and Republican lawmakers.

At the present time, the U.S. faces a $17 trillion national debt and a near $1 trillion budget deficit. The Congressional Budget Office (CBO) published a report Tuesday that warned the U.S. public debt could account for more than 100 percent of the country’s economic output within the next 25 years unless action is taken.

Despite modest revenue growth and a tax increase in January which have reduced near-term budget deficits, the CBO argues that this is not enough, especially due to the rising costs of Social Security and healthcare for seniors. The agency is now calling for the government to slash $2 trillion in spending over the next 10 years.

“Unless substantial changes are made to the major health care programs and Social Security programs will absorb a much larger share of the economy’s total output in the future than they have in the past,” the report stated.

What should be troubling most Americans is the issue of rising interest rates. It is projected that the U.S. will make $765 billion in annual interest debt payments by 2023, but that is only if interest rates remain the same as they are today. This means that the debt will continue to balloon and this could affect the pocketbooks of most households through the means of taxes and inflation.

In addition, the U.S. owes foreign governments trillions of dollars, particularly China and Japan. Seeing as how it won’t pay the money back, it only has two options: admit insolvency or devalue the debt by half through inflating the money supply. In other words, a complete collapse in the U.S. dollar is inevitable.

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Comments

  1. If the Dollar collapses, nowhere will be unaffected. Bad days ahead, I fear, and I’m in Australia, supposedly untroubled by the GFC. With economic strife, comes recession, depression and war, then nowhere will be safe. Not even Australia.

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