"The last superpower" in the debt loop


Annual maintenance of U.S. debt is about $ 7.36 trillion. (Including interest payments and principal parts, which must be repaid each year.) This figure is confirmed by a dozen prominent economists and experts from government agencies and private institutions.

Most household debt is presented in the form of bonds and bank loans. Bonds are issued with different maturities, depending on the type of bond. For example, corporate bonds have a longer maturity than government bonds. Real revelation was the change in the maturity of the bonds. For example, in 1980, the average maturity of corporate bonds is 19.4 years.

But corporations pay lower amounts for interest on bonds with shorter maturities than long. And the company began to reduce the maturity of bonds issued by them. In 2001, the average maturity of corporate bonds was 6.6 years. It also leads to an increase in the principal amount and, therefore, the cost of its maintenance. For example, for a $ 1000 bond maturity 4.19 years means that the main duty of $ 1,000 must be paid for 19.4 years, in other words - 1/19.4 portion of the principal amount, or $ 52, to be paid annually. However, for a bond with a maturity of 6.6 years each year will be paid out of the principal amount is $ 152. That is, the value of the annual repayment of principal is increased almost threefold.

Even if the maturity of the bonds does not change, a simple increase in the number of bonds will result in a proportional increase in the amount of debt service. The more America is immersed in debt, the greater the cost of its maintenance. For twenty years it has grown by 6 times, and today only interest payments are more than $ 2.07 trillion. The high cost of service is amazing. The figure shows the ratio of the value of annual debt service to annual GDP (although GDP is not an accurate indicator of the economy, however it can be used for qualitative assessments).

In 1960, the cost of debt was 31% of GDP, for twenty years, she has risen to 46.3%, and in 2001 soared to 72.1% of GDP. Payment of the annual debt require remove three quarters of gross product that is physically impossible. Within the community, where we assume the economic growth and development of human life, such a paradox can not exist.

How can he be paid?

As U.S. to service the debt? Financiers on Wall Street for a long time taking steps to maximize the collection of payments on debt. This is destroying the real economy, on which people depend. This leads to the full robbery, similar to what the Nazis carried out in the conquered countries. But this does not gain the necessary $ 7.36 trillion. a year!

You can renew a large part of the payments through refinancing debt with new debt or other means. Part of the new government debt will be monetized: that is, will be money issue, so - a huge increase in money in circulation and inflation, as it was in Germany during the Weimar Republic. The annual growth of the debt and its service is so great, that the process can no longer continue. Any attempt to keep the amount of its units, which include the entire mass of debt, derivatives and other securities, creating a hyperinflationary front, like a shock wave, gaining momentum with each passing day. This front can destroy the whole world monetary system - certainly much more than the Weimar hyperinflation, lamenting monetary system of Germany in 1923.

To graph used data provided by US Federal Reserve Board of Governors, Office of Management and Budget, US Department of Commerce, Mortgage Bankers Association, Thompson Financial Service, EIR.