The American Financial Collapse

by Sal on May 13, 2009

in Economy,Politics

Early yesterday I wrote about the current crisis in the U.S. Fiscal system in the areas of unemployment and our national debt, and how they are leading indicators towards a major financial collapse.  Today, there are several pieces of news that add credence to that theory.  First, the April retail sales and foreclosure numbers were released today, showing far worse performance than expected and leading to market declines.

Second, Social Security and Medicare are now dangerously close to being insolvent.  The trustees of Social Security are already predicting that expenditures will overtake revenues in 2016, and the phony Social Security “trust fund” will run out of theoretical money in 2037 (keeping in mind that the “trust fund” is simply IOUs from the government on money already spent).    The Democrats first ignored the Republican attempt to reform Social Security, then cheered the defeat of the GOP reform bill back in 2006, and now the problem is worse than previously predicted.  In fact, treasury data shows the problem even worse than the trustees are admitting, with Social Security in the red this year.

Finally, the bond rating for U.S. Treasuries may be downgraded this year unless the government starts to put its financial health in order.  Coupled with the lack of demand for U.S. treasuries, this will make the cost of any future debt far more expensive, leading to the case of the U.S. eventually spending the majority of its budget on debt servicing.

As the bad news continues to mount, we are on the verge of a collapse of epic proportions.  The Obama administration is pursuing exactly the wrong course at this time to stave off this crisis, and he along with the Democrats will be responsible for bringing this collapse to the forefront.  True, there were systemic problems that existed in our fiscal system before Obama came into office.  However, his actions since then have exacerbated all of the existing problems and brought them to the forefront now, at precisely the moment when we can least afford them.

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