US Dollar – Healthy?
On Friday, we showed you the history of the Dollar. So let’s now look at the U.S. Dollar with eyes wide open and see if this is a fiat currency that can buck the trend of following every other fiat currency into the wastebasket of history…
There are a couple really important things to look at:
- Do we export more than we import, or import more than we export? This is important because if more people want to buy our goods than we buy from them, they will need our Dollars to do so and this keeps the Dollar strong.
- Does our government spend less money than it brings in (surplus) or does it spend more money than it brings in (deficit)? This tells us whether our debt is growing or shrinking.
The US Debt
You probably realize that our country has been consuming more imports than we have produced exports for a long time. This means that people around the world don’t have a strong reason to hold our Dollars. You also probably know that we have run a deficit for almost all of the last several decades and that our debt has become monstrous. Our stated debt is now OVER 13 Trillion Dollars. That does not include our promises to institutions like Fannie Mae & the FDIC which are broke. Those probably add another $2 Trillion. And that does not include unfunded liabilities (the promises we’ve made to Americans by way of things like Social Security and Medicare).
The United States Government does not display its financial statements accurately the way a corporation or a family has to. They have their regular financial statements which show the on balance sheet assets and liabilities. And then they have their off balance sheet liabilities. These are promises made to fund expenses in the future that are not funded (such as Social Security and Medicare.) A few decades ago, the major accounting firms of America noticed that the government was breaking the basic rules of GAAP (Generally Accepted Accounting Principles) accounting.
The government then agreed to publish their books in this manner (with very little fanfare of course). The latest budget deficit accounting for the future payment of promised benefits is over $5 Trillion a year! This is far greater than the $1.5 Trillion that we already cannot afford.
You probably know that we’ve been saying for years that someday Social Security was going to be a big problem for us, right? Did you know 2010 was the first year that Social Security pays out more than is paid into it? Up till now it has been a slush fund for Congress. Now it is an expense that is going to grow monstrous and be impossible to pay.
If you add all this real total debt up, the US Government owes over $60 Trillion. If we divide $60T by 300M people in America, that is $200,000 per person. If you’re a family of four, that means your family has to pay in $800,000 to pay off our debt. Can you afford that? No, and neither can any of the others.
If the United States Government confiscated every asset of every American, it would not be nearly enough to pay off the debts that it has accumulated! And we keep adding to our debt by over a Trillion Dollars each year and plan to continue this far into the future!
This might be okay if people would keep lending us the money, but the world has said it’s had enough! The two countries that lend us the most money (China & Japan) have both stopped lending us any new money. One Chinese official said, “There is not enough money in all the world to buy the amount of debt that America wants to borrow!”
We’ll continue on with more factors affecting the health of the Dollar tomorrow.
Photo credit: andrew.figueroa23