Sovereign Debt, A Problem for You?

by Wes Bridel on July 8, 2010

in Stewardship

Sovereign Debt is not only a problem in the US but in much of the “developed world”.  We’ve been looking at problems facing the US dollar and today we’ll examine the competition and contagion that this sovereign debt creates.

Higher Worldwide Debt Means Higher Interest Rates

We’ve had historically low interest rates in recent years, but these seasons always change.  As more and more debt is being issued by governments around the world, the available capital to be lent is used up.  There is only so much money in the world.  Because the supply and demand characteristics of the market are changing, those with capital to lend will be more and more able to demand higher interest rates to lend money.  Also, the worldwide sovereign debt crises is making lenders nervous.  The more lenders see countries unable to pay their debts, the more they will turn a critical eye toward the US and examine the credibility of its promises.  As we’ve stated before, the US government has the biggest debt in the world and has annual deficits just as bad as any country making news.

As interest rates begin to rise, the cost of the huge debt and deficits that the US Government holds will start to be a tremendous burden on the country’s budget.  Our government currently brings in a little over $1Trillion in tax revenue each year.  If the interest rate on the $14T debt next year were to increase to 8% (not an unheard of number), the entire revenue of our country would be going towards interest on our debt without any left over for the many government programs.  And they would be adding new debt on top of this each year according to their plan.  This could very quickly spiral out of control.

The Sovereign Debt Dominoes

As one country after another fails to raise the money that they need to operate at anywhere near sustainable interest rates, the clock ticks backwards towards the US implosion.  Or at least this is what we believe.  We could be wrong, and the rest of the world could decide that the US Dollar is the only safe haven and continue to support our debt habit.

We believe a massive US Dollar devaluation (either moderate or severe hyperinflation) is coming for two reasons.  First, we believe the issues above point to this reality.  Also, because we believe the Lord has said that He is removing the Sovereign Authority of the United States in the world.  (See The Coming Storm Video for this explanation)  It seems to us that the US Dollar represents that authority today.  Therefore, it makes sense to us that even though it is unthinkable that this would happen, it most probably will happen.  Stories like this have repeated themselves over and over again in history, even if it only happens once in the lives of one generation.

Next we’ll look at how these dominoes have started to fall and how they will continue to do so until your life can’t ignore the problem.

This is Part 7 of the series Hyperinflation and the Dollar. To continue with this series, click on Pt 8. To use this as a growth tool to better understand your own calling, please read Pt 1, Pt 2, Pt 3, Pt 4, Pt 5 and Pt 6.

Photo credit: Kath Walker

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