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Article published March 5, 2013
National debt a danger
George PikoulasCenter Township
How large is a $16 trillion national debt? The simple answer is that we don’t know. Many say we could never default on our national debt. But Republicans and Democrats are using the “default card” as leverage to get what they want. Republicans want to freeze the debt level, and Democrats want to raise the debt ceiling. Both have threatened to let the debt default if they don’t get their way. Robert Shapiro, of the Daily Beast, states, “Trillions of dollars in U.S. Treasury securities are held by financial institutions here and abroad, so the default would quickly freeze capital markets around the world. Private lending to businesses and households here and in many other nations would halt. The reserves held by many of the world’s central banks also include trillions of dollars in U.S. Treasuries, so a U.S. default also could quickly bring on a global financial crisis that would dwarf the chaos of late-2008.” Countries like Greece, Portugal and Spain are at the verge of involuntary default. According to economists, when a nation’s debt equals or surpasses its gross domestic product (economic output), it usually means that a downward economic spiral is imminent. Like Greece, Spain’s economy is on the brink of imploding. The Associated Press reports: “The Spanish government debt rose to 75.9 percent of its economy in the second quarter of 2012, according to figures published by the Bank of Spain. Over 350,000 Spaniards have received eviction notices since the housing bubble burst five years ago. In Spain, tenants who are evicted are still liable for huge payments. Banks have the authority to garnish wages if necessary.” The United States has the largest debt of any country in the world. Could our government crumble to levels that would require radical measures to keep it from going bankrupt? As of July, $5.3 trillion, or approximately 48 percent of the $16 trillion debt held by the public, was owned by foreign investors, the largest of which were China and Japan, at just over $1.1 trillion each. What if a global crisis necessitates foreign creditors to suddenly demand payment for total balance due? Think about what the creditors would demand if we couldn’t pay that debt in American dollars. What assets would we have that could be used to pay that debt? Gold reserves? Print more money? So much would be printed that it would render the dollar worthless. How about military arms? What about raising taxes? Sorry, still not close. How would the Chinese react if we told them we couldn’t pay? China continues to build silent-running nuclear attack submarines and continues to increase its nuclear first-strike capabilities. Could China be preparing for a global economic crisis?