We are headed into one of the biggest financial catastrophes in generations. Although it began in the U.S., it has spread across the world. America’s debt has exploded and it appears as if no one cares. It’s almost as if no one thinks it’s real and that it won’t affect them. Our governmental use of debt is unsustainable. You may be saying to yourself, “So what!” In fact, many people think American debt is nowhere close to being an issue. However, economists believe America is facing a looming debt crisis.
I know most Americans think it is unfathomable that the government would become insolvent or not be able to pay debts. However, the 2018 CBO (Congressional Budget Office) projections said, “The economy grows relatively quickly this year (2018) and next (2019), and then more slowly in the following several years. The federal budget deficit rises substantially, boosting federal debt to nearly 100 percent of GDP by 2028.”
This is important data because it means there is still time to do something before it is too late. However, the United States is in a precarious fiscal position. Our accumulated debt is expected to roughly match the size of our economy. Most people know we have a looming debt crisis and can’t say they weren’t warned, yet most people ignore this fact. They just don’t believe it is possible that America will lose its fiscal dominance.
Many people have a “let’s cross that bridge when we get there” attitude. Well, we are at that bridge. The truth is, there are few options for fixing this situation. Ignoring it is simply self-sabotage. For years, economists have warned of major increases in future public-debt burdens. That future is on our doorstep.
There are sobering statistics that find other countries are in a debt crisis, as well. Ten years after the 2008 crash, consumer debt hasn’t really changed. Although there is education on the evils of debt by people like Dave Ramsey, the use of debt instruments is still in the trillions of dollars per year:
· Mortgages
· Auto loans
· Credit cards
· Student loans
· Personal loans
· Payday loans
These are the biggest culprits in the personal debt category. Americans are following the example of our government leaders. They continue on the debt cycle as if there is not a looming debt crisis.
In 2018, Americans paid interest fees to the tune of $104 billion. That is up 11% from the previous year. This is important to understand. There is so much debt in the world, that when the debt bubble bursts, you will need to know where the backlash will strike and what the damage will be. If you had to live without credit right now, how would your quality of life change? If you had to live within your means right now, could you do it?
The average American has about $38,000 in personal debt, excluding their home mortgage. The average American household has $4,830 saved. Experts say the true protection for financial emergencies means having at least $23,000 saved. According to Equities.com, each American taxpayer owes about $400,000 in U.S. national debt, PLUS their personal debt.
If asked, do you have your share of the federal debt saved to payback your share of the national debt? I’m certain most people reading this don’t think the government is really going to ask us for it. I’m certain that is what Iceland believed too before its financial crisis.
At one time, Icelandic locals enjoyed the highest standard of living in the world. Before their crisis, their three largest banks totaled more than 10 times the GDP. They pushed loans both at home and abroad. In a nation of 320,000 people, about 70,000 families had taken bank loans. They often indebted themselves up to their ears to treat themselves to a nice 4x4 or a spacious new home.
The United States investment bank, Lehman Brothers, filed for bankruptcy. Overnight, the global credit market froze and suddenly Iceland’s 3 biggest banks (Kaupthing, Landsbanki and Glitnir) had no access to refinancing its loans. The Icelandic currency lost more than half its value in just a few months and inflation rose to 18%. IceSave, the online branch of Landsbanki, (1 of the 3 largest banks) froze its savings accounts. A quarter of Icelanders lost their savings. The country saw its biggest wave of emigration.
So who will the looming debt crisis hurt most? The answer is everyone. Every American taxpayer will have $400,000 worth of just federal debt, and it is growing daily. When this bubble bursts everyone will feel it. Credit will no longer flow freely, and your way of life will be disrupted.
Most people don’t want to think about this. It can be seen as being a fear tactic, but you can look for yourself at our debt clock. You can educate yourself as to how unsustainable our current debt driven economy truly is. The American dream was never meant to be driven by the use of debt instruments. Our addiction to it is killing our freedom.
Vickie Helm is a bestselling author, business and asset strategist, and the CEO of Smart Group Firm. She has improved the success of more than a thousand companies and the lives of thousands of individuals throughout her career. You can learn more about Vickie at https://thesmartlifeclub.com or https://vickiehelm.com.