The Mounting US National Debt and its Consequences

Few months ago, we all learnt what happens when an economy (government, to be precise) spends more than its means. The recent increase in debt level would result in inflation, lower standard of living, currency devaluation, and so on. This is certainly not a good sign for an economy.

Although our President, Barack Obama, is taking several measures to smoothen the economic conditions, US national debt is mounting incessantly. Annual deficit increases due to several years of faulty management, and it certainly cannot be rectified in a short period.

When the debt level of a country exceeds its GDP (Gross Domestic Product), the debt is simply too high. Greece is going through such similar situation. The debt owed by the nation is much more than what it earns. Besides, when such crisis occurs, the nation cannot boost the economy by printing more currency or borrow funds by issuing bonds. They only way to recover from such debt is by cutting down spending.

People in such countries don’t really notice the borrowings. However, since the cut-down affects their day-today life, they would definitely be aware about the consequences. US national debt is still mounting, and if it increases at a similar pace, it can be 200% of your GDP in a year or two.

Government, then, wouldn’t be able to keep prices down. Interest rates would increase considerably, which would result in a steady fall in bond rates. Hence, currency value would depreciate and investments would go down. And this era would certainly be here for a long time.

You don’t really need experts to talk about the current economic conditions and what the consequences would be. It has all happened in the past; it’s a historical pattern. Although the US Fed government is striving hard keep the inflation rate down by introducing several long term spending programs, it would eradicate the problem. These measures can just delay the inevitable.

As a consumer, things seem to be better than yesterday. The stock market is rising gradually, and unemployment rate is diminishing, but at a slower rate. Optimism is the only that I can suggest people to have as of now.