Today I am going to talk about the most happening thing we are facing now….our national debts. If we closely look over the past reports, we will see that our national debt has exploded in recent years. In my article, we’ll discuss about the reasons for which the debt level has increased drastically. We will also learn what will be the future of this situation. So, let us begin with some perspective.
The biggest debt obligation in the world is owned by America . There were some elements which enhanced the debt amount greatly. The U.S. debt-to-GDP ratio is 104.5% which is much lower than compared with Japan ( 226.1%). It might be considered modest perhaps, but if you can see the big picture, our debt index is rapidly going higher, and approaching to $18 trillion scale.
Do we have that capability to bear a debt burden worth of $30 or $40 trillion?
When the federal government increases their expenditure over what they are actually collecting, the “deficit” amount is added to the total debts of the nation. So, debt fiscal deficits due to overspending is the main reason behind debt exploration. As long as we are gathering deficit, the problem will continue rising. Now the question is, how it is happening to us?
From 1980 to 1991, the total national debt expanded in a great way, it was about 13.4%. The next largest increase came into effect during 1974 to 1979, it was about 10.9%.
In 2008 we had the 2nd largest expansion of debts , which is about (18.3%)followed to the 19.5% in 1982. So, I mentioned earlier, let’s look at the main reasons for which the deficits occur and added to the total debt of the nation.
Deficit Spending in today’s age
The national debt has rose up heavily over the past few decades. But why did the debt began to rise with so much intensity? One of main causes behind was decoupling the dollar from the gold standard, decided by the former President Nixon in 1971. The effect was massive on our economy. There was no limit on printing certain amount of money. The only thing that can back up the dollar was U.S. Government’s credit. The government became free to overspend since even gold cannot redeem dollar and they could get their authorization signed by the President.
From 1977, the fiscal year started to end at September 30 instead of June 30. The federal government generated fiscal-year deficit from June 30, 1965, and it continued through the recent fiscal year which ended September 30, 2014.
So, now the question is…what would be the future of our debts? Will our next generation be bearing such an huge national debt obligation upon their shoulders? What should be be our status in the global stage?
The Future Of America’s Debt Problem
The economic boom started since 1982, to the housing bubble burst and also the collapse of the stock markets was predicated on debt. This debt is the reason which led to some of the worst economic and financial crisis since 1930s. At the verge of the 2008 recession, nation’s total fiscal deficits crossed $1 trillion. In recent days, the deficit has been improving a lot. But is still more than $550 billion per fiscal year. So, the nation’s debt is continuously getting higher, but at a slower rate.