World War II is well behind us now, but its lessons should be ever with us.
Is a danger lurking just over the horizon? Should we take note, no matter how safe, secure and well-off we may feel?
Signs of serious trouble on the economic front are there for anyone willing to see them. One such sign occurred in August, when Fitch Ratings downgraded the U.S. credit score from AAA to AA+. The independent entity looked at the upward-spiraling federal debt — now $33 trillion — and noticed it far outpaces our national worth — about $25.6 trillion — as measured by the gross domestic product. That seemingly slight ratings change may become a trend.
I for one cannot conceive of such astronomical figures, but the fact is we owe far more than we are worth or can repay.
What is a trillion? The late economist Larry Burkett once described how to envision the figure.
“A trillion dollars in tightly bound $1,000 bills would produce a stack nearly sixty-three miles high!” Burkett wrote in The Coming Economic Earthquake (Moody Press, Chicago, 1991).
Keep in mind the $1,000 bill is no longer in general circulation. Thus, substituting $100 bills would make the stack 630 miles high!
Most people I know cannot conceive of millions — let alone billions or trillions — as they try to stretch every dollar in the inflationary environment in which we live.
Burkett and others have warned about extravagant government spending, living beyond our means individually and nationally, and printing too much money with no solid backing, such as gold or silver.
As we service our debt — not paying it down but merely paying interest on it — the debt mushrooms with unchecked deficit spending. Presidents and members of Congress of both political parties are guilty.
As spending increases, and as more cash is printed to finance the great fun party called the economy, the value of each dollar you and I have drops. Remember that the prices climb not because the products — gasoline, food, tires, home and car insurance — are worth more; rather, our dollars are worth less.
Which brings us to today: While the U.S. has yet to default on its bonds and T-bills in the “no-pay” sense, the fact is the Congress, the administrations and the Federal Reserve System are actually defaulting on their responsibility to maintain a trustworthy currency. What happens if foreign investors decide to get rid of their U.S. bonds and invest in hard commodities, such as precious metals, instead of watching inflation burn up the value of mere paper dollars?
A good indicator of the U.S. dollar’s health is the price of gold — now at a new record, topping $2,000 per ounce!
What would happen if a major crisis occurred, such as a heightened Middle East war, an invasion of Taiwan by Communist China, or a massive terrorist attack on the U.S. homeland or in Europe?
Things seem fairly calm and “normal” now, just as they did on Sept. 10, 2001; Nov. 21, 1963; Dec. 6, 1941; and Oct. 28, 1929 — the day before Black Tuesday, when the U.S. stock market crashed, precipitating the Great Depression. What a difference a day makes.
We have been warned. Are we prepared?
