posted on Aug, 8 2011 @ 12:01 AM
The concept of national debt is really kind of tricky.
For starters - there's no one to really "pay back." National debt is simply a comparison of how many dollars have been printed versus how many
have been collected for tax purposes. It's a little more tricky than that - but that is really what it all boils down to.
So... what actually backs this 'dollar' stuff up? Really? Nothing. The only thing that backs the value of the dollar is the relative perceived
value of U.S. economic activity. That is - our goods, services, raw materials, etc. And even then - there's nothing really solid backing the
dollar. "Back in the day" - the dollar essentially represented a share of the silver/gold stored in the U.S. Treasury. If you went to the right
authorities with a dollar bill and said: "I am exchanging this for silver" - they gave you the amount of silver that was printed on the bill.
Anyway - the way currency works, at present, what happens when the U.S. spends more money than it takes in through revenue? There are simply more
dollar bills floating around for the same amount of economic activity. This may not sound so bad - but over time, you start to see the dollar lose
its relative value. When there were only a billion dollars in circulation within the U.S. - a million dollars means you've got 1/1000th of the
entire economic value of the U.S. However, whenever you've got 10 Trillion in circulation - a million dollars isn't nearly as big of a cut of the
pie. Nor is a single dollar, for that matter.
Basically, what it all boils down to is that deficit spending and large national debts lead to inflation. Remember your grandparents talking about
being sent to the store with a quarter to get a gallon of milk and a loaf of bread? You need about six dollars to do that, now. Not all inflation is
due to deficit government spending - but it is a primary driving factor. Graphs showing inflation have a strong correlation with annual deficit
spending by the federal government.
The economy usually reacts by 'sinking' inflationary spending into investment markets - often into real-estate and stocks. This causes 'bubbles'
in the markets that eventually collapse. I should elaborate a little - the economy reacts somewhat defensively with the effect being a preservation
of food and commodity expenses. Food prices through the 2000s didn't change much until after the housing market burst (also accompanied by an
increase in minimum wage justified by the increased housing expenses in the market). Now, food and textile prices are set to go up because the
markets are now flooded with dollars that were previously tied up in real-estate investments.
I expect, over the coming years, we will see an increase in popularity of third-party currency systems. I actually expect face-book to open up its
own currency and payment system (or a company to link in with facebook for this purpose). Rather than getting paid in U.S. dollars - you would be
paid in some kind of credits handled by a third-party system that negotiates exchange rates with banks and companies. It would likely encompass a lot
of online markets, at first - but expand rapidly into stores like WalMart.
Though I am sure the Treasury and Federal Reserve would have an aneurism over it, and the IRS would start screaming to high heaven that we mandate all
U.S. licensed employers pay in U.S. Dollars - I'm not quite sure how the legalities pan out on that one. By that time - the U.S. federal government
may have been rendered mostly invalid due to its lack of responsible policies.