As Niall describes, when the debt loads become so large, it only takes a small increase in rates to create a fiscal crisis because you become overwhelmed by the huge amount of debt issuances that you need to service. For example: Increasing interest rates by 2% on bonds with the overwhelming amount of debt we have today might be the equivalent of taking rates to 8-10% in the early 1980's when it comes to the percentage of GDP it will cost us to service the debt (pay interest on the debt).There will be no fiscal discipline, no national fiscal housecleaning. Not under Obama Pelosi or any equivalent government. That is why Americans -- and all who rely on the American economy -- need to put their economic affairs in order.
The bond market will eventually call the Fed out by taking rates higher as they begin to realize that our GDP will simply not be large enough to service the debt.
Will the PIIGS and the rest of Europe get called out before us? Sure, but eventually we will end up in the same place; our situation is no better. We get a pass for now because we are still considered to be the safest haven left. Or as I like to say: The best of the worst!
This is all unsustainable and I think the reality is beginning to set in that we cannot continue to spend like this. Anyone that has a job and pays bills understands that you cannot spend more than you bring in every month over a long period of time without going bankrupt.
The problem we have here is the political will is not there to make painful decisions we need to make in order to clean up our fiscal house. It's going to take a fiscal crisis similar to Greece in order to finally force the government to clean up its balance sheet.. _SeekingAlpha
The blowback from this debt buildup will be devastating, and global in extent. The US needs to begin pulling back its military forces -- particularly ground forces -- before the US government loses all credibility. Otherwise, the precipitous withdrawal of overseas troops made necessary by the economic collapse of the US government, may resemble Dunkirk.
Obama is determined to turn Afghanistan into another Vietnam. If his economic policies create the disastrous collapse that many observers anticipate, he will succeed in his perverse determinations of designed defeat.