$15 trillion in debt

We win! First country to reach $15 trillion in debt

The last country that amassed such a debt was the United Kingdom, whose pound sterling reserve was replaced by the U.S. dollar back in 1944. Proof that enormous debt can turn on you in a moment’s notice and rear its ugly head. 

For all of you non-spending countries who said we could never do it, you can kiss our printing press! Now after all of the celebrating is done for hitting such a monumental number, the question still remains … how do we pay it off? 

Or do we pay it off? Back in 2008 when we officially hit $10 trillion, there were many doomsayers that said the U.S. was finished as the global powerhouse — our reserve currency was in question and we had hit our limit. 

In fact, the official debt clock in New York actually ran out of digits once we reached $10 trillion. It appears even the debt clock creators (when they built the second clock) never imagined even we could run a debt that high. But we all could be wrong today, and our children might see a new debt clock in the quadrillions that will make our current $15 trillion look minute. 

I firmly believe at some point our debt bubble will burst. The big question is when, not if. There will come a time (maybe very soon) where the global society will not reward, encourage or condone massive debts like we have built up. And the result will not be pretty. 

The last country that amassed such a debt was the United Kingdom, whose pound sterling reserve was replaced by the U.S. dollar back in 1944. Proof that enormous debt can turn on you in a moment’s notice and rear its ugly head. 

For you history buffs, here is a brief lesson on what transpired with Britain’s economy. 

In 1917, the British government borrowed 2 billion pounds (roughly equivalent to $739 billion today). But keep in mind, this loan was taken out when Britain’s economy was much smaller than it is today. 

The loan actually equaled 75 percent of Britain’s gross domestic product at the time. To put that into perspective, imagine this loan being the equivalent to the United States borrowing another $10 trillion this year. 

Why the loan you ask? To finance “The Great War.” The result? The war bankrupted Britain. Financially, it never recovered and even led to the immediate suspension of the gold standard in 1914. Sounding familiar at all? Just keep reading. 

What would you guess happened next now that citizens and corporations could no longer demand bullion from the Bank of England? If you guessed massive expansion of the public debt and money supply, you would be correct. 

The huge expansion of the credit and money supply came with a corresponding increase in price inflation. Gold, silver, oil, etc. all went to new highs. Three years later (1917), inflation was accelerating to the point Britain believed it was threatening it’s financial stability. 

So what did they do? Their own version of quantative easing: the massive 1917 war loan that enabled them to retire floating rate-debt, control the increase of the money supply and slow down inflation. 

Fast forward (imagine kicking the can down the road for 10 years) to 1931. Eventually, Britain realized this war debt was becoming progressively harder to manage and much of the principle could never be repaid. And to make matters worse, a German and Austria trade union forces France to withdraw its capital from Austria’s leading bank. 

The bank (controlled by the Rothchilds) was absorbing most of Austria’s mounting financial issues. And Europe’s economy was under severe stress due to the U.S. launching a global trade war with the Smoot-Hawley tariff in 1930. Could such a small spark like one Austrian bank going under (think Greece) turn into a flame that would engulf the entire globe? 

If you guessed yes, you are correct again. What happened next was felt worldwide. The result was a global economic depression and a corresponding increase in bad debts that would never be repaid. Not to mention the lead up into the Great Depression for our own country. 

The similarities between Britain (pre World War II) and the United States are numerous. Both were the world’s foremost military power. Both controlled the world’s currency, but couldn’t pay their debts in sound money. Both manipulated their currencies and bond markets to try to monetize their debts. And both thought their reserve currency status could never be taken away from them. 

Fortunately, the U.S. still has a fighting chance. 

What will be the final outcome in our day and age? Will the clock ever start going backwards? All we can do it watch it to find out and educate ourselves and our clients. 

Most Americans have no idea about the history I just revealed. And they have just as little clarification on the long-lasting ramifications on our standard of living and our standing in the world if we can’t refinance and fix these debts.