US debt and the trillion dollar question

Speaking of the $20 trillion US debt level on Tuesday, I wrote how Washington was stymying growth by not moving on middle-class tax cut or infrastructure spending.

Since 2008 the debt level doubled growing by nearly $10 trillion, while the economy stumbled along with little growth because as I said yesterday there was no velocity for all that cash. That money did not move through the economy.

There was no lending to speak up, wages did not climb significantly and there was no interest provided to savers. So we are on the hook for $10 trillion in debt, while 99 percent of the economy saw no benefit from taking on that debt.

Some five years ago I wrote if Washington took just $1 trillion and paid off everyone’s mortgage, the economy would have been chugging along at a 5% GDP level for the last half decade as middle class homeowners, who contribute the majority of the spending behind the GDP, would not have to take part-time jobs at Wal-Mart and MacDonald’s since new business growth would have exploded .

This action would also have bailed out Wall Street as well, since it would have taken all the toxic mortgages off the market at 100% value even if the paper was only worth dimes on the dollar. Also trading revenue for these firm would also soar as expendable income would have to find places to work in investments.

If you were a renter, you still would have benefited as well since the economy would be growing and the opportunity to move up the economic ladder would have been great since the cash had velocity and was in circulation, as oppose to the trickle down from corporate levels through the economy like we had during that time.

While earlier in my career I would have been highly skeptical of having government pay off private debt, since it would have smelled and tasted like socialism, however all we received over the last 5 years was the worst form of socialism — all the regulations and expenses with none of the economic benefits for the middle class.

Another positive aspect of  the above measure would have been $9 trillion less debt that US citizens were on the hook for. However if that occurred how would the government fund its secret programs?

Of the aforementioned $10 trillion of new dent taken on over the last eight years, roughly $6.5 trillion — a conservative number — is missing funds. The American people are on the hook for that money, but it is unaccountable according to the government’s auditors.

So what do we own that we don’t yet know about?

That’s the trillion-dollar question.


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