Monday, November 25, 2013

The Simple Truth On The U.S. Debt: Repayment Is Impossible

The thing about Ponzi schemes is that they have to keep on growing and if they don`t grow, they implode because you need a bigger supply of new investors to cash out the old investors.

Look at the U.S. Treasury Bond market. We have a 17 trillion dollar national debt (although that is just a tip of the iceberg, we actually have 100 trillion plus in total debt. 17 trillion is just where there are U.S. treasuries outstanding but the U.S. government has lots of obligations beyond the treasury debt).

But if you just focus on that, where does the U.S. government get the money to retire all the maturing bonds every year, trillions of dollars worth of Treasuries mature. The government does not have that money. It relies on new buyers to cash out the old buyers. And in many cases its the same holders, people that hold the debt, just roll it over, so we never have to pay it back.

But nobody wants to acknowledge the simple truth that repayment is impossible. All we can do is borrow more money to pay out the maturing debt but the debt stock keeps getting bigger and bigger because of the compounding interest and because the government borrows more more money every single year.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

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