The United States Debt Wall

It is no secret that the U.S. is facing a debt crisis today. The nation's debt has increased to $14 trillion this year and is predicted to rise to $16 trillion in 2012. High interest rates and budget deficit troubles are two of the key reasons why the national debt has ballooned to this amount. And if the U.S. federal government can't find a method to reduce the country's debt, the country and its people will suffer from its consequences.

Marc Nuttle, a worldwide economic policy specialist recently applied the debt wall concept to today's economic situation of the U.S. This debt wall happens when a country relies on foreign debt to subsidize the country's deficits and there's very little foreign capital flow entering the country. And given that the U.S. is in a very crucial circumstance right now, they are predicted to reach the debt wall quickly. According to Nuttle, the U.S. has as few as 18 months before they hit this wall.

With the overwhelming debt problem of the U.S., there's no doubt that the debt wall is going to be hit. And having America's back against the wall brings bad consequences to the nation's economic system and its people. Some of the outcomes will comprise very high interest levels, unemployment, hyperinflation, bankruptcies and even sovereign instability.

The U.S. budget deficit problem has been in existence for 40 years. Obviously, the U.S. is investing more than they're making which resulted to numerous debts. And since the country isn't earning enough money, they are inclined to rely on foreign debt to provide them the money for government expenses. The reduced foreign capital flow or investments in the country is detrimental to the U.S. currency. The lack of foreign capital flow entails a reduced demand for the currency and the U.S. will end up with a high supply of useless currencies. Due to this, currency devaluation will arise. Therefore, what used to be one of the most powerful currencies in the world is just a few months away from getting devalued and pretty much close to becoming worthless.

Another consequence that every American citizen needs to be concerned about is the chance of the U.S. going bankrupt. Reaching the debt wall is a symbol of a serious financial problem and this is something that all nations' economy should avoid. When the wall is hit and there's no money going in to the economy, liquid capital runs dry. Without liquid capital, the country will no longer have the ability to finance their deficits. Simply put, without money, the U.S. economy will go bankrupt.

And if you think the U.S. will be the only one affected by this problem, you better think again. The entire world's finances are affected. For economists, the world capacity for sustainable debt is $42 trillion and that is 70% of GDP. But right now, the world's debt is already at $58 trillion and that's 97% of GDP. They predict that by 2013, the world debt will be $70 trillion, 116% of GDP which leaves the world's economy with nothing but debts to their name.