The Consequences of Inaction
It is natural to reject what makes us uncomfortable. The familiar adage “shoot the messenger” comes from this tendency to marginalize bad news. However, before you dismiss the following analysis as hyperbole, repeat the “thought experiment.” Sadly, you will come to the same conclusions.
Decline of the Dollar
The U.S. Dollar is depreciating in value every day from the continual printing of what is called “fiat money.” Fiat money is based on an IOU, not backed by something of value (such as gold or silver).
Billions of fiat Dollars are being printed every day to pay for services and the cost of government beyond what is collected in taxes. With more fiat Dollars circulating to purchase the same amount of goods and services, prices go up. Called “inflation,” it takes more U.S. Dollars to purchase the same goods and services. Said another way, the value of the U.S. Dollar is continually going down.
To keep inflation in check, only so much fiat money can be printed each year. To cover the remaining deficit, billions more Dollars are borrowed from foreign and domestic investors with the promise they will be paid back with interest. Naturally, the interest on the debt is compounding and comes out of taxes collected, reducing further every year what is left to pay expenses.
With the debt burden becoming so large, investors are becoming nervous. They rightly fear the day when the U.S. government announces it can no longer pay the interest on its debt.
Note: Lucky for us, other countries are printing fiat money as well, and they too are running huge deficits. The only reason the U.S. Dollar has not yet crashed is it is still the better investment by default.
If the printing of fiat money and the massive yearly deficits continue, a better investment will eventually emerge, causing investors to abandon the U.S. Dollar en masse. Should that day come, a chain of unstoppable events will unfold, beginning with the U.S. Dollar becoming worthless.