meet Uncle Sam he has a lot of bills to
pay almost four trillion dollars worth every
year Uncle Sam’s income is a little over
two trillion dollars per year to make up the difference the deficit he
does what most Americans do he borrows money, When uncle sam picks up a loan he calls it a bond, Bonds can be held by
banks investors or even foreign governments
uncle sam has to promise to pay interest on these bonds just as you do on any
loan you take out ever think about paying your mortgage
with your credit card? that’s exactly what Uncle Sam does he
takes out new loans new bonds so that he can make payments
on the old ones all those loans and especially over
interest adds up right now uncle sam ows about 14 trillion dollars to put that in
perspective $14 trillion is about the same as the national GDP
the total value of all the goods and services produced by the American economy in an
entire year it’s such a huge amount of money the local same starting to run out of
people to borrow from and he’s having trouble just paying the interest on his loans the
obvious solution would be to either cut spending
or increase taxes but if it cut spending the people that
he’s spending money on would complain that they don’t have
money to spend and that he was hurting the economy if he tried to raise taxes enough to
close this gap not only would people
definitely have less money to spend he probably have riots on a sense so Uncle Sam chooses the easy way to make
money just make it he calls up the Federal Reserve which is
our central bank and like magic dollars are created and
deposited in banks all around america the problem is that
the more something there is the less it’s worth same goes for the US
dollar the more dollars there are the less each
one will buy that’s why commodities like gasoline food and gold become more expensive
when uncle Sam does his money making magic the commodities aren’t really worth more
your money is just worth less that’s called inflation remember the foreign
governments that lent money to uncle sam when they
lent money to the american government something interesting happened it made
the us look richer in their countries look poorer when a country looks poor compared to
america one dollar our money buys a lot of their money so they can
pay their workers only a few pennies a day with such low
labor costs they can sell their products in america
for lower prices than any American manufacturer can I’ll
the easiest way for american companies to compete is to move their factories overseas and
pay their workers a few pennies a day to you this
contributes to a recession Americans lose their jobs stop paying
taxes and start collecting government benefits
like Medicaid and unemployment this means that Uncle
Sam has even less income and even more expenses at the same time
the people who still have jobs are desperate to keep them so they tend
to do more work but not to get paid anymore when your
dollars are worth less and you’re not earning more them that’s
called stagflation and this is why Uncle Sam’s in a
catch-22 he can’t raise taxes or cut spending
without making the recession worse and he can’t have the Federal Reserve
create more money without making inflation worse for now he can keep borrowing money but since
you can’t even pay the interest on the loans he already has
it just makes his inevitable bankruptcy even worse whether it’s in two months
or two years the day will come when Uncle Sam can no
longer pay his bills when that happens the bank’s investors and foreign governments who are counting
on that money will be able to pay their bills you see just like Uncle Sam governments banks and corporations don’t actually
have much money mostly all they have is debt to each
other if one late in the day chain stops
paying defaults the whole thing falls apart if investors
can’t pay their bills corporations will be able to pay their
employees if banks can’t pay their bills you’ll be able to
take out a loan use a credit card or even withdraw your
savings if foreign governments can’t pay their
bills their own banks and corporations will have the same problems that’s
called a Global Economic Collapse it’s never happened before so nobody
really knows how bad it will be how long it will last
or even how will eventually get out a bit the
house of cards has already been built there’s no
painless way to dismantle it now all we can do is to educate each other
but what’s actually going on and to prepare for what may be very
extraordinary circumstances