How Much is a Trillion?

It seems a week doesn't go by when I don't hear of someone warning us that the U.S. debt is out of control and unmanageable, even for our "wealthy" country.  I saw an article on CNBC's website that quoted an editorial from the Washington Post.  Sheila Bair, the chair of the FDIC thinks the "Next Debt Crisis May Start in Washington".

The U.S. debt is now estimated at about 14 trillion dollars.  How much is 14 trillion?  According to website, "The U.S. government spends more than the entire Gross Domestic Product (GDP) of Australia, China and Spain combined. If you laid one dollar bills end to end, you could make a chain that stretches from earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills."

There are several great videos out there, but attached is my favorite that helps put this into perspective. Keep in mind that 1 trillion is less than 1/10th of our nations debt!

Just some stuff for you to chew on.


That Didn't Take Long - What Does it Mean?

The U.S. Dollar is the "world currency", and is the currency oil is traded with; has been for many many decades.  It is estimated that China has about $1 Trillion dollars in reserves in order to purchase oil and other commodities that trade in U.S. Dollars. Russia is likely in a similar position. If these countries don't need the dollar to purchase oil and commodities, they will dump it, and fast. That potentially means a glut of dollars surging into circulation that lower it in value quickly.

Because the U.S. continues to print our money (fiat currency - not linked to any standard since the early 70's), China, Russia, and several other countries have threatened and even encouraged others to drop the dollar as the world currency.  There has been talk of using a "basket" of currencies that include the Yuan (China), the Yen (Japan), and the Euro (though the Euro is also experiencing a lot of trouble due to several Euro-nations huge in huge debt crisis).

What does that mean? It means that the U.S. will no longer be able to sell our supply of U.S. treasuries to pay for our its deficit spending. Of course, QE2 had the Fed creating the money and then using that money to buy their own treasuries! I still haven't figured out the math on that one. Either way, we have no way of paying our debt or paying the interest on our debt.

So what does THAT mean?  It means that they'll have to raise interest rates to gather the money back in.  They'll also have to print even MORE money so they can make the interest payments on our national debt. Bottom line: INFLATION!  Some experts believe it may even lead to hyperinflation.

What does THAT MEAN?  That means we need to prepare so we can still function when bread costs $10 a loaf (or more?), gas is $10 a gallon, and your monthly grocery bill triples or quadruples. 

So what am I suggesting?  Stock up. 

Why am I saying this now?

On November 23rd, in the China Daily News, there was an article that China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade.  While it is not a wholesale quitting of the dollar from a world-wide perspective, it is two of the more powerful countries making their first HUGE step towards the eventual destruction of the U.S. Dollar, which I believe will have a domino effect on other countries holding U.S. dollars.

Here's just some examples of what I've noticed lately about rising prices.  In some cases these increases haven't hit the consumer yet, but they will once the companies can no longer sustain the losses:

Sugar prices already rising over 70% this year alone
General Mills and Kraft to raise prices due to grain price increases
Rising Corn prices
Cotton going up


Where is the U.S. Dollar Headed?

 Things have really changed in the U.S. economy since 2007.  The real estate we've held has dropped dramatically, cutting into our networth in the hundreds of thousands. I am thankful for a good job that pays me well, but I don't even begin to assume that I'll have that forever.  I've seen some amazingly talented workers get laid off in the last 2 years.  I've watched them struggle to find jobs, make mortgage payments, and many have filed bankruptcy or simply lost their homes.  We've all heard the stories.  The lines at the food banks get longer each week while our country's leaders borrow more in a misguided effort to stimulate the economy.  Most of us know that with our own household budgets, you cut spending when you can't meet your bills; borrowing more simply leads to a bigger fall in the end.

So what do we do?  Do we sit back and passively wait to see what the Federal Reserve and the White House comes up with to try to save our economy?  Or, do we do some legwork of our own to find out what history can tell us about other countries that have struggled similarly?  How did the people survive when their monetary system crashed?  How can we personally avoid adding to the problem and actually become part of the solution?

Just some questions and thoughts that have been on my mind lately.  I'll post more with links to some research I've done of late.  I know that this is not a popular subject.  We all would like life to go on as it has for decades.  I just really don't think that is going to be the case.  I think the next 10 years is going to look dramatically different than the last 10 and I want to be as ready for it as I can possibly be.

Image: Salvatore Vuono /