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The US Appetite for Debt

So far, I’ve never heard the same commotion in the market and the media unlike earlier this year when the US economy earned an embarrassing downgrade.

Perhaps, with all the Thanksgiving Holiday frenzy and the Black Friday storm that took place, almost everyone doesn’t care a whit about the surging US debt and is just looking forward to inflate personal spending. Well, that isn’t the case in Washington though. Democrats and Republicans are currently at a stalemate as to the best way to reduce the US debt, which now tops the $15 trillion mark from its $5.6 trillion level in 2000 according to usdebtclock.org.

Standard & Poor’s calls this “political brinkmanship” as the Senate continues to resolve this debacle. Whether to blame this financial catastrophe to Keynesian economics or simply the White House’s failed fiscal management, it seems there’s no way to abate the situation to say the least. President Obama refuses to give in, in light of his strong stance on military spending. With no possible solution in the offing by Washington’s supercommittee, it’s no surprise that we still never fail to paint a horrific picture of US public finances.

President Obama is calling for an immediate action to this matter, stating that there is “very little time” before the government defaults on its payments. The President is also asking Republicans to come to terms with offering tax cuts for workers. And the Democrats’ proposal is to increase planned debt by $2.1 trillion from its current $14.29 trillion limit. Now how’s that for reining in spending?

Washington is deeply divided on an issue that requires the utmost urgency and it may be too late before we plunge into deep waters much like Ireland and Greece did.

If you’re wondering how long it will take for our debt to stop swelling, you’re not alone. It’s the same question that School House Rocks asked way back in 1974 when it released “Tyrannosaurus Debt”. They’ve waited longer than some of us to find the answer.

Take it from the video’s tour guide, “Feeding time is ALL the time.”

And how does our monstrous debt affect the housing market? A continued surge in US debt means that we cannot keep up with timely payments and this will lead rating agencies to be on the lookout for a lack of accordance in crafting a resolution. A downgrade in the US economy will hike interest rates and cause mortgage rates to skyrocket since these are tied to US Treasuries. It’s that simple but what lies is a Herculean task.


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