The deficits are unfinanceable

The increasing dependence of the United States on borrowing from foreign countries is alarming, and the speed with which it has accelerated during the last three years is an even greater red flag. To understand the nature and depth of the problem, we need to do a little arithmetic.

At the turn of this decade, $3.6 trillion of Treasury securities were held by the public, and 35% of those were held by foreigners. Now there are $6.4 trillion in such securities outstanding and 51% of those are held by foreigners.

So foreigners have gone from owning $1.3 trillion at the beginning of the decade to now owning $3.3 trillion of such securities — a $2 trillion increase. More important and interesting than that, of the $2.8 trillion in net new issuances of Treasury securities during this decade, foreigners have bought $2.0 of the $2.8 trillion, a stunning 71%. (China alone appears to have bought over one third of the total of foreign purchases.) Who will purchase the debt to fund the upcoming $10 trillion in deficits is anyone’s guess, as the bond market seems to have figured out.

Foreigners increased their purchases of Treasuries by only $2 trillion during this decade — and yet we expect them to purchase perhaps as much as $7 trillion of new deficit debt over the next decade? That seems impossible.

Put it another way. The US government is grossly negligent in creating the conditions that necessitate America’s importing up to 70% of its oil, making the country dependent on countries that are strategic adversaries. Now we also import 70% of the financing of the US government’s budget deficits, again making America dependent on potential adversaries or enemies. This can’t end well. Where are the serious men to address these strategic vulnerabilities?

Simply put: the US cannot in any prudent way finance the Obama deficits — whether from domestic or foreign borrowing. There just isn’t $10 trillion available in the global marketplace to support this American spending binge — and there are plenty of governments lining up in front of the USA for their bailouts.

UPDATE

Jeffrey Anderson points out just how bad things are going to get if we stay on this course:

Obama is responsible for $4.4 trillion in actual or projected deficit spending in just three years in office..At the end of 2008, just before President Obama took office, the national debt was $9.986 trillion and 69 percent of GDP. Under his projections, eight years later it will be $20.825 trillion and 104 percent of GDP. That’s right: Our debt will soon exceed our national economic output for an entire year. And that’s even if you believe the president’s rosy projections of 4 percent real GDP growth over the next four years, considerably higher than the 2.7 percent achieved over the past quarter-century and the 3.2 percent over the past half-century…

interest payments on the debt are on course to triple from 2010 (his first budgetary year) to 2018, climbing from $196 billion to $685 billion annually. Under his projections for 2018, interest payments on the debt will exceed all defense spending, including wartime spending. Think about that: In the first budgetary year after the next presidential term, our creditors are projected to get more money than our military.

It’s amazing, when you think about, that America could be facing this level of catastrophe and most of the media simply ignore the issue.

One Response to “The deficits are unfinanceable”

  1. Zachriel Says:

    Your chart has a mistake. The Bush Years include the FY2009 budget. Even before the stimulus, it was projected to be over $1 trillion in deficit.
    http://en.wikipedia.org/wiki/2009_United_States_federal_budget

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