The Comimg Next Super Crisis

The comimg next super crisis!!?‏

On Thu, Mar 10, 2011 at 5:40 PM, Sathit Uthaisri <sathit.uth@bbl.co.th> wrote:

This article (in the WSJ) coincides with the doom-sayers' belief of the coming of the next super financial crisis. It would happen when the USA defaults its debt payment obligations.

It will be the biggest Ponzi scheme, the newspaper said, if the US has to keeps on borrowing more and more to pay for the ever increasing interest payments, until it can no longer remain solvent.

At the moment the interest rate on the US loans are dirt cheap (2-3%), and yet it is paying $200 billion for it. How much more money will it need if the rate of interest goes up, as the US credit rating declines along with the growth of debt?

It is interesting to know how the Congress and the Administration will go about solving this financial cancerous predicament. If the matter is not being taken care of soon enough the new round of super financial crisis could be inevitable.

Oh boy, I hate this kind of nightmare! -- Sathit

WSJ MARCH 8, 2011

As Budget Battle Rages On, a Quiet Cancer Grows

• By GERALD F. SEIB

If Washington's leaders need a reason to get serious about the long-term-deficit problem—now—here it is.

As the U.S. figures out how to lower its deficit, it does so at a time when it's paying $200 billion in interest in 2011 alone. WSJ's Gerald F. Seib foreshadows bad times ahead if Congress doesn't immediately make inroads into the deficit.

There is a cancer eating away at the budget from within, one that steadily drains American wealth, sends much of it overseas and only gets worse over time. It is the interest America pays on its national debt.

This year the U.S. will spend more than $200 billion—roughly the gross domestic product of Chile—merely paying off that interest. That's nearly as much as it will spend to provide health care to poor citizens through the Medicaid program.

By comparison, the spending debate now raging in Washington, over whether to cut discretionary programs by $20 billion or $60 billion this year, is about chump change, and misses the real long-range threat almost entirely.

That's because the interest burden gets worse—much worse—as time goes on and spending grows, not so much in the programs now being discussed as on Medicare, Medicaid and Social Security. Without a change, in 10 years the federal government's net interest bill rises to $928 billion annually. That would be 17% more than the government would pay to provide health care to the elderly through Medicare that year, and 82% more than the cost of all non-security discretionary spending programs