Monday, May 14, 2007

Debt and Default are Inescapable Concepts

Gary North notes that we always owe debts -to our parents, to our children. He says:

Debt is inescapable. The question is this: Who owes you what, under which conditions? Find out now, before the debt comes due. Default is your enemy.
North then quotes David Walker, Comptroller General of the United States, in his appearance on 60 Minutes:

Walker says we have promised almost unlimited health care to senior citizens who never see the bills, and the government already is borrowing money to pay them. He says the system is unsustainable.
"It’s the number one fiscal challenge for the federal government, it’s the number one fiscal challenge for state governments and it’s the number one competitive challenge for American business. We’re gonna have to dramatically and fundamentally reform our health care system in installments over the next 20 years," Walker tells Kroft.
And if we don’t?
"And if we don’t, it could bankrupt America. . . ."
North continues:
We have therefore witnessed a massive creation of unfunded debt in the West. The magnitude of this unfunded liability is so large that the end is sure: default. The only question is the form this default will take.

I began with a statement: "Debt is an inescapable concept." To this, I now add a corollary: "Default is an inescapable concept."
We are a generation of slaves to the entitlement programs of our ancestors. Millenials and Generation X will be paying the bills when those who incurred the debt are pushing up daisies... or retired in Sedona.

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