Empowering Small Business to Repay Debt
The Coming Paradigm Shift from Creditor to Debtor in Loan Repayment Solutions
U.S. Debt Burden
Ever increasing debt and stress levels for individuals, families, and small businesses
will become increasingly acute
If you live in the United States of America, the U.S. is a great example of excessive and ever-increasing debt levels; many other countries may be in even less favorable circumstances. But, Americans, in particular, have demonstrated a strong propensity of taking on as much debt as possible, notwithstanding the Great Recession of 2008. Economic stress on individuals, families, and small business will become increasingly acute during times of economic downturns. Consider these facts :
US total debt of $77,351,273,506,588 ($77.4 trillion), includes household, business, State and local governments, financial institutions, and the Federal government
US total unfunded liability of $147,598,516,380,210 ($147.6 trillion), includes Social Security, Medicare, Federal debt held by the public, plus Federal employee and Veteran benefits
The U.S. national (Federal) debt of $25,310,571,621,641 ($25.3 trillion), or $76,769 for every citizen, or $203,954 for every tax payer
Personal debt of $20,509,041,220,648 ($20.5 trillion) includes all personal obligations: mortgage debt, consumer debt which includes car loans and short-term revolving credit card debt
Student debt is $1,671,702,298,113 ($1.7 trillion)
Credit card debt is $1,021,703,016,854 ($1 trillion)
Actual unemployed is 40,220,224 persons
Of the 329,661,490 citizens in the U.S., 36,162,944 people (11.0%) are living in poverty, and 36,335,146 people (11.0%) are receiving food stamp assistance
28,245,903 people (8.6%) are without health insurance
Median new home price is $322,938
138,904,278 people (42.1%) are receiving government Medicaid and/or Medicaid benefits
The gross debt, as a percentage of Gross National Product (GNP) is 134.15%
As you consider and ponder these statistics, do you know the main reasons governments around the world take unprecedented fiscal (spending) and monetary (interest rates) accommodations in order to keep the financial systems open and functioning? At this time, is there any choice but to keep spending and keep interest rates near zero percent? But at what cost will this be to the ‘forest’, and will it cost too much in the long run? Every effort seems to be made to ‘not let any of the forest burn’, at any cost, with more debt spending even during non-recession periods. But, now, during a new crisis, how many more trillions of dollars in new debt will be created to maintain liquidity and credit needs before the consequences of too much debt result in a loss of confidence in government, and it begins to default itself?
NCARA believes such actions have been and are being taken not because the economy was or is in good shape, but that it has actually been in alarming shape; recoveries and economic growth periods have been essentially juiced and fueled by untold debt levels, with the risks spread out nationally, and debts renewed over again and again by more and more debt just about everywhere. Good times, living off a zero percent credit card; who wouldn’t? And when a crisis comes and we’re maxed out, just increase the borrowing limits again – what could possibly go wrong with that?
Government should not be expected to bail everyone out of every crisis, but that’s the politically correct thing to do these days. Where are local governments, financial institutions, businesses and consumers, taking more responsibility for themselves as more and more crises emerge as they always do – and then what? Households are in the same boat; the debt levels have never been higher, and they will likely be higher tomorrow – unless credit is shut off.
The world-wide stimulus everyone sees is ultimately akin to a lit can of starting fluid, fire being sprayed onto a pile of logs, or simply put, living off a mock credit card. Interest rates the world over are maintained at near zero percent because it’s the only way economies won’t really burn; everyone seems to borrow more and more money. But very low interest rates likely create asset bubbles (think housing) and bond and equity market bubbles. And what will happen to bubbles when inflation and short-term interest rates increase to four percent (or higher) – for whatever reasons? Very few people, it seems, are even willing to talk about that.
Currently, the world is facing massive global stress, high unemployment, and lackluster demand. Life is wonderful but bad things happen every so often. There are consequences in life, to each decision an individual makes, all the way to major governmental policies. NCARA believes the U.S. will unavoidably see ‘stagflation’ in the near term – by 2023 to 2025, or sooner. Stagflation is routinely described as a time where inflation increases, but economic growth slows down. The massive and ever increasingly unsustainable levels of debt are the bedrock foundation that underlies what will become a long period of economic defaults and restructurings and other challenges.
Moreover, and sadly, NCARA believes the destruction of the family unit is the ‘solution that could have been’ to lessen or remediate economic downturns before they become severe. The ability of nations to prosper depends on the strength of the family unit – mother, father, children. When that unit is so sorely disrupted and even destroyed, so goes the hope of prosperity to properly manage or repay outstanding indebtedness. Society becomes addicted to government protection (debt spending) and is dependent thereon – until the music stops.
Like the Great Recession in 2008, and starting again with the economic perplexities in early 2020, the risk burden is once again shifted to governments and their central banks; they endeavor to keep adequate liquidity and credit in their financial systems and keep their economies afloat. Even with those resources, many small businesses will suffer and increasing unemployment. When will be the next wave, the next crisis? Can and should government continue to come to the rescue? Realistically speaking, and who knows for what reason(s), it’s probable that the world’s heavy debt burden will one day come crushing upon its citizens and small business in particular. Are you prepared?
1 USdebtclock.org (May 2020)