The United States Economic System

Mathew Enoch Mount By Mathew Enoch Mount, 5th Feb 2013 | Follow this author | RSS Feed
Posted in Wikinut>Money>Economics

The national debt and its impacts on the United States and the world are evaluated in the article along with a discussion of concerns raised by isolationist groups.

How Much Debt does the Nation Owe, and Who Pays the Bills?

According to one estimate as of 2/5/2013 the United States owes about 23.5% of the total debt in the world as this is 74.7% of the nation’s total Gross Domestic product. The same source shows the United States to have a total population of only 314,545,901. According to one estimate the nation owes 16.45 trillion dollars and each citizen in the United States is responsible for $52,334.15.

$52 thousand dollars per person is an incredible number especially considering the fact that an unemployment rate of 4 to 12% at any given time does not count everyone that is without a job in the United States. In the United States large numbers of elderly and retired individuals live without participating in the labor force, and the same could be said for homemakers and children. I have thus learned that some economists believe as a somewhat general principle that about half the people in the United States at any given time may not participate in the labor force (this figure can vary by geographical location). With such a truth, every worker in the United States would be responsible for an amount of national debt equal to $105 thousand dollars per person (excluding interest).

One must be reminded at this point that the national debt does not include the debt of the states or debt that is held by cities. Some states, like Illinois, borrowed huge sums of money from employee pension plans and thus caused state bankruptcies, and during such times a state would undergo wild changes and incredible proposals. When Illinois was going through its bankruptcy, I can remember a sales tax was proposed that would tax industry on every single element of production and thus drive manufacturing companies away from the state.

Often times when economic conditions become very poor, cities will compete to bring jobs to a community. The way that cities will compete is generally to offer large businesses sizable tax breaks, and when people thus move into a city in order to secure employment prospects those people find themselves needing government services such as education for children, roads, and such. What can happen is that a city will issue low interest bonds that wealthy people will buy in order to avoid paying state and federal taxes on capital gains, and as a result those wealthy people will be guaranteed the income for those bonds against property taxes. In this way not only do the rich people that own the large corporations gain from having a tax break by moving into town, but they can also invest their earnings into bonds that pay earnings from the revenue of property taxes paid by the company’s employees.

Who Does the United States Owe Debt to?

Many people believe that almost all of the United States debt is owned by foreign countries, but this is not true. All foreign entities own only 34.2% of the U.S. government debt with China owning the largest portion of 8.1% and Japan owning the second largest portion of 7%. The groups that own large portions of the national debt are individuals and institutions in the United States with 30.4%, the Social Security Trust Fund with 16.7%, the Federal Reserve with 10.8%, the Civil Service Retirement Fund with 5.6%, and the Military Retirement Fund with 2.4%.

The way that the system generally works is that as people get older they invest into retirement accounts and they rely upon social security to provide for them in the future. These retirement accounts will invest in treasury bonds and thus the national debt will be purchased and stored in retirement accounts for safe keeping. As a result, when each worker owes $105 thousand dollars in national debt to the government, he or she could ‘break even’ (so to speak) by having $105 thousand dollars saved in treasury bonds in a retirement account. In such a way the interest on the national debt would reflect the interest earnings on the treasury bonds in the retirement account.

Unfortunately young workers often do not save for retirement and as a result their only interest in the national debt would come in the form of their social security tax being invested into treasury bonds. In such a case the young worker needs to work for decades in order to have enough claims to the government’s debt that he or she could be over the $105 thousand dollar breakeven threshold point. Once the worker has more than $105 thousand in total treasury securities associated with him or her, he or she would be considered to not owe the government anymore but instead the government would owe him or her (because the person’s government assets would outweigh their dutiful liabilities to the government).

How will the National Debt Impact People in the Future

If nations such as China decide to demand payment for their share in the national debt, then that would cause the US debt to suffer a ‘hit’ to its credit ‘score’ (so to speak). Such a ‘hit’ would cause the interest rate on treasury bonds to increase in order for the government to sell all of its debt, and this would cause the national debt to increase more rapidly and it would also cause retirement accounts to became a lot more lucrative as treasury bonds would jump in value. On the other hand the Federal Reserve could buy and retain much of the debt that would be repurchased from foreign holders, and in this case a lot more money would be in circulation such that the dollar could have less value abroad.

If such a devaluation of the dollar has a negative impact on the balance of trade with nations such as China and Japan, then such nations will have a lower opportunity cost of war. What this means is that in economic good times political differences would be overlooked between nations as a result of trade rendering such lucrative results, but once trade diminishes it can remind nations of their despised differences. A major call on the national debt could thus have a powerful political impact on foreign relations to say the least.

The fact that many foreign banks operate with such unstable currencies that a foreign politician can quickly bankrupt the foreign currency means that at the end of the day the foreign bank would record all of their figures in dollars as they would also use the dollar for their underlying asset. Although the Euro is proving to be a stable substitute for the dollar, the fact remains that rapid inflation of the dollar would not only impact the United States but also other nations that bank on the dollar. As a result, foreign savings and cash flows due over time would become devalued in such nations as the increase in money supply would increase more rapidly compared to the likely increase in the supply of goods and services. In this way if someone saved a dollar in 2013 and it could buy a bottle of water, then if that same bottle of water costs $2.00 in 2014 this would mean that the man that saved his money lost half his buying power as a result of the increase in the money supply causing the dollar to be devalued.

The basic point is that the two fundamental ways that the United States government controls the financial system in the United States and in much of the world is by exchanging and issuing dollars and treasury bonds (as well as other debt instruments). If people do not like the Treasury bond, then they can have the dollar instead, and if they do not like the dollar, then they can have the Treasury bond. Either way both papers represent the fact that the federal government is the source of awesomeness and that you should give them things in exchange for transactions in those papers in order for the government to became more powerful and for you to became more integrated into a co-operative co-serving relationship with it.

The Debt and the Religion of the People

One must be reminded at this point that the reason why the United States almost lost the revolutionary war against Great Britten is because the minute-men that fought the war did not have the adequate supplies to fight the war because they all belonged to a militia that was not supported by taxes. In other words by the government charging taxes, exchanging paper money for paper debt, and paper debt for paper money, they are able to now have far more power compared to what they had when the nation was founded. The more paper that flows between the government and the people the more dependent the two are on one another, so the greater the national debt is the more paper exchange and “integration” people are expected to experience.

Groups like the Amish and groups with Zionistic expectations however would stress the importance of complete independence from the integrated nature associated with living in the United States. To this end Micah 4:2-4 teaches that, "Many nations will come and say, 'Come, let us go up to the mountain of the Lord, to the temple of the God of Jacob. He will teach us his ways, so that we may walk in his paths.' The law will go out from Zion, the word of the Lord from Jerusalem. He will judge between many peoples and will settle disputes for strong nations far and wide. They will beat their swords into plowshares and their spears into pruning hooks. Nation will not take up sword against nation, nor will they train for war anymore. Everyone will sit under their own vine and under their own fig tree, and no one will make them afraid, for the Lord Almighty has spoken." (NIV) Thus when the Amish read Micah 4:2-4 and the Zionists read the passage, they do not see the United States as being the Jerusalem that ushers out God’s law, teaches the people his ways, ushers God’s justice, causes world peace, and gives everyone the financial independence to sit under their own “fig tree” and thus live under the fruit of their own labors.

Although the Native American Indians may share much the same sentiments toward independence as what the Zionists and the Amish take so much pride in preserving, the Native American Indians had originally hoped for a friendly exchange and a peaceful integration of peoples. Unfortunately the American way of life did not work very well for the Indians at first, and it is only now that they are able to profit from having lucrative gambling establishments that take credit cards on their reservations in places like Wisconsin (this is their “fig tree”). Overall, perhaps the majority of the people that live in the United States have to rent their labor out to a corporate buyer and they have to be so dependent on the system through at least twelve years of public education that they became much more than just a citizen.

On the other hand the Puritans that escaped Great Britten to pursue God’s national covenant would have seen the United States as the great Jerusalem because they believed that God’s covenant was transferred from Israel to Great Britten and eventually to the United States. The Puritans would have fought the hardest for religious freedom, but at the same time they would have used that freedom to punish outcasts like the Amish and Quakers. The question that many are thus asking is how the rise in the national debt will impact personal and religious freedom of those groups that have historically sought separation from the political and economic system that everyone else in the nation lives by.


Economic System, Global Economic Collapse, Global Recession, Last Days, National Debt, New World Order, Us National Debt

Meet the author

author avatar Mathew Enoch Mount
My MBA (Master’s degree in Business Administration) is underway, and I have completed a Master’s degree in Divinity (Mdiv) among six other degrees. I have had a variety of experiences with business development, management, and church planting activi...(more)

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author avatar Mark Gordon Brown
6th Feb 2013 (#)

The government bailing out big companies instead of individual people was wrong.
As individuals we must try to buy American (or Canadian) made products rather than anything imported from overseas. We need to have fewer kids so we are not raising kids we cannot afford and we need to change the way our government works so that it cannot be corrupted by financial gain from companies.

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