Detroit the Start of the U.S. Death Spiral of Debt?97 views 2013-06-20 00:50 Tags: principal interest payments solution higher
Debt is deadly, and it’s made even worse with rising interest rates that prevent you from eliminating the debt load. What happens with rising interest rates is that payments mostly go toward the interest and less to the principal. In fact, it’s what I call a death spiral of debt that worsens as rates move higher.
When individuals face excessive debt, often the solution is to pare down on spending and adhere to a strict debt repayment program.
When corporations face excessive debt, they tend to streamline; but they must be careful when they do so, because any cost-cutting could impact the company’s growth. What generally happens is more debt or credit is issued.
But when governments build up massive debt loads, there is no definitive solution, and it becomes problematic. The national debt is estimated to reach $17.55 trillion by the end of this year, while the country’s total debt, including federal, state, and municipal debt, is earmarked at $20.54 trillion. (Source: USGovernmentDebt.us, June 18, 2013.)
Congress and Obama must resolve the national debt limit.
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