America is heading towards a fiscal cliff. This isn't biblical

I do not disagree with anything written here but will say that the debt of the EU, Japan and the USA is a three legged stool. The only reason things work is that the help each other carry the weight. Otherwise the exchange rates would knock one of the legs out. If a leg were to break first, I would consider Japan. Their debt to GDP ratio is 216%. For those not familiar with debt to GDP, it is calculated by the total amount of debt / the total amount of all goods and services produced in that nation. In comparison the USA is 125%. So for Japan, to pay back the 216% government debt, they would need to spend absolutely nothing, not even paying individual debt for two years and about 33 days and still work just as hard as they do today. The USA would need to work 1 year and 3 months.

Like the USA though the reality is that Japan's debt is rising. I will say too that these levels are already in uncharted territory, meaning that economists have no idea how far anyone can go. In part it depends on faith in the currency. That is why gold is at 4000 an ounce now because more and more are not finding faith in fiat currency. The yen is suffering, the dollar also to a lesser extent. This latest year even the Mexican peso appreciated against the dollar about ten percent.

Of course other nations have gone off the cliff before. Typically it ends in inflation. Zimbabwe for example, had a million percent inflation in a year. I think they are now facing another crisis, just a few years after that.

I watch the Treasury auctions at times. Below is a sample of the auction calendar for two days just in the short-term bills. Source:

I should say that most of the debt auctions are not new debt. It is just debt expiring and paid off with new debt. That is like paying your visa bill of 1300 with 1000 of new debt and letting the 300 extra spent ride until a later date. The USA government has been doing that since President Clinton. Not a single dollar of debt has been paid except by rolling it over into new debt. For every dollar the US Fed Govt takes in as revenue projected in 2025, it will spend a 1.37 (google ai) The total amount of public debt has never been positive for a single year since Clinton. So the USA needs growth and inflation to help reduce the old debt. Inflation helps because the dollars are easier to earn when you make a loaf of bread cost five dollars, even better if the loaf is 50 dollars. It would be OK, but wages rarely keep up with inflation. Growth too means that the USA is expanding and more output makes it easier to pay off debt.

I did not want to make this too long, but I just looked at Argentina. It's peso is down over 70% against the dollar in the last year. It's debt to GDP ratio is about 70% of GDP, or a little over half of the USA or a third of japan. Sounds ok, but Argentina has defaulted on debt like 3 times in the last 25 years. So with poor credit you do not get the 150% debt to GDP level without a crisis. So i asked ai what their highest debt to GDP ratio was. The answer "Approximately 166% in 2001-2002."

It was late 2001 when they had a major financial crisis. So the difference between Argentina and the U.S. or Japan? They are a much smaller economy and will not too big too fail for the system to absorb their losses. So while the US is near their highest level of debt and japan is well over that, no one is panicking yet but you can't spend 1.37 for every dollar you take in forever.