Economic crash

Economic crash
The Fade of Uncle Sam Economic Flourish Era

Deficit
 Meet Uncle Sam, who has a lot of bills to pay, almost $4
trillions dollars every year.
 Uncle Sam income is a little a bit over $2 trillions per year.
 To make up the difference “the deficit”, he does what most
of the Americans do. “HE BORROWES MONEY”

Income Vs. Expenses
EXPENSES
3.8 Trillions
INCOME 2.2
Trillions

Uncle Sam Bills
Please – Pay us, so I can pay them & they can pay you..

Uncle Sam's Bonds
 When Uncle Sam take out a loan, he calls it a “BOND”.
Bonds can be held by banks, investors, or even foreign
government.
 Uncle Sam has to promise to pay interest on these bonds
just as you do on any loan you take out from a bank.
 Have you ever think of paying mortgage with a credit
card? That is exactly what Uncle Sam does.

 Uncle Sam takes out new loans, new bonds, so he can make
payments on the old ones.
 All those loans and specially all that interests adds up!!!
 Right now Uncle Sam owes about $14 trillion dollars
($14,000,000,000,000).

Uncle Sam's Debt
 To put that in perspective, $14 trillions is about the same
as the National GDP (the total value of all the goods and
services produced by the American economy in an entire
year.
DEBT = ENTIRE GDP

When Worse Comes to
Worst
 It is such a huge amount of money that Uncle Sam has
starting to run out of people he borrowed from, and he is
having troubles just paying the interests on his loans.
 The obvious solution would be to either cuts expending or
increase taxes.

No Exit
 If he cuts expending, the people that he is spending
money on would complain that they don’t have money to
spend and that he is hurting the economy.
 If he tries to raise taxes enough to close this gap, not only
would people have definitely less money to spend, he
would probably have a riots on the streets.

Uncle Sam's Magic
 So, Uncle Sam chose the easy way to make money…
“JUST MAKE IT”
 He calls up the Federal Reserve, which is the American
Central Bank, and like magic… Dollars are created and
deposited in banks all around America.
 The problem is that the more something there is the less it
is worth! Same goes for the US dollar.

Inflation
 The more dollars there are the less each one will buy.
 That is why commodities like gasoline, food, and gold
become more expensive when Uncle Sam does his
money making this magic.
 The commodities are not really worth more, your money is
just worth less. That is called “Inflation”.
 Inflation: Prices go up because money is worth less.

 Remember the foreign governments! That lent money to
Uncle Sam.
 When they lent money to the American government,
something interesting happened.
 It made the US look richer, and their countries look poorer.

 When a country looks poor comparing to America, one dollar
of the American money buys a lot of their money, So they can
pay their workers only a few pennies a day.
 With such low labour cost, they can sell their products to
America for lower prices than the any American manufacturer
can.

 The easiest way for American companies to compete is to
move their factories overseas, and pay their workers a few
pennies a day too.
 This contributes to “Recession”, American lose their jobs,
stop paying taxes, and start collecting government benefits,
like Medicaid, and farmer subsidies.
 This means that Uncle Sam has even less income and even
more expenses.

 At the same time the people who still have jobs are desperate
to keep them, so they intend to do more work but not to get
paid any more.
 When the US dollars worth less and you are not earning more
of them that is called “Stagflation”.
Stagflation = Recession + Inflation

“Catch 22”
 This is why Uncle Sam is in a so called “CATCH 22”.
 Uncle Sam cannot raise taxes or cut spending without
making the RECESSION worse, also Uncle Sam cannot
have the federal reserve create more money without
making INFLATION worse.
 For now Uncle Sam can keep borrowing money, but since
he cannot even pay the interest on the loans he already
has, it just makes his inevitable bankruptcy even worse.

 The day will come, weather in two months or two years, when
Uncle Sam can no longer pay his bills, when that happens the
banks, investors, and the foreign governments who are
counting on that money will be unable to pay their bills.
 Just like Uncle Sam, governments, banks, and corporations
don’t actually have much money, mostly all they have is debt
to each other.

 If one link in the debt chain stops paying defaults, the whole
chain falls apart.
 If investors cannot pay their bills, corporations will not be able
to pay their employees.
 If banks cannot pay their bills, people will not be able to take
loans, use credit cards, or even withdraw their savings.

 If foreign governments cannot pay their bills, their own banks
and corporations will have the same problems.
 That is called “Global Economic Collapse”.
 It is never happened before, so nobody really knows how bad
it will be? How long it will last? Or even how will eventually get
out of it?

 The house of cards has been already built, there is no
painless way to dismantled now.
 All we can do is to educate each other about what is actually
going on, and to prepare for what may be very extraordinary
circumstances.

Economic crash

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to Economic crash

Similar to Economic crash (20)

Recently uploaded

Recently uploaded (20)

Economic crash