The national debt has a lot of us worried these days. In Thursday’s Marino on Money, certified financial planner Ross Marino takes a look at what happens if we can’t pay it off.
A viewer asked, “What if? What if we can’t afford to repay the debt? What will we do if investors won’t loan us anymore money? Can this really go on forever?”
Only time will tell. But here is what may happen. If investors are concerned with our ability to pay back the money, they may want more interest to make the loan. That’s reasonable. Rising interest rates would mean rising costs to the government. Which means we would need even more money. Historically, when government interest rates increased, other rates increased as well. The past doesn’t necessarily predict the future, but we could see higher interest rates for mortgages, consumer loans, etc. The ripple effect through the economy from significantly higher interest rates could be divesting.
Here is a simple principle which applies to me, you, and the government. We cannot spend more than we make indefinitely. We can do it for a period of time if someone will loan us money. We can also print even more money than we are printing now. Both of those strategies may help short term, but are not a long term solution. We must, as a nation, stop spending more than we make. If we can’t do that, then I’m afraid everything else is like rearranging the deck chairs on the Titanic.
Ross Marino will be answering questions right here on our 5 o’clock news every Tuesday, Wednesday and Thursday.