Can you summarize what is going with the "US debt crisis" currently?

Current US "debt crisis":

The gov't has a legal limit on the amount it can borrow - referred to as "the debt ceiling". US is about to reach that max - just like the max amount you can borrow on your credit card. The gov't borrows money to pay it's expenses, including amounts to repay maturing debt (Treasury bills and bonds) - old debt is often repaid with new debt - and interest payments on existing debt. With it's credit "maxed-out" it can't borrow to make the interest payments and the principal payments on the maturing debt. If the debt ceiling isn't raised, the gov't must find other sources with which to pay it's obligations - typically tax revenues. The current tax revenues are insufficient to pay all of the US gov'ts obligations, thus it must choose which obligations to pay, and which to forego or delay. It's is expected that the gov't would pay the debt obligations first, but they also need to pay social security payments, Medicare pmts., the military payroll, and all their other operating bills - obviously, with not enough money (tax revenues) to pay all the bills, someone doesn't get paid.

While the maturing and existing Treasury bills/bonds could be serviced from tax revenues, this can't go on indefinitely because then too many other bills won't get paid, so the debt limit must be raised. If the gov't defaults on the T-bills/bonds (i.e. doesn't make the interest pmts and/or doesn't pay off the maturing T-bills/bonds), the gov't is considered to have defaulted on these obligations. A default on the obligations, or the possibility of a default, will lower the US gov't's credit rating. The credit rating influences the amount of interest that must be paid on new gov't debt - i.e. a lower credit rating indicates a "riskier" investment, which demands a higher interest rate be paid in order to induce investors to buy the T-bills/bonds. If these interest rates go up, several other interest rates are also affected because they are often based off of these rates (i.e. a 30 year mortgage is often based off of the 10 year or 30 year Treasury bond). Interest rates on mortgages, car loans, student loans, etc would rise in response to a rise in the Treasury interest rates. Rising interest rates make borrowing more expensive, slowing the economy, reducing consumer disposable income, etc., etc. Additionally, there is speculation that investors seeking "safe", i.e. AAA rated, investments might stop purchasing US Treasuries and put their money elsewhere. This means fewer investors are "lending" to the US gov't (gov't borrows when it issues Treasuries, investors lend when they buy them). In order to attrack investors TO Treasuries, a higher interest rate must be paid for the "risk" differences between a AAA rated security and a lower (i.e. AA) rated security. If investors stop, or slow the amount of US debt they are buying, it can be very bad for our economy.

I totally agree with the answer I recommended, but feel that it has left something out.

Namely, the problem is not only the National Debt, which is what is most often blamed for the economic mess, but rather the balance of payments.

This is where a nation buys goods or services form any other nation on credit.

The problem then is, how to pay for these goods and services? The buying nation MUST pay in the selling nation's currency, but can only this if it has that currency on hand, or can sell goods and services to the nation that is owed the money.

Exporting and selling in in this way is not easy, as the other nation may have restrictive laws to prevent this. Also, the people in that nation may take action; in the form of demonstrations, against such sales due to this endangering their jobs.

The USA has encouraged many nations of the world to import its goods and services on credit, which stimulated their economy for a while.

But these nations can no longer pay the Americans, and so there is a great debt that is causing the American economy to slump.

The "I Hate America" campaign has helped this along!

In the end, I feel that, the Americans are reaping what they have sown.

What the true answer to this is, I do not know, neither can I suggest one.

CNN doesn't really explain it well.

What the government has done is got into an enormous amount of debt, so big that it can't be paid back. This causes enormous social and economic problems.

1. It takes from future generations, many of whom aren't even born yet, making them slaves to pay for government giving away money to people today - people who haven't earned it - in hopes that they will vote for politicians.

2. Many of the purposes for which government borrowed the money are bad - like making perpetual war, giving billions of dollars to bank, big corporations and foreign governments, and passing laws that destroy people's jobs and freedoms. Because governments know that, if they got the money by taxation, they would be voted out, governments *borrow* the money instead - it's kind of like a sneaky form of taxation.

3. Because government controls the supply of money and credit through the Mint (money) and the Federal Reserve (credit), this means that, instead of government paying the money back, they can always try to sneak around the problem by printing more money. When they do this, each additional dollar is worth less, so it cheats the people they borrowed the money from.

4. Printing money also causes a lot of very serious economic and social problems. Basically, it destroys the American economy - it sucks money out of productive employments that are helping society, and creates depressions, with their bankruptcies, unemployment, hardship and misery. Inflation is a breeding ground for tyrannical governments.

Now the government can't pay its debts when they fall due, it is faced with this choice. It can either borrow *more* money - in which case it merely postpones the day of reckoning, causing an even *bigger* disaster in the future. This is what the politicians want to do, with the support of the mass media.

Or they can default on their debts, in which case basically there will be an economic crisis worse than the one they've already caused.

The other thing they can do is *stop spending so much money in the first place*! Most of it is unconstitutional anyway, and spent on anti-social, corrupt or criminal purposes. This is the option the media and politicians never discuss.

The only exception is Ron Paul, who stands for sound money, freedom at home, and peace abroad - by reducing the size of government and expanding the size of freedoms!

For a 30 day plan to reduce government spending, see: http://www.lewrockwell.com/rockwell/30-day-plan.ht...

So basically the government has to agree to raise the debt ceiling, which is a cap on the amount of money that the US can borrow. Republicans and Democrats are arguing over what should be done to raise the ceiling. Republicans don't want tax increases and want spending cuts. Democrats want spending cuts on certain things and tax increases. Therefore, there has been a stalemate.