Debt: Destroyer of Lives, Businesses, and Countries

Dan Steinhart, Managing Editor, The Casey Report


Dear Reader,

“Raise your hand if you’re scared of flying.” The professor of my Intro to Psychology course made this request of the class on the very first day of college. Of the 30 or so students in the room, six raised their hands.

“OK, put them down. Now raise your hand if you’re scared of driving.”

Not a hand was raised.
“Statistically, you’re much more likely to die in a car than a plane.”
Thirty blank stares awaited an explanation.
“You see, we humans aren’t as rational as we like to think. Driving is more dangerous than flying, but almost everyone is more scared to fly. That’s why the study of psychology is important: so we can identify and modify irrational thoughts.”
Even as a dumb 18-year-old, I knew my professor’s example was bogus. The mathematical odds of death are just one of several valid reasons to fear something. Another is a lack of control: flying makes me nervous because I’m putting my life in the hands of a stranger. There’s nothing irrational about that.
Debt worries me much more than flying, but for the same reason: I have no control over it. Not personal debt, of course: I have 100% control over my credit card, auto, student loan, and mortgage debt. I’m talking about Uncle Sam’s big, fat federal debt, which today stands at over $17.5 trillion. As one of 115 million taxpayers, my own personal portion of that is $152,000. Add in my wife’s share, and we’re up to $304,000. Do we have to include that in our net-worth calculation when we apply for a mortgage?
Nothing is as destructive as a government drowning in debt. Though the time it takes to play out varies, the narrative is always the same:

1. Government borrows too much

2. Government prints money in a desperate attempt to service debt

3. Government ultimately prints too much money, destroying its currency and the savings of all its citizens

Unfortunately, it often doesn’t end there. Several of the most horrific atrocities in human history were committed by hopelessly indebted governments. Having just watched Meltdown America, a brand-new documentary produced by Casey Research that examines how a financial crisis can turn a once-prosperous country into a literal war zone, this fact is fresh in my mind.
Meltdown America follows the stories of three regular folks who lived in the wrong country at the wrong time. One is former Serbian businessman Mica Miljkovic, who, during Yugoslavia’s hyperinflation, was exchanging foreign currency with a taxi driver. Taxi drivers often become de facto currency dealers during severe inflation because they have easy access to cash. Plus, they’re moving targets, so they’re difficult for a government to crack down on.
During the transaction, Mica spotted an Uzi underneath the cab driver’s seat. It turned out that this particular cabbie, in addition to dealing currency, was also peddling guns to people who feared civil war—a fear that eventually came true.

Personally, I like peeking into the lives of ordinary people who experienced extraordinary things. Hearing their firsthand experiences is eye-opening and, at least for me, carries the added benefit of piercing the “It can’t happen here” psychological defense mechanism that causes so many to downplay a potential crisis until it arrives on their doorstep.