Greetings!

Welcome to my new blog. The purpose of this blog is to discuss the financial collapse of the United States, which I project will happen about 2022, and how to prepare for it. I will also discuss ways to delay or prevent this from occurring and alternative theories. The term "aftermath" really refers to the aftermath of an atomic blast, and seems appropriate as the devastation that will be caused will be similar.

Why 2022? I have a theory that the maximum debt that the US Government can incur will be about 300% of GDP before it either defaults or hyperinflation occurs. At about this point, the interest paid on the debt will equal 100% of tax revenues (although this depends on interest rates and tax rates), and any futher interest will just be tacked onto the debt causing it to spiral out of control even faster. Beyond this point it should be completely obvious to everyone that any additional debt will never be paid back, and the debt would acquire junk bond status and would require extremely high rates of interest to attract buyers.

The numbers I am using are as follows. Dates are as of 12/31 of each year. I'm assuming that debt increases 3%/quarter and that GDP increases 2%/year.

Year Debt GDP %
==== ===== ===== ====
2009 12311 14235 86.5%
2010 13958 14595 95.6%
2011 15709 14992 104.8%
2012 17681 15292 115.6%
2013 19900 15598 127.6%
2014 22400 15910 140.8%
2015 25200 16228 155.3%
2016 28400 16552 171.6%
2017 31900 16883 188.9%
2018 35900 17221 208.5%
2019 40500 17566 230.6%
2020 45500 17917 254%
2021 51200 18275 280.2%
2022 57700 18641 309.5%

I don't think it is inevitable that this will occur; however, I think this is the most likely scenario if nothing changes. Obviously lots of assumptions are being made here that could be wrong. It doesn't help to be in denial about the problem, nor does it help to be overly pessimistic. We need to talk about the problem, and find ways of dealing with it.

=====================
In related news, which I will add on here instead of making another post, is a recent article by Alan Greenspan about the problem:

“Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt challenge, Greenspan wrote in an opinion piece posted on the Wall Street Journal’s website. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80, he said.
...
“The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. The “very severity of the pending crisis and growing analogies to Greece set the stage for a serious response.”
...
The swing in demand toward American government debt and away from euro-denominated bonds is “temporary,” he said.

“Our economy cannot afford a major mistake in underestimating the corrosive momentum of this fiscal crisis,” Greenspan said. “Our policy focus must therefore err significantly on the side of restraint.”--http://preview.bloomberg.com/news/2010-06-18/greenspan-says-u-s-nearing-limits-on-borrowing-capacity-restraint-needed.html

Paraphrase: Nobody knows exactly what the borrowing capacity of the US is. When it is reached, interest rates will surge rapidly. Therefore the US shouldn't test the limits and should err on the side of restraint, even if this means reducing spending during a time of recession.

==========
Update 6/19/12:  Obviously I was way too pessimistic.  I label this model A-1.