ABOUT MURRAY HOLLAND:
Murray T. Holland is the original Renaissance man: Attorney, investment banker, entrepreneur. He graduated in 1975 from Washington and Lee University with a B.S. in Chemistry and Biology. He earned an M.B.A. from the University of Virginia in 1978 and a law degree from Washington and Lee University in 1980.
During the 1980s, he practiced corporate and securities law with Akin, Gump, Strauss, Hauer and Feld in Dallas, Texas. In 1987, he became an investment banker in New York with First Boston and later moved to Kidder, Peabody & Co., where he was a Managing Director. In the early 1990s, he started the private equity firm of Convergent Associates, based in Dallas, Texas, where he lives today.
He became Chairman of the Board and Chief Executive Officer of Convergent Media Systems Corporation, Atlanta, Georgia, from 1992 through January 2006, at which time the company was sold.
Mr. Holland also served as principal shareholder and Chairman of the Board of Convergent Group Corporation, Denver, Colorado, until the company was sold, and as principal shareholder and Chairman and Chief Executive Officer of BTI Americas travel agency before its sale.
ABOUT HOLLAND’S BOOK, DEBT TRAP: http://debttrap.org/
Debt Trap is written to provide the reader a complete and professional analysis of the federal debt crisis and the implications of the crisis to the United States and to you. The author has researched every angle of the crisis and provides the reader a clear understanding of the tragedy facing all of us if the government fails to cut the deficit and cut it immediately. Nothing short of a national disaster is facing our country.
Overview
The history of sovereign debt defaults has a common thread of too much debt accumulation by both the government and businesses where the accumulation becomes an integral part of the national system of business and government.
The use of debt by governments is a politically easy way out of increasing taxes that people do not want. It is also a good mechanism to make the economy appear as though it is growing when, in fact, it is false growth. Sovereign debt defaults as well as economic, currency and banking crises are all interrelated.
Sovereign debt crises occur when a government cannot or will not pay interest and principal on its debts. Investors stop lending to that government, and the entire economy of that country goes into depression, as the government can no longer stimulate the economy with borrowed money.
Economic crises happen when investment and business activity slow down in a country. When businesses slow down expansion or actually downsize, they fire employees who in turn cannot pay their mortgages or eat out at restaurants; if the downturn is large scale, it can cause banks and other businesses to fail. The unavoidable conclusion is that sovereign debt default is almost a common occurrence and size of the government has nothing to do with a default.
Real Numbers
Today, the United States debt is sitting at $16.0 trillion ($11 trillion to third parties) and we are receiving $2.4 trillion in tax revenue. Our interest expense is around $450 billion.
Neither the government nor any citizen gets any benefit from this expense. When interest rates rise to, say, 7% for a ten-year Treasury, our interest expense would be around $750 billion or almost 34% of the current federal tax revenue.
Once a country issues enough debt to make the market scared, interest on its debt soars very quickly. We do not have to look hard to see a clear picture of exactly what is going on with our government finances.
Around 60% of federal outlays go to “social spending,” and primarily healthcare, social security, food stamps and unemployment. The inescapable conclusion of the above numbers is that almost two thirds of the federal government is nothing more than a money collection and distribution machine.
The federal government itself is not providing any service, other than collecting and distributing cash as it sees fit. With the exception of Social Security and Medicare, where the recipients are the ones who paid for it, all the other payments are a transfer of wealth from some people to other people. The numbers being generated by the White House and Congressional Budget Office do not tell the story of what is really going on inside the government budget.
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