What would happen if all of us paid off our debt? We would become a third world country!

As crazy as it sounds, it is true.

I urge you to stop reading further and do some critical thinking about it for 5 minutes before resuming.

Let's first understand the basic principles involved:

1. You literally create money out of thin air when you create a personal debt supposedly for spending.

2. Formulae for calculating GDP has been modified and in US GDP is calculated based on the spending with the assumption that if you are spending then somebody is producing what you are spending on.

Now the analysis

The GDP of the USA in 2016 was $18.46 Trillion. Personal debt (called household debt) in 2016 was $12.46 Trillion. The breakdown of this debt is given below in the chart.

So essentially, by some miracle, if all of us paid off our debt our GDP would be $18.46 - $12.46 or a mere $6 Trillion. Suddenly, our national debt to GDP ratio would then skyrocket from current 106.10% to 290.25%. And that is worse than Greece or most of the countries in the world.

With this kind of debt to GDP ratio, our bond yields will skyrocket and we won't be able to borrow any more money. With crumbling physical infrastructure such as roads and bridges etc. and mental infrastructure such as obsession with Russia hacking, LGBT, hurt feelings, corruption etc., and no money, we would no longer enjoy the standards of living that we do today (yeah, believe me, its not much anyway).

And what if you don't pay off your debt? Simply speaking, you are enslaving your future generations. If you don't pay off your debt then soon we will get into a situation where all the countries that we are meddling in are going to meddle in with our country. We will be as helpless as they are now. And worst, our friends who we are successfully converting into our enemies will rule us. What would you choose?

In 2008 crisis, we had a choice to let a few banks fail so that we could stand back on our feet again. We didn't do that, instead, we made too big to fail banks even bigger. We chose unwisely for the sake of temporary comfort. The same crisis is upon us again and we are making the wrong choices again.

Today we have 42.5% unemployment rate and over 40 million people below poverty line. These are the statistics from a third world country. When the economy comes to a grinding halt (and it is coming soon), we will be worse than a third world country.

Only solution is to cut spending, pay off personal and national debt, go through the pains of rebuilding and come out stronger.

So are you ready, awake and prepared?