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Bankruptcy 1995 by Harry E. Figgie, Jr. and Gerald J. Swanson, Ph. D. Book review by William B. Lindley
This book predicts that, if current practices continue, the United States government will be bankrupt by 1995. Another alarmist book? Yes. Implausible? No. This book, I'm afraid, is one we need to pay attention to. What is bankruptcy for a nation? It is (1) the inability to pay foreign debt, or (2) hyperinflation, where the value of the national currency goes practically to zero, or both. A time plot of government deficit spending may provide advance warning. This curve is what the author calls a "hockey stick", going from near horizontal to near vertical in its variation with time; several countries that went bankrupt showed this pattern. In 1984, the author used such a curve to predict our government deficit from then through 1992. His predictions came true. This is evidence that we are in trouble. The author gives two scenarios for the fin2and "death by hyperinflation".In the first case, the value of the dollar holds, and at some point the willingness to lend is exhausted. A financial panic ensues, banks close, major companies close, and a depression follows. The other case, with more real examples, is where the Federal Reserve monetizes all new debt, "speeding up the printing presses," and the value of the dollar quickly becomes microscopic. The proper measure of the debt burden is debt expressed as percent of the gross domestic product (GDP), which shows our ability to repay. Even so expressed, the author rightly notes that the figures are alarming. Time histories of total debt, current deficit, interest payments on the federal debt, and net debt held by foreigners, all as percent of GDP, would be very helpful. Regrettably, these comprehensive histories are not found in the book; however, numerous spot figures that suggest danger are given. Thus the book makes a strong but not air-tight case for Bankruptcy 1995. The author suggests immediate and drastic steps for the government to take, and includes a "debt-buster's toolkit," to facilitate political action by concerned citizens. Senator Warren Rudman uses the war metaphor: "America is at war... Nothing is more important to the future of our country than getting this (fiscal) problem under control." Thomas Paine faced a similar situation during the War of Independence: a businessman with his child, reluctant to fight, saying, "Give me peace in my day." Paine's outraged reply: "... a generous parent should have said, 'If there must be war, let it be in my day, that my child may have peace.'" Little, Brown Co., ©1992, hardback, 206 pp., $19.95.
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