We're constantly being bombarded with the possible economic ramifications of the level of our national debt. Even Warren Buffett, in his annual letter to Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) shareholders, has for years pondered the consequences of the nation's looming debt.
A million a minuteA quick look at some sobering numbers illustrates the potential ticking time bomb that is our national debt. Our total debt stands at $9.13 trillion and could top $10 trillion in 2009.
According to some estimates, that debt is growing by $1.4 billion a day. That's nearly a million dollars a minute! So by the time you finish reading this article, our national debt will have gone up by some $5 million to $7 million.
And although the size of the debt is of paramount concern, it's more frightening if we understand how this debt works. In a sense, the government is taking out a huge adjustable-rate mortgage from other countries around the world. As Buffett says, the U.S. continues "selling little pieces of itself" in the form of IOUs to foreign countries, such as China, which continues to buy our T-bills. If borrowing costs -- i.e. interest rates -- go up, then making the payments could become more painful.
What to do?Does this mean it's time to stuff all your cash under the mattress? Absolutely not. Buffett has always said that he is "a better investor because he is a businessman, and a better businessman because he is an investor." So if you invest in businesses and not in stocks, per se, then you are more likely to take advantage of any curveball the economy throws at you.
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