This post first appeared on The Deviant Investor.
Official US national debt exceeds $21 trillion. National debt increases over $3 billion per day.
Another day older and $3 billion deeper in debt!
The U.S. government pays the interest by issuing new debt. But that new debt increases total debt and (eventually) drives up interest rates, which requires more borrowing to pay the annual interest payments. Another year older and deeper in debt! A reset will occur when the debt load becomes too heavy.
WHY DEEPER IN DEBT?
Governments spend currency units, corporations demand their payoffs, the warfare and welfare lobbies own congress and the “borrow and spend” circus performs.
“The real story is we made a significant investment in the military which is very, very important, and to get that done we had to increase non-military spending.”
The Deep State extracted its share of the swag, participants collected their payoffs and debt expanded. Borrow and spend is the lifeblood of the Wall Street and D.C. circus.
But it extends beyond Washington D.C. Consider these massive debt burdens in the U.S.:
- Sub-prime auto loans. Defaults will rise in the coming recession.
- Over $1 trillion in credit card debt. More defaults coming.
- Over $10 trillion in mortgage debt. The 2008 recession hammered mortgage debt and related derivatives. The next recession could be worse.
- About $1.5 trillion in student loan debt, much of which is deferred or in default. The next recession will illuminate the lunacy in this program.
- Public and private pension liabilities are underfunded by many $trillions even though stock markets trade near all-time highs. The next recession will push many pension plans over the abyss.
- U.S. government has unfunded liabilities of $100 – $200 trillion. Those liabilities increase every day and will be defaulted or paid in mini-dollars.
Summary: Congressional promises and boondoggles push the U.S. deeper into debt.
From David Stockman:
“That’s how the Warfare State-Welfare State system works, greased by the Deep State and its fetid ecosystem of bureaucrats, “think-tanks,” lobbyists, lawyers, pundits, carnival-barkers, grifters and other thieves.”
Another government contract, weapons system, wars, expanded welfare, free cell phones, ethanol subsidies, food stamps (SNAP), foreign aid to buy US weapons… and the circus descends deeper in debt.
BUT LET’S NOT TAKE IT TOO SERIOUSLY:
The Treasury Department issues bonds and sells them to the Fed. The Fed creates the dollars and buys the bonds. Insiders collect their swag, the government pays off corporations and voters, and those new dollars devalue existing dollars. Prices rise and the circus rolls down the road toward debt-ruin.
The game works until confidence in the currency and/or the Fed breaks. That confidence has not broken yet, but it will.
The dollars are mostly illusory. They are debts of the Federal Reserve. Bonds are promises to repay future mini-dollars by a government that can only repay via additional borrowing or printing. In a better world using real money, not fiat debt-based pretend dollars, the government would be a poor credit risk—a large chance of default.
That realization is coming. The U.S. needs a return to asset backed money that the banking cartel can’t create from nothing. This option is not politically viable in 2018.
Tennessee Ernie Ford sang about the plight of coal miners decades ago. Coal miners were often paid in company script which bought food and supplies at inflated prices in the company story. The “script” had no intrinsic value and was backed only by management promises. Silver coins – real money with intrinsic value—circulated in the United States while mining companies issued script. But script created more profit for mine owners.
“You load sixteen tons, what do you get?
Another day older and deeper in debt.
Saint Peter don’t you call me ‘cause I can’t go
I owe my soul to the company store.
Today we use “script” called Federal Reserve (digital and paper) Notes (debts), which have no intrinsic value and are backed only by promises from the Fed and the U.S. government. Labor is exchanged for debts from the Fed—the “Company Store.”
We use a flawed system that benefits the banker cartel, big corporations and the government. The system will not change without trauma. “I owe my soul to the company store.”
Our economy runs on low interest rates, credit and ever-increasing debt – auto loans, corporate loans, credit cards, mortgages, etc. Most retail transactions use plastic cards. The banking cartel takes their cut. Confidence holds the game together. But rising interest rates cut profits, increase debt service, and bankrupt marginal companies and households!
Another day older and deeper in debt. $21 trillion plus unfunded liabilities and rising $billions every day. If credit dries up, like in 2008, the piper will be paid in blood and bankruptcies.
Protect yourself from the coming reset:
- Reduce your debt load.
- Some retirement promises will not be paid.
- A reset is inevitable.
- Debt must be paid, defaulted or inflated away.
- Much of the debt can’t be paid.
- Default creates immediate and devastating consequences.
- Inflation and hyper-inflation are destructive but delay the consequences. Politicians like delayed consequences.
- Congress, the Administration and the banking cartel prefer inflation. Borrow and spend created inflation has worked for decades. The political and financial elite are unlikely to want change.
- Read Chris Marcus: Is the Price of Silver About to Explode?
Gold and silver are real money. They will retain their value and purchasing power as dollars are devalued, and will be safe assets during the coming reset, regardless of when or how it occurs.