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Record Global Debt: A Ticking Time Bomb for the World Economy

Record Global Debt: A Ticking Time Bomb for the World Economy

The relentless increase in global debt is an enormous problem for the economy. Public deficits are neither reserves for the private sector nor a tool for growth. Bloated public debt is a burden on the economy, making productivity stall, raising taxes, and crowding out financing for the private sector. With each passing year, the global debt figure climbs higher, the burdens grow heavier, and the risks loom larger. The world’s financial markets ignored the record-breaking increase in global debt levels to a staggering $313 trillion in 2023, which marked yet another worrying milestone.

In the Congressional Budget Office (CBO) projections, the United States deficit will fluctuate over the next four years, averaging an insane 5.8 percent of GDP without even considering a recession. By 2033, they still expect a 6.9 percent GDP budget hole. Unsurprisingly, the economy, even using optimistic scenarios, stalls and will show a level of real GDP growth of 1.8% between 2028 and 2033, 33% less than the 2026–2027 period, which is already 25% lower than the historical average.

Some analysts say that this whole mess can be solved by raising taxes, but reality shows that there is no revenue measure that will fill an annual financial hole of $2 trillion with additional yearly receipts. This, of course, comes with an optimistic scenario of no recession or economic impact from a higher tax burden. Deficits are always a spending problem.

Citizens are led to believe that lower growth, declining real wages, and persistent inflation are external factors that have nothing to do with governments, but this is incorrect. Deficit spending is printing money, and it erodes the purchasing power of the currency while destroying the opportunities for the private sector to invest. The entire burden of higher taxes and inflation falls on the middle class and small businesses.

…click on the above link to read the rest…

The Era of Easy Money Ruined Us

The Era of Easy Money Ruined Us

The rot caused by easy money will only become fully visible when the hollowed out institutions start collapsing under the weight of incompetence, debt and hubris.

We have yet to reach a full reckoning of the consequences of the era of easy money, but it’s abundantly clear that it ruined us. The damage was incremental at first, but the perverse incentives and distortions of easy money–zero-interest rate policy (ZIRP), credit available without limits to those who are more equal than others–accelerated the institutionalization of these toxic dynamics throughout the economy and society.

Fifteen long years later, the damage cannot be undone because the entire status quo is now dependent on the easy-money bubble for its survival. Should the bubbles inflated by easy money pop, the financial system and the economy will collapse into a putrid heap, undone by the perversions and distortions of endless easy money.

Easy money created destructive, mutually reinforcing distortions on multiple fronts. Let’s examine the primary ways easy money led to ruin.

1. The near-zero rate credit was distributed asymmetrically; only the wealthiest few had access to the open spigot of “free money.” The rest of us saw mortgage rates decline, but we were still paying much higher rates of interest than corporations, banks and financiers.

If we’d all been given the opportunity to borrow a couple million dollars at 1% and put the easy money into bonds yielding 2.5%, skimming a low-risk 1.5% for producing nothing, we’d have jumped on it. But that opportunity was only available to banks, the super-wealthy, corporations and financiers.

The charts below show the perverse consequences of offering the wealthiest few limitless money at near-zero rates while the rest of us paid much higher interest. The wealthiest few could buy income-producing assets on the cheap at carrying costs no ordinary investor could match…

…click on the above link to read the rest…

The US Is Living on Borrowed Time

The US Is Living on Borrowed Time

In late December, I published a final report on the themes of 2023 while looking ahead at their implications for the year to come.

I repeated my claim that debt markets and debt levels made the future of Fed policies, currency moves, rate markets and gold’s endgame fairly clear to see.

Of course, as facts change, opinions change as well.

But the facts are only worsening, which means my opinions in late 2023 are only growing stronger as we conclude the first month of 2024.

Then as now, the debt-soaked US is tilting ever more toward policies which will weaken its currency, wound its middleclass and reward its false idols (and false markets) with even greater desperation.

In particular, some recent facts below are emerging which further support my otherwise sad conviction that the American economy (not to be confused with its Fed-supported stock exchanges) is literally living on borrowed time.

The Latest Bits of Crazy from the CBO

Almost a year ago to date, I was shaking my head and rubbing my eyes as the Congressional Budget Office (CBO) announced a staggering $422B Federal budget deficit for Q1 2023.

Now that’s a lot of borrowing in a short amount of time…

For some strange reason, this bothered me in early 2023, as I was still under this odd impression that debt, and hence deficits, actually mattered.

Fast forward to January 2024, and that same CBO has just announced a $509B Federal budget deficit for Q1 2024.

Folks, that adds up to annual deficit run rate of $2.2T.

Please: Re-read that last line again.

Do the Math: DC is Getting Even Dumber

…click on the above link to read the rest…

A Renewable Energy Future Will Collapse the Financial System

Energy Contrarian Featured Image

Energy is the economy. That’s a radical concept because most people think that the economy runs on money. It doesn’t.

What is energy? It is the potential or capacity to do work. The economy runs on work. That’s why energy is the economy. That’s simple.

What is money? That’s a little more complex.

“Money is not the value for which goods are exchanged, but the value by which they are exchanged.”

John Law

In other words, money has no inherent value. Economists often attempt to change the subject by pointing out that money is at least a medium of exchange, a store of value or a unit of account. The same, however, could be said for cigarettes that were used as money in Communist Romania in the 1980s.

“Society runs on energy and materials, but most people think it runs on money…[Money] is created as debt subject to mathematical laws of compound interest…Money eventually gets spent on a good or service which will contain embodied energy. Money is a claim on energy yet its creation is not tethered to energy availability or cost.”

N. J. Hagens

In the end, money–as paper, coins, gold or cigarettes–is just a financial claim on energy, a marker, a unit of account. For example, I may contract someone to do work for me—to build a fence or to move some heavy equipment—and we agree on a payment amount. I pay him dollars for his physical work (joules). He may then use those dollars to buy food (joules), gasoline for his car (joules) or contract someone else’s labor to do some work for him (joules). Money is the medium of exchange but the value exchanged is energy.

…click on the above link to read the rest…

“Worried About Next Two Months”: Solar Firms Running Out Of Cash In California

“Worried About Next Two Months”: Solar Firms Running Out Of Cash In California

The solar industry in California is facing significant headwinds following the implementation of a new policy in April, which reduced incentives that had encouraged homeowners to install solar systems.

Bloomberg reports the California Solar & Storage Association has found about 63% of its 400 solar installer members have reported cash flow issues because the new policy crushed consumer demand.

Since last April, sales of rooftop solar systems across the state have crashed 85% in the most recent months of 2023 compared to similar periods one year before, according to solar firm Ohm Analytics.

On Wednesday, California Solar and Storage Association Executive Director Bernadette Del Chiaro told an audience at the Intersolar North America conference in San Diego that 25 to 30 solar companies have already closed shop or abandoned the state.

“We are worried about the next two months,” she said. “We think a lot more fallout may be coming.” 

Besides a reduction in incentives, higher interest rates and expensive panels have also curbed demand. This means that solar installers have a dismal pipeline of work through the year’s first half.

Meanwhile, a Bloomberg MLIV Pulse survey of professional and retail investors from late last year found the green energy downturn will last well into 2024.

iShares Global Clean Energy ETF has nearly roundtriped Covid lows.

The ownership portfolio of the iShares Global Clean Energy ETF shows solar, wind, and hydrogen stocks have been clubbed like a baby seal over the past year.

US Debt Hits A Record $34.001 Trillion

US Debt Hits A Record $34.001 Trillion

The US Treasury has a morbid habit of revealing big, round numbers of debt around major calendar milestones, and the new 2024 year was no different because according to the latest Treasury Daily Statement published after the close today and reflecting the US Treasury’s financial statements as of Dec 29, 2023, total US debt as of the end of the year was – drumroll – just over $34 trillion for the first time ever, or $34,001,493,655,565.48 to be precise.

Since this is a topic we have covered more or less daily for our 15 year existence, we don’t need to say much suffice to show a chart of total US debt since zerohedge launched in Jan 2009, when total US debt was only $10.6 trillion. We sure have gone a long way since then.

Some context: US debt increased by…

  • $1 trillion in the past 3 months
  • $2 trillion in the past 6 months
  • $4 trillion in the past 2 years
  • $11 trillion in the past 4 years

… and so on. You get the exponential picture. At this point everyone knows how this ends – certainly the CBO does…

… but since there is no way to reverse the catastrophic outcome, there is no point in even talking about it. At best, one may only prepare for the inevitable hyperinflationary outcome, which would be good news to what is now over $1 trillion in interest expense: after all, someone has to devalue the currency all that interest is payable in.

And since there is no longer a way out, we may as well joke about it so consider this: in the third quarter when US GDP supposedly grew at a 4.9% annualized rate – hardly the stuff of recessions – rising $547 billion in nominal (not real) dollars, the US budget deficit increased by a whopping $622 billion.

This not only explains where US “growth” has come from, but begs the question just how much debt will be needed when the US falls into an official recession.

Or actually not, because at this point the best anyone can do is polish the brass on the titanic while waiting for the inevitable, captures so vividly by the following endgame chart.

Everyone Loves a Generous Government Until They Have to Pay For It

Everyone Loves a Generous Government Until They Have to Pay For It

Not only does everyone love getting “free money” from the state, they also love hearing the fantasy repeated endlessly that debts are no problem.

Governments, like individuals, can spend liberally with great generosity, or they can be frugal. Everyone receiving government money loves the state’s free-spending generosity, as it is “free money” to the recipients.

But there is no such thing as truly “free money,” a reality discussed by Niccolo Machiavelli in his classic work on leadership and statecraft, The Prince, published in 1516. In Machiavelli’s terminology, leaders could either pursue the positive reputation of being liberal in their spending (not “liberal” in a political sense) or suffer the negative reputation of being mean, i.e. miserly, tight-fisted and frugal.

Machiavelli pointed out that the spending demanded to maintain the reputation for free-spending liberality soon exhausted the funds of the state and required the leader to levy increasingly heavy taxes on the citizenry to pay for the state’s largesse.

Once we examine this necessary consequence of liberal spending, it turns out the generous government is anything but generous, as it is eventually forced to impoverish its people to support its spending.

It is the miserly leader and state that is actually generous, for it is the miserly leader / state that places a light burden on the earnings and livelihoods of the citizenry.

As Machiavelli explained, taxes and the inflation that comes with free spending both rob everyone, while the state’s generosity is a political process that necessarily distributes the largesse asymmetrically:

If he is wise he ought not to fear the reputation of being mean, for in time he will come to be more considered than if liberal, seeing that with his economy his revenues are enough…

…click on the above link to read the rest…

The Great Taking: The Latest “Anti-Mainstream” Conspiracy

A new book has exploded on the alternative / conspiracy / fringe landscape over the past few weeks – I don’t mean that in a derogatory sense. Zerohedge, Bombthrower Media, et al, we all occupy this space. Let’s call it, “anti-mainstream”.

The book is called “The Great Taking” and there is now a YouTube video documentary of it here. You can’t actually find it on Amazon (deliberate choice by author, I presume); I bought my copy via Lulu, but you can download the PDF for free here.

At the risk of oversimplifying it: The Great Taking puts forth a warning that a virtually unknown entity called “The Depository Trust & Clearing Corporation” (DTCC) is effectively the “owner” of all the publicly traded companies in the world, and in fact all debt-based assets of any kind:

“It is about the taking of collateral (all of it), the end game of the current globally synchronous debt accumulation super cycle. This scheme is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass.

Included are all financial assets and bank deposits, all stocks and bonds; and hence, all underlying property of all public corporations, including all inventories, plant and equipment; land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will likewise be taken, as will the assets of privately owned businesses which have been financed with debt.”

Over the course of the book, the author describes a 50-year process by which ownership of shares in public companies, and all debt collateral has been “dematerialized”.

In the olden days, you invested in a company – they gave you physical share certificates – and you were now part owner of the company. This is still how many value investors including me think of stock ownership.

…click on the above link to read the rest…

“This Is Off The Charts”: Economist Claims 2024 Will Bring ‘Biggest Crash Of Our Lifetime’ In US

“This Is Off The Charts”: Economist Claims 2024 Will Bring ‘Biggest Crash Of Our Lifetime’ In US

An economist who focuses on consumer spending has issued a dire warning about the U.S. economy in the coming year.

Since 2009, this has been 100 percent artificial, unprecedented money printing and deficits: $27 trillion over 15 years, to be exact,” economist Harry Dent told Fox Business on Dec. 19. “This is off the charts, 100 percent artificial, which means we’re in a dangerous state.

“I think 2024 is going to be the biggest single crash year we’ll see in our lifetime.

“We need to get back down to normal, and we need to send a message to central banks,” he said. “This should be a lesson I don’t think we’ll ever revisit. I don’t think we’ll ever see a bubble for any of our lifetimes again.”

A trader looks over his cellphone outside the New York Stock Exchange in New York on Sept. 14, 2022. (Mary Altaffer/AP Photo)

As Jack Phillips reports at The Epoch TimesMr. Dent, who owns the HS Dent Investment Management firm, told the outlet that U.S. markets are currently in a bubble that started in late 2021 amid the COVID-19 pandemic.

“Things are not going to come back to normal in a few years. We may never see these levels again. And this crash is not going to be a correction,” he said.

It’s going to be more in the ’29 to ’32 level. And anybody who sat through that would have shot their stockbroker,” Mr. Dent said, making references to the stock market crash in 1929 that led to the Great Depression throughout the 1930s.

“If I’m right, it is going to be the biggest crash of our lifetime, most of it happening in 2024. You’re going to see it start and be more obvious by May.

…click on the above link to read the rest…

The World Is Sitting on a Powder Keg of Debt

The World Is Sitting on a Powder Keg of Debt

The Federal Reserve recently surrendered in its inflation fight. But price inflation is nowhere near the 2% target. Why did the Fed raise the white flag prematurely?

One of the major reasons is debt.

The world is buried under record debt levels and the global economy can’t function in a high interest rate environment.

Fed officials know that and it is certainly one of the reasons they don’t want to raise rates any higher and hope to bring them down as soon as possible.

Over a decade of easy money policies incentivized borrowing to “stimulate” the economy. As a result, governments, individuals, and corporations all borrowed to the hilt. That was all well and good when interest rates were hovering around zero, but when central banks had to hike rates to battle the inevitable price inflation, it pulled the rug out from under the borrow-and-spend economy.

Governments around the world are feeling the squeeze as they try to deal with trillions in debt in a rising interest rate environment.

According to projections by the International Monetary Fund (IMF) global government debt will hit $97.1 trillion in 2023. That represents a 40% increase since 2019.

By 2028, the IMF projects that global public debt will exceed 100% of global GDP. The only other time global debt-to-GDP was that high was at the height of the pandemic lockdowns.

Americans like to brag about being number one. Well, when it comes to debt, they’re right.

The US national debt makes up 32.4% of the total global government debt.

According to the IMF, America’s debt-to-GDP ratio stands at 123.3%.

This chart by Visual Capitalist captures the extent of the problem.

THE DEBT SPIRAL

Unless governments dramatically cut spending and/or raise taxes, this debt spiral will only get worse, especially if interest rates remain elevated.

…click on the above link to read the rest…

The Great Simplification Ahead

The Great Simplification Ahead

“Until debt tear us apart”

There is no denying that a major economic downturn is now in the books, and that lacking an energy miracle, the world economy is about to go through a major shift. After discussing the faulty nature of prevailing economic metrics (GDP) in last week’s essay, and understanding how economic growth has turned into stagnation 18 years ago already, let’s turn our eyes towards the future. What might the world economy look like after the onset of the coming crisis? How would world leaders react? Could gold or bitcoin save the day? Let’s dive in.


There is a yawning gap between real economic productivity and debt in the world economy. Despite the fact that GDP seems to be growing, real economic output (best measured by energy consumption) has been stagnating for almost two decades now. As a result Western nations have lost their dominance in the world economy, and now face a steep decline due to an ever worsening energy balance and their colossal import dependence.

You see, this is not a matter of money or the lack thereof. Governments all around the world had the chance to print all the money they wanted in the past two decades. There were two thing they could not conjure up, however: cheap raw materials and energy. Contrary to common wisdom, the green energy transition is not a miracle waiting to happen, only an expensive and utterly unsustainable addition to the existing fossil fuel energy infrastructure. Shale oil, the much heralded “solution” to peak oil, has also run its course and now is close to reaching its all time high… Only to embark on a steep decline afterwards. None of this is a monetary question, only a matter of geology and economics: resource depletion and the resulting cost increase. Printing money does not solve any of these issues, only creates more inflation.

…click on the above link to read the rest…

The Crash Will Be Spectacular

THE CRASH WILL BE SPECTACULAR

“Interest on the federal debt is now so immense that it’s consuming 40% of all personal income taxes… If federal finances continue on their current path, we are only a few years from the entirety of income taxes being needed to finance the debt…”

The government collects $2.6 trillion of individual taxes at the point of a gun and threat of prison. Meanwhile they still operate at an annual deficit of $2 trillion. And this is before interest on the national debt starts to really skyrocket. Our Troll Secretary of the Treasury Yellen had the opportunity to lock in trillions of our national debt for 30 years at 2% rates, but purposely kept rolling it on a short-term basis.

Interest on the debt will surpass $1 trillion annually within the next year, and, as you can see, will be approaching $2 trillion per year in a few more years. The government already spends every dime of the taxes they collect. That means they are already printing more fiat and borrowing from the rest of the world in order to pay the interest on the debt they already have.

Foreign countries, in particular China and India, are not only not buying any new US Treasuries, but unloading the Treasuries they already have. With the BRICS purposefully moving away from the USD for their trade, it’s only a matter of time until our mountain of debt crashes down in an epic avalanche upon the unsuspecting American public. The writing is on the wall, and if you refuse to read it, you will be shocked and devastated when you see your supposed paper wealth evaporate.

Now you know why Biden and his handlers are attempting to provoke wars across the globe against those countries who they realize are engineering the demise of the USD as the basis for world domination and control. We have evil men ruling our nation and they would rather burn it all to the ground than lose their wealth, power and control.

David Stockman on Washington’s Fiscal Doomsday Machine

David Stockman on Washington’s Fiscal Doomsday Machine

Washington DC

Here’s one that will make your hair stand on end: The US Treasury closed the books on FY 2023, bringing the four-year cumulative deficit to $9.0 trillion!

That’s right. During the last 1,461 days (FY 2020 thru FY 2023), Uncle Sam has generated $6.2 billion of red ink each and every day including weekends, holidays and snow-days. For anyone keeping score at home, that’s $4.2 million of red ink per minute.

For the purpose of perspective, here’s how long it took to generate the first $9 trillion of US government debt: It took all of 43 presidents and 219 years to reach $9 trillion of public debt in July 2007. So the national debt clock has now accelerated to hyper-drive.

Market Value of Public Debt Outstanding, 1940 to July 2007

And, yes, we do mean accelerate. It turns out that when you remove the budgetary Mickey Mouse from the numbers, the federal deficit for FY 2023 clocked in at over $2.0 trillion, or double the comparable level in FY 2022. The reported numbers, of course, do not look quite as alarming, posting at $1.4 trillion last year and $1.7 trillion this year.

But as The Wall Street Journal cogently explained recently, that comparison is very misleading because it includes a $380 billion budgetary shuffle between the two years. It seems that Sleepy Joe’s student debt cancellation got recorded as a cost in September 2022, but then got canceled by the courts in FY 2023, turning it into a giant “savings”!

When the Biden administration announced its plan to forgive federal student debt held by 40 million Americans in September 2022, it logged the long-term cost of the program, $379 billion, on the budget all at once, even though effectively no money was spent on it that year… But in June 2023, the Supreme Court tossed the debt-cancellation program, meaning most of that money wouldn’t actually be spent. Rather than update last year’s deficit numbers, though, the Treasury recorded the changes as a $333 billion spending cut in August 2023.

…click on the above link to read the rest…

U.S. Financial Death Spiral – John Rubino

U.S. Financial Death Spiral – John Rubino

Analyst and financial writer John Rubino has a new warning about being fooled into thinking the economy is improving because inflation and interest rates have fallen some recently.  Rubino says, “If the U.S. government is running crisis level deficits, which it is right now, borrowing money and paying interest on it means we are in a financial death spiral.  The debt goes up, the interest on the debt goes up and that raises the debt even further, and you just spiral out of control.  We are there right now.  The official U.S. debt is $33.5 trillion.  It’s growing by $1.7 trillion a year, and $1 trillion of that is interest costs.  Interest costs are rising as the overall debt goes up.  Then throw in this incredibly reckless military spending in the guise of foreign aid, and you get a society that has completely lost control. That’s where we are now.  We are in the blowoff stage of a 70-year credit super-cycle.  Those things do not end with a whimper, and they certainly do not end with a soft landing.  They end with a bang, and the bang is going to be centered on the currency.  People are going to look at this and say, ‘Do I really want to hold the currency or bonds of a country that is destroying its finances at this trajectory and this scale?’  The answer will be ‘No.’  At that point, it is game over for a deeply indebted economy.  We are headed that way fast, and these wars are taking us that way even faster.”

If the Fed keeps raising interest rates, the economy tanks, but you protect the dollar.  If you cut interest rates, you spike inflation even more, and the U.S. dollar tanks.  Rubino says in the end, we get a “massive reset,” and the everything bubble explodes.

…click on the above link to read the rest…

The Debt Reaper

The Debt Reaper

Debt is an integral aspect of modern economies and has long been hailed as a catalyst for growth. When wielded judiciously, it stands as a potent tool for economic development, providing the means to finance projects, expand operations, and invest in essential sectors like education, health, and housing. In the right context, debt fuels economic growth, creates jobs, and fosters innovation. Furthermore, during economic downturns, it offers a safety net for individuals and organizations, helping them weather financial storms.

Source: GettyImages

The ghost of future wealth

Governments have traditionally argued that as long as debt remains manageable and serviceable without difficulty, there’s little cause for concern. While this notion holds some truth, the reality is that recent growth has largely been fueled by an insurmountable increase in debt. Particularly since the Global Financial Crisis of 2008, the creation of what seems like wealth has resulted in soaring asset prices, including equities and real estate, contributing to an alarming rise in wealth inequality. However, there exists a disconnect between perceived wealth and actual wealth, a scenario unlikely to endure. Distinguished economists have persistently argued that debt for consumption essentially borrows demand from the future. This borrowed debt inevitably must be repaid, heralding a probable future slowdown in demand. However, debt allocated for investment purposes differs significantly, capable of fostering future growth and potentially curbing long-term debt.

Source: IMF (2022)

The trajectory of global debt, as depicted in the chart above, illustrates an unrelenting rise in both government and private debt over time. Up until the 2000s, the surge in debt was primarily attributed to burgeoning private debt, empowering a substantial improvement in living standards, especially in developed nations. Since 2000, private debt has plateaued, whilst government debt has sharply ascended, sustaining the growth in living standards. Yet, the overarching question remains – at what cost? However benign they might seem, debt levels can swiftly move from being a seemingly manageable concern to a formidable challenge once they surpass a particular threshold.

…click on the above link to read the rest…

Olduvai IV: Courage
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Olduvai II: Exodus
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