The U.S. national debt is at 34.7 trillion dollars. If you laid that many dollar bills end-to-end, it would wrap around the Earth 134,599 times. That’s enough to travel to the sun and back 17 times. Suffice it to say, we’re in a pickle.

America is slowly approaching the precipice of debt default. This is no minor dilemma. A default could cause approximately 8 million jobs to be lost. In other words, the bill would come due.

For many politicians, the debt crisis is not a pressing concern. At least not enough to take measures to fix it. The Biden administration passed a 1.2 trillion-dollar infrastructure bill in 2021, adding 256 billion dollars to the budget deficit over the next ten years. Biden has also forgiven 167 billion dollars in student loans during his tenure, which was financed through increased government spending. Despite already being one of the most indebted countries in the world, politicians continue to dig the U.S. into an even deeper hole. The problem is not simply a monetary one. There is an ideological battle underlying our descent into debt.

The ideas that have caused America’s current debt crisis were birthed during the Great Depression. In 1932, Franklin D. Roosevelt issued a series of spending measures that were intended to stimulate economic activity in what was called the “New Deal.” FDR spent over 950 billion (inflation-adjusted) dollars on the program while being touted as an economic “savior.” The deal was promoted as what released America from the bonds of the recession. In reality, it made the problem worse.

A study conducted by two UCLA economists found that the New Deal actually extended the Great Depression by seven years. By artificially increasing wages while unemployment remained rampant and below projected recovery rates, FDR’s program harmed economic health. Simply pumping money into the economy wasn’t the fix-all solution it was advertised to be.

…click on the above link to read the rest of the article…

IMF Warns Biden’s Fiscal Profligacy Poses “Significant Risks” To Global Economy ‘In Great Election Year’

April 17, 2024

IMF Warns Biden’s Fiscal Profligacy Poses “Significant Risks” To Global Economy ‘In Great Election Year’

The IMF said the the quiet part out loud today (admittedly wrapped in 100s of pages of PhD-ese) in their benchmark Fiscal Monitor this morning: pointing out that America’s recent economic performance is partially the result of the country’s unsustainable borrowing, and that the US’ massive fiscal deficits have stoked inflation and pose “significant risks” for the global economy.

“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” the IMF wrote in its latest World Economic Outlook. They added that: “Fiscal policy developments in major economies, notably in the United States, have implications for global financing conditions.”

The IMF said the US had exhibited “remarkably large fiscal slippages”, with the fiscal deficit hitting 8.8 per cent of GDP last year – more than double the 4.1 per cent deficit figure recorded for 2022, calculating that ‘Bidenomics’ (and its Inflation Reduction Act) had contributed 0.5 percentage points to core inflation (due to its fiscal profligacy).

Who could have seen that coming?

The fund further said in its Fiscal Monitor report that it expected the US to record a deficit of 7.1 per cent next year – more than three times the average for other advanced economies. It also raised concerns over Chinese government debt as Beijing copes with weak demand and a housing crisis.

The US and China were among four countries the fund named that “critically need to take policy action to address fundamental imbalances between spending and revenues.”

The others were the UK and Italy.

…click on the above link to read the rest of the article…

What About Prices?

April 16, 2024

What About Prices?

Chapter 8 from my forthcoming book Rebuilding Economics from the Top Down

Inflation, having been quiescent for decades, became a serious issue once more with the bout of inflation that occurred after the peak of the government reaction to the Covid crisis. Though it did not reach the 12-15% levels of the mid-1970s to mid-1980s, and it has fallen sharply from its peak of 8.9% p.a. in June of 2022 to 3.2% in October 2023, it was still a serious break from the low inflation period from the mid-1980s until the beginning of the 2020s—see the top chart in Figure 19.

This is Chapter 8 from my forthcoming book Rebuilding Economics from the Top Down, which will be published by the Budapest Centre for Long-Term Sustainability and the Pallas Athéné Domus Meriti Foundation. I am serialising the book chapters here. A watermarked PDF of the manuscript is available to supporters.

The original Neoclassical (and Austrian) explanation for inflation is that it is caused by “too much money chasing too few goods”, with government money creation being the culprit, and with “long and variable lags” between government deficits and actual inflation:

The lag between the creation of a government deficit and its effects on the behavior of consumers and producers could conceivably be so long and variable that the stimulating effects of the deficit were often operative only after other factors had already brought about a recovery rather than when the initial decline was in progress. Despite intuitive feelings to the contrary, I do not believe we know enough to rule out completely this possibility. If it were realized, the proposed framework could intensify rather than mitigate cyclical fluctuations; that is, long and variable lags could convert the fluctuations in the government contribution to the income stream into the equivalent of an additional random disturbance. (Friedman 1948, p. 254. Emphasis added).

…click on the above link to read the rest of the article…

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

April 11, 2024

This Double Whammy Will Unleash Unprecedented Money Printing… or Break the U.S. Economy

Deficits, Deficits, and More Deficits, Unravelling Social Security, Money Printer Going Brrr

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”

~ Gerald Ford

The Federal Reserve is gearing up to cut rates and fire up the money printer this year. And you can see why…

You have Joe Biden, who’s in dire need of a push to turn the tide in the upcoming election. Then you have U.S. banks sitting on a hefty $480 billion in unrealized losses on government securities. The Fed is poised to lend a helping hand to both.

But then there’s another reason that tells me that the Fed won’t likely stop soon once it starts up the proverbial money printer.

Let me elaborate.

Numbers Straight Out of a Horror Flick

Every six months, the Congressional Budget Office (CBO) releases a rolling 10-year “Budget and Economic Outlook.” Most people ignore reading material of this sort, but I’m always eager for it because it showcases just how utterly incompetent governments can be.

If you open the most recent report, and scroll to Page 10, you’ll find Table 1-1: CBO’s Baseline Budget Projections. Look for the line labeled “Total Deficit.” These are government deficits, and I’ve marked them in the next image.

The first thing that should catch your eye from the table above is that the deficits will consistently worsen, starting at $1.5 trillion in 2024 and reaching about $2.6 trillion by 2024. That’s an increase of 71% in just a decade.

Alarmingly, this also means that the total cumulative deficit between 2024 and 2034 would hit an astounding $21.6 trillion.

If this isn’t a damning indication that the U.S. is rapidly heading towards complete fiscal ruin, I don’t know what is. But it gets even worse.

…click on the above link to read the rest of the article…

The Great Growth Hoax

February 6, 2024

The Great Growth Hoax

For several days, ever since the supposedly amazing GDP report from quarter four 2023, we’ve been blasted by the media about how great the economy is doing.

It’s exasperating because these claims do not fit with human experience. Last we heard from the Census Bureau, real income is down, and no one doubts it. Everyone, or at least most average people, has felt strong downgrades in living standards over these last four years.

And yet, no recession has been declared. This is for technical reasons. A recession is supposed to show up in the technical reading of the GDP plus unemployment.

We’ve known for years that the unemployment data is broken. It does not account for labor dropouts or adjust for multiple job holders or otherwise reveal anything about labor participation or remuneration.

Unemployment is technically low, but so what?

As for GDP, it is not a measure of the standard of living or even economic growth. It is a measure of output — stuff going on as measured in dollar terms, whether necessary, productive, society serving, efficient or not at all.

The aggregate was concocted at a time when economists believed that spending was itself productive, whether it flowed from a sustainable capital base or government itself. Anything moving and churning was regarded as good.

We Don’t Need More GDP Reports Like These

When the latest report came out and everyone cheered, I dug around the data a bit but figured I would wait for my favorite analysts to weigh in. Sure enough, Peter St Onge writes it up and it is a doozy:

Fresh GDP numbers came in and it was a blowout. The kind of blowout that only a $2.7 trillion government deficit can buy while the private economy crumbles around it. Another couple blowout GDP reports like this and Americans will be living under an overpass.

…click on the above link to read the rest…

The US Is Living on Borrowed Time

February 1, 2024

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…

The Crash Will Be Spectacular

November 22, 2023

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

November 22, 2023

David Stockman on Washington’s Fiscal Doomsday Machine

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…

Doug Casey on the Imminent Bankruptcy of the US Government

November 15, 2023

Doug Casey on the Imminent Bankruptcy of the US Government

International Man: Everyone knows that the US government has been bankrupt for many years. But we thought it might be instructive to see its current cash-flow situation.

The US government’s budget is the biggest in the history of the world and is growing at an uncontrollable rate.

Below is a chart of the budget for the most recent fiscal year, which had a deficit of nearly $1.7 trillion.

Before we get into the specific items in the budget, what is your take on the Big Picture for the US budget?

Doug Casey: The biggest expenditure for the US government are so-called entitlements. It’s strange how the word “entitlements” has been legitimized. Are people really entitled to the government paying for their health, retirement, and welfare? In a moral society, the answer is: No. Entitlements destroy personal responsibility, legitimize theft, destroy wealth, and create antagonisms.

The fact is that once people have an “entitlement,” they come to rely on it, and you can’t easily take it away. The Chinese call that breaking somebody’s rice bowl. In the case of the American welfare state, it’s more a question of breaking a whipped dog’s doggy bowl. It’s a shame because many have come to rely on their mother, the State, not entirely through their own fault. The US has become pervasively corrupt.

The World Economic Forum (WEF)—a pox upon them—isn’t entirely incorrect when it arrogantly calls most people “useless mouths.” An increasing number produce absolutely nothing but only consume at the expense of others. Courtesy of the State.

…click on the above link to read the rest…

Government “Stimulus” Keeps Having a Diminishing Effect

August 7, 2021

Government “Stimulus” Keeps Having a Diminishing Effect

The United States economy recovered at a 6.5 percent annualized rate in the second quarter of 2021, and gross domestic product (GDP) is now above the prepandemic level. This should be viewed as good news until we put it in the context of the largest fiscal and monetary stimulus in recent history.

With the Federal Reserve purchasing $40 billion of mortgage-backed securities (MBS) and $80 billion in Treasurys every month, and the deficit expected to run above $2 trillion, one thing is clear: the diminishing effect of the stimulus is not just staggering, but the increasingly short impact of these programs is alarming.

The GDP figure is even worse considering the expectations. Wall Street expected a GDP growth of 8.5 percent and most analysts had trimmed their expectations in the past months. The vast majority of analysts were sure that real GDP would comfortably beat consensus estimates. It came in massively below.

What is wrong?

In recent times, mainstream economists only discuss the merit of stimulus plans based on the size of the programs. If it is not more than a trillion US dollars it is not even worth discussing. The government continues to announce trillion-dollar packages as if any growth at any cost were acceptable. How much is squandered, what parts are not working, and, more importantly, which ones generate negative returns on the economy are issues that are never discussed. If the eurozone grows slower than the United States, it is always blamed on an allegedly lower size of stimulus plans, even if the reality of figures shows otherwise, as the European Central Bank (ECB) balance sheet is significantly larger than the Fed’s relative to each economy’s GDP and the endless chain of fiscal stimulus plans in the eurozone is well documented.

…click on the above link to read the rest of the article…

Debt Ceiling Drama, Yellen Begins “Extraordinary Measures” to Stave Off Default

August 7, 2021

Debt Ceiling Drama, Yellen Begins “Extraordinary Measures” to Stave Off Default

Photo by Senator Mark Warner CC BY 2.0

Two years ago, the debt ceiling was lifted. Lifting the debt ceiling to make room for more government spending has been pretty routine since since 1917.

Until now…

While it’s quite likely that U.S. debt had already reached the point of no return around three years ago, amazingly the situation might have just gotten even worse. Why?

The debt ceiling extension that was granted back in 2019 has expired. Oops.

Janet Yellen is taking what are called “extraordinary measures” that hopefully will keep the U.S. economy from spiraling into a historic disaster of defaults on bond payments and government obligations, skyrocketing interest rates, and massive inflation.

The non-partisan Congressional Budget Office (CBO) predicts the Treasury will run out of cash in October or possibly November.

So as reported above, the U.S. risks default within 90 days if nothing is done.

Yellen wrote a strongly-worded letter to Speaker Nancy Pelosi, describing the potential for “irreparable harm” if no action is taken.

But it might already be too late…

A closer look at the official U.S. debt reveals an unbelievable increase over the last 20 years:

Data from St. Louis Fed

That’s a 4.6x rise in “public debt,” meaning money the U.S. government owes. It’s called “public” debt because all of America shares the responsibility for paying it back. It’s public debt because the public, you and me, are on the hook for it.

Amazing, isn’t it?

Even so, this isn’t the first time “extraordinary measures” have kept the government spending machine humming along in response to debt-ceiling politics. But this could be the first time the clock will run out before a solution is reached.

Surprisingly — or perhaps not — the White House appears to be simply avoiding the current problem.

…click on the above link to read the rest of the article…

A dangerous misunderstanding

April 25, 2021

How much money should there be in the world? It is an interesting question; to which, at any time, there is a correct answer that is unknown to anyone. It is the amount at which money is able to perfectly perform its two key functions – being a medium of exchange and a store of value. Too little money in circulation and it would cease being a fair store of value because its value would be increasing – something that hasn’t occurred in half a century. Most often, money ceases to be a store of value on the downside – losing its value – because it is far easier for states and banks to create new currency than it is to destroy it.

In practice, whether there is too much, or not enough money in the system is largely a matter of political economy rather than science. There are two broad economic camps – Monetarists and Keynesians – which largely correspond to conservative and liberal politics. The conservative-monetarist camp has been arguing for more than a decade that there is too much money in a system which should have been allowed to fail back in 2008. The liberal-Keynesian camp in contrast, argues that the absence of productivity gains, inflation and wage growth pressure show that there is too little money in circulation.

The liberal-Keynesian camp appears to be winning the argument for now. This is because the economic fallout from the pandemic and the response to it would – at least in the short-term – have been devastating were it not for the various grants, loans, bailouts, stimulus payments and public services spending embarked upon by states and central banks around the world. Moreover, by pumping trillions of newly created dollars into the system, the Biden administration may well create a short-term post-pandemic bounce which will prevent the immediate onset of depression.

…click on the above link to read the rest of the article…

‘Spend as much as you can,’ IMF head urges governments worldwide

January 25, 2021

‘Spend as much as you can,’ IMF head urges governments worldwide

MOSCOW (Reuters) – Policymakers worldwide should embrace more spending to help revive their stuttering economies, the head of the International Monetary Fund said on Friday at Russia’s annual Gaidar economic forum.

Managing Director Kristalina Georgieva did not give any specific economic forecasts, but made clear her desire for governments to up their spending and that a synchronised approach internationally was best for growth.

In 2020, the IMF provided support to 83 countries, she said.

“In terms of policies for right now, very unusual for the IMF, starting in March I would go out and I would say: ‘please spend’. Spend as much as you can and then spend a little bit more,” Georgieva said.

“I continue to advocate for monetary policy accommodation and fiscal policies that protect the economy from collapse at a time when we are on purpose restricting both production and consumption,” she said.

Georgieva praised Russia’s synchronised response to the economic challenges created by the COVID-19 pandemic, mentioning both the central bank’s monetary easing and fiscal stimulus from the finance ministry.

She also called for more international cooperation, as has been seen in the race for a COVID-19 vaccine, on the push for digital and green growth.

“IMF staff calculated that a coordinated G20 fiscal stimulus in green infrastructure, if it is done in a coordinated manner, would deliver two-thirds more in growth … than if each country acts on its own,” she said.

The Next Wave Of Spending Will Not Bring Prosperity

January 22, 2021

The Next Wave Of Spending Will Not Bring Prosperity

We Are Starting A New Series Of Mistakes

The surprisingly bad job numbers recently released show America lost 140,000 jobs in December. A big part of the problem is that this is only one indicator of the carnage taking place in our economy. As small businesses close their doors forever, many of these jobs won’t be coming back. This translates into far higher deficits going forward as many more Americans exit the workforce. Adding to our dilemma is the answer to our problem being touted around includes giving substantial amounts of money to most Americans which reduces their incentive to get out and hustle to find work. This underlines the fact we should not confuse what some call “the latest economic rebound” with a “recovery.”After these numbers were released, Biden came out declaring his administration with its two newly elected Democrat Senators would hit the ground running.

“The price tag will be high,” Biden said of his planned package in Wilmington, Delaware. He promised to lay out his proposals before taking office on Jan. 20, he also stated, “It will be in the trillions of dollars.”

The package Biden laid out only came in at 1.9 trillion dollars disappointing some of his followers. This is because it does not include a great deal of what he has promised. Missing were things like spending on infrastructure and forgiving student loans. This, however, is only the first of many packages that will be rolling through congress in an effort to halt the economy from unraveling. To see how devastating the pandemic and the lock-downs instituted to slow its advance have been on the economy we only need to look to cities such as New York where it has become obvious the effects will be long term. Recent revelations that many large and notable companies now intend to relocate to smaller cities in coming years will only exacerbate these problems.

…click on the above link to read the rest of the article…

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