Posted on 11/26/2019 10:35:26 PM PST by Crucial
Yesterday, in my post about the latest jobs report, I said that “our massive looming government debt bubble” will “precipitate the biggest economic disaster of them all.” A commenter here at RedState asked what I meant by a “government debt bubble.” I have talked about this before, but it is an important enough topic that it is worth revisiting.
In short, we’re in a bus speeding towards a cliff. We’re probably already past the point of no return. The bus is going over the side. It’s not a matter of if, but a matter of when. About the only thing we can do is bail out of the bus before it goes over.
(Excerpt) Read more at redstate.com ...
“Trump was talking about negative interest rates the other day and that indicates to me it is past time to take action on this problem. “
He said he didn’t believe in neg rates but would love to personally get such a loan.
I’ve been proclaiming for at least a decade that the most dire threat to our country is the national debt. I am not an economist, so I don’t have any solutions to this except common sense things like cutting entitlements and, thus, spending. But, as the author said, these are taboo third-rail subjects and no politician will touch them. I had hoped with the election of Donald Trump, a man who knows something about debt, that he would take some steps to halt the slide, but it appears not, unless he has some plans for his second term. Otherwise, there is unimaginable, catastrophic financial pain in the U.S. future that likely will take the rest of the world down with it.
Here is excerpt from Ken Fischer of Fischer Investments on the national debt.
America’s massive debt will doom us. That’s common wisdom, but wrong.
In Manhattan, a giant clock displays not only the total – almost $23 trillion for now – but your share, ticking up every second. Pundits say it’s trouble. But U.S. debt fears have lurked forever, and those troubles are no closer now than decades ago. In some ways, they’re further off.
Here’s how to see that, using tools that show when debt truly becomes problematic.
The $23 trillion total seems jaw-dropping but says little about what really matters: How readily Uncle Sam can pay the piper.
Pundits cite our debt-to-GDP ratio as evidence of a debt addiction. With $21 trillion of GDP, that ratio is 103% — lower than Italy’s and Japan’s, but higher than Germany’s and Britain’s. Debt topping GDP sounds dire. But that’s misleading. The federal government itself owns more than a quarter of U.S. debt, money the government essentially owes itself. It’s an accounting entry. As an asset and a liability, it effectively cancels out. Otherwise, net outstanding public debt is $16.7 trillion— 76% of GDP. That’s still unimportant.
See: Ken Fisher, Will America’s Massive Debt Really Doom Us? Sept. 22, 2019
I have been saying this for 30 yesrs. I have been wrong best predictor of inflation is 10 and 30 year bond yields which are at historical liws. I have no idea why
Ah, well that is much better that what I had heard. I still think this debt could spiral the economy out of control as the banks are overextended. Interest rates should be higher but cannot be raised.
[In short, we’re in a bus speeding towards a cliff. We’re probably already past the point of no return. The bus is going over the side. It’s not a matter of if, but a matter of when.]
Yes, still true 2 years later.
It will be a Global crisis - 2008 will look mild in comparison.
I’m not happy to say that. Just saying some day it’s gonna go. I was saying similar in the 3 years up to 2008. And 2008 was worse that I imagined possible.
So I don’t know what the next one will bring. But it wouldn’t surprise me if it was accompanied by “peace and security”.
That’s just the Federal debt. Then add in all the State and Local Gov’t debt. Then add all the underfunded pensions and other liabilities almost impossible to get out of. (See, for example, public employee pensions in IL and KY, where State Supreme Courts have ruled no modifications can be made for existing pension holders.) Further consider the direction of most big states’ governments. Then add private debt.
Now, if everything else is going along hunky-dory, maybe even all the above, if it does not continue to get worse, can be sustained indefinitely. But, I think it weakens us badly, restricts growth in GDP (we should be and need to be at 5%, dang it!), and eventually will make some other crisis much more likely to take us down...
The debt held by the U.S. Federal Government largely consists of Treasury department bonds of various denominations and maturities held as an asset by the Social Security Administration. For decades, the SSA was taking in more money than it was spending. Now that has changed, but at the time it would purchase U.S. Treasury Bonds in great abundance as if to squirrel money away for the future. For the federal government to “zero out” the debt by the SSA would be to admit that all the the extra money it was taking in over the years from U.S. citizens in the form of Social Security payroll taxes was spent on other unrelated things and will never come back to those citizens in the form of future benefits. Meaning that SSA will go from being technically solvent to being demonstrably bankrupt (and in need of a huge influx of new money to pay existing and new beneficiaries) in one nanosecond. How sanguine are we to be about that prospect? Wouldn’t this constitute punch #2 the proverbial one-two punch, destroying what shreds may be left of the federal government’s credibility?
I took a second job and am now working 12 hour days and 7 days a week to dump my debt before the debt bubble bursts.
Yes, one guy in new jersey. You are correct.
Remember the Figgy J-Curve in the early 1990’s?
I am absolutely amazed that this could be covered up this long.
Bankruptcy 1995: The Coming Collapse of America and How to Stop It by Harry E. Figgie
“The security of our country depends on the fiscal integrity of our government, and we’re throwing it away.
“Bankruptcy 1995, with dozens of tables and graphs, with a foreword by former Senator Warren B. Rudman of New Hampshire and written with the assistance of University of Arizona economist Gerald Swanson, constitutes a call to arms, a denunciation of America’s growing $4 trillion national debt, and a forecast that interest on the national debt, now exceeding $200 billion annually, is likely to soon become the biggest item in the federal budget, topping the outlays for the Pentagon or Social Security.
Declares Senator Rudman, stunned at the planned chaos: “We are at war economically. Our nation’s wealth is being drained drop by drop, because our government continues to mount record deficits and, in order to finance its obligations, puts us at the mercy of foreign lenders.
The security of our country depends on the fiscal integrity of our government, and we’re throwing it away. We’re doing nothing to protect it; instead, it’s politics as usual.”
Exactly. And when the government needs more they just add on a few “virtual zeros”. I mean, who uses cash any more.
This does keep me up at night, no question.
I have been concerned about the national debt and economic collapse for 2 decades. In preparation, I bought farmland, precious metals, guns, ammo, freeze dried food, etc.
I have come to understand that some people make their living selling fear and distraction.
The world ain’t coming to an end today. Tomorrow will probably be OK too.
The only thing I can figure is that the rest of the world is screwed up worse than us.
He has taken steps. Getting people off of government assistance and into work is a step. Decreasing regulation is another. The debt took a long time to build; it's going to take a while to pay down.
That’s a great article.
The debt alarmists have been moaning under a dark cloud for decades. If only they would try to find out why the end of the world keeps getting postponed.
But, I think it weakens us badly, restricts growth in GDP (we should be and need to be at 5%, dang it!), and eventually will make some other crisis much more likely to take us down...
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I think President Trump has proved that bad government policy and the Federal Reserve are far bigger threats to economic growth than debt.
The growth rate would be higher if the Federal Reserve allowed the market to determine rates.
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