Posted on 08/01/2018 8:19:43 PM PDT by 11th_VA
...The yield on US 10-year Treasury paper is up almost 100 basis points since last September. Meanwhile, the government continues to borrow money and roll over its existing debt. But now it has to do so at ever-higher interest rates, which means it has to pay more interest, which means its deficits are rising, which means it has to borrow even more money at higher interest rates... and so on until this "interest rate death spiral" becomes fatal.
It would already be fatal, if not for the Federal Reserve's willingness to buy Treasury bonds at extremely favorable prices (i.e., very low interest rates). But now the Fed is promising to stop doing that, which leaves the US in the early stages of a very negative feedback loop.
... An annual interest bill of $1+ trillion would send the deficit - which is projected exceed a trillion without a meaningful rise in interest rates - above $2 trillion. And since new interest will accrue on each year's new borrowing, the current $21 trillion US government debt would grow by around 10% a year in this scenario, shifting the process of higher rates producing higher deficits into overdrive. This impossible-to-hide acceleration will, in turn, produce extreme responses from governments and/or markets, including but not limited to spiking inflation, plunging bond prices, capital controls, martial law and a global monetary reset.
And remember, this scenario involves only central government debt, which is cumulatively dwarfed by private sector debts, state and local unfunded pension liabilities, emerging market external dollar debts, and bank derivatives. And all of these things are vulnerable, one way or another, to rising interest rates - which means the interest rate death spiral, when it kicks into high gear, will be something for the history books.
(Excerpt) Read more at seekingalpha.com ...
TRUMP’S FAU... wait, no.
This guy has been pimping for the collapse of the US economy for some time now.
A stopped clock will be right twice a day...someday.
It depends on how much manufacturing and other production we get going on U.S. to avoid the balance of payments deficits, and thereby, the increasing debts.
People who don’t want the debt collapse should support President Trump and vote in the midterm elections this year. That applies especially to government employees who want more sustainable revenues to support their jobs.
[Little typo correction here.]
It depends on how much manufacturing and other production we get going on U.S. soil to avoid the balance of payments deficits, and thereby, the increasing debts.
People who don’t want the debt collapse should support President Trump and vote in the midterm elections this year. That applies especially to government employees who want more sustainable revenues to support their jobs.
The sky has been falling over the national debt since at least 1984. Who know, maybe at some point the whole thing will really end in catastrophe. But the only time we didn’t really hear these doomsday predictions was during the halcyon days of the Obama administration when all bad news was good news and all good news was great news.
A bit hyperbolic to call it an interest rate death spiral, when rates are below 3%.
Interestingly, our debt to GDP ratio went down last quarter.
I’m 67 years old, and one of the things I remember during my years in high school, is reading dire predictions like this.
It was during those years that I realized some people could make money and influence people by screaming that the sky was falling, and I decided right then and there that I would ignore them throughout life.
What’s sobering is that this shtick hasn’t grown old in 50 years. Heck, it probably hasn’t grown old since the days of ancient Egypt and before.
We’ve been spiraling out of control under the administration of what I call Keystone Keynesians (who see bad times as demanding more spending and good times as an opportunity to spend more, think “Keystone” as in “Keystone Cops”) for many years. Even when Nixon infamously said that we’re all Keynesians now they were already starting to transition into the Keystone Keynesian form.
There is no way that would ever end well.
In the past I’ve joked that maybe part of the reason for a 1,000 year reign with a rod of iron is that God isn’t gonna let ANYONE into the new Heaven or Earth till the debts run up have been paid down in whole, meaning relative to what we might call constant dollars.
It would take a thousand years....
Fear is a strong motivator. Panic selling is how people like Soros get and stay rich.
The strengthening USD is killing gold.
I’m curious what Trump thinks about the deficit. In business, they say it’s good to use other people’s money.
Bronco Bama turned us all into Kenyanesians....
“In business, they say it’s good to use other people’s money.”
Only if you’re making more on that money than you have to pay out.
He’s been “gloom and doom” for quite a while...
“John Rubino manages the financial website DollarCollapse.com. He is the co-author, with GoldMoney’s James Turk, of The Money Bubble (DollarCollapse Press, 2014) and The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998).”
Same here. You have seen my thoughts on sovereign debt. The money changers like it and lots of it. The swamp and the snake pit and their handlers don’t want the debt to get smaller.
It is funny money really that they are after.
Fiscal '65 Ends With U.S. In RedThis article is correct, though. Our interest payments are at a high and a raising interest rate environment, which was inevitable, can easily put us into the hypothesized death spiral. This time it is truly different.
By JOHN PIERSON
WASHINGTON (UPI) - Fiscal 1965 ended today with Uncle Sam expected to be about $3.6 billion in the red the smallest budget deficit in five years. Officials estimated that federal spending for the budget year which began last July 1 would probably run about $96.6 billion with revenues of about $93 billion.But they cautioned that official figures would not be available until the third week in July. Last minute buying or tax collections could put the final reckoning up or down by as much as a few hundred million dollars.
No one was willing to say for sure when the budget would be balanced, although President Johnson has promised “steady progress” toward erasing the red ink.
Doing away with the deficit will depend on such things as the war in Viet Nam and the need for more tax cuts or more federal spending to stimulate the economy, administration officials said Tuesday.
A deficit of $3.6 billion would represent the best budget performance since fiscal 1960 when the government closed its books with a $1.2 billion surplus. It would be a $1.3 billion improvement over what the President originally estimated in January, when he first sent his fiscal 1958 budget to Congress.
The better showing is due entirely to reduced spending by various government agencies particularly the Defense Department. Johnson’s original spending estimated was $97.9 billion, but this was cut steadily as the year progressed.
The $700 million that Johnson asked and Congress granted in May to step up the war in Viet Nam will show up mostly in fiscal 1966, which begins Thursday Budget Bureau sources said.
A lot of our fiscal malfeasance can be traced back to Johnson and the Vietnam War and his "Great Society" disaster.
For comparison, that $3.6 billion deficit in 1965 is $28.7 billion in 2018 dollars. In real terms, we are now running annual deficits 20X to 30X that amount.
Yep. That’s right.
And half of humanity was going to starve too.
We no longer have a physical cash system. It’s all virtual credits. Just add a few computer zero’s to the bottom line. That should fix it.
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