Debt & Deficits

America’s national philosophy has become relying on debt to pay today’s expenses. Nothing’s easier than borrowing money, especially at super-low interest rates but believing that debt has no consequence, that the status quo is permanent, that all the promises based on soaring debt can be paid—it’s all an appealing fantasy. Believe at your own risk.

Watch what emerges in the coming months and ask yourself if the DAY OF FINANCIAL JUDGMENT is here! I am.

This scheme of revolving credit will end badly when the pigeons come home to roost; when the piper has to be paid; when we find out that there is no such thing as a free lunch. It is just a matter of time before we become the last of society’s ‘greater fools’ and, as such, are the ones required to pay the inevitable price of achieving future economic and financial stability.

The general public doesn’t like hearing what some of us who are Cassandras have to say because our message does not fit in with the choir of propaganda and lies. We are predicting a future for the world which is unpleasant for most people and therefore few believe our predictions.

The S&P 500 is near a record high, and global bonds have rallied for 5 straight months. The benchmark 10-year Treasury yield, at 2.20%, is close to its 2017 low. One of those investor groups has to lose. The US Treasury will be under-financed by as much as $4.5 trillion over the next 5 years, and will have to issue more debt. To find enough demand, interest rates would have to climb 120 basis points from current levels, or equity prices would have to plunge 30%.

Stockman explains why the economy could go off the rails this year, after our government endures a major budgetary crisis.

Financial markets tend to lead economic expectations so it begs these questions:

While Washington is buried in bungled health care reform and Wall Street is vexed about possibly jinxed tax reform, both seem to have lost sight of the one, giant, intractable monster in the economy that virtually no one talks about any more: Debt.

Now that Canada has been flagged for a recession next year, it’ll be interesting to see how Canadians respond. Will they abstain from further binging, or are they too busy shopping for new homes to hear the warnings.

The rise of the national debt and the gold price are intertwined and the gold price has fallen behind. A huge catch-up may be on the horizon given issues over the debt limit and [with] the Fed and the President potentially on a collision course.