Debt & Deficits

It's pandering season again, with politicians and journalists wringing their hands about how cutting taxes will be a windfall to the rich and result in higher deficits. The truth, however, is that by NOT cutting taxes the federal government is losing money and the economy is suffering from sluggish growth. Cutting taxes would almost surely result in a significant boost in revenues and stronger growth.

Governments are champions of inflation and rely on central banks to cause it. In the past eight years, the Fed has tried almost every trick in the book to cause inflation but their methods have failed. Here's why and what the Fed might eventually do to cause massive inflation overnight.

I do realise that bearers of bad news are unpopular figures. If they are right, nobody will thank them and many people will blame them. If they are wrong they will be ridiculed but, as most readers know, I am not here to be a prophet of doom and gloom. No, my purpose is just to tell things as I see them and to warn people about the massive risks that the world is now facing.

We are living in the greatest debt bubble in the history of the world... I am searching for words to describe how completely and utterly insane this [situation] is, but I am coming up empty. We are slowly but surely committing national suicide, and yet most Americans don’t even understand what is happening.

Have Americans been living above their means these past 37 years (since 1980)? I think so. We have borrowed and borrowed (and borrowed) to maintain our prosperity and our exceptional lifestyle. Much of this at the expense of the world’s citizens who provided us the goods. America has 4.4% of the world’s population yet we consume some 23.6% of Global production. How can this happen? Why this favoritism?

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%.