The nation’s credit card is way above its limit already. From Ron Paul at antiwar.com:
Bloomberg Intelligence recently released an analysis showing that a year of interest payments on the national debt now exceeds one trillion dollars. This should have been a wake-up call to Congress and the Biden administration, but it was largely ignored. The political and financial elites’ continued failure to acknowledge the dangers posed by the ever-growing national debt is exemplified by Treasury Secretary Janet Yellen’s comment that America can, and must, fund both the Ukraine war and the Israel war.
As a former Fed Chair, Yellen no doubt thinks it does not matter how much the US government spends as long as the Fed can monetize the debt. Monetizing federal debt requires the Federal Reserve to keep interest rates low. These low rates incentivize government, businesses, and private citizens to take on large amounts of debt. This may not be a problem as long as the central bank keeps rates low. However, once the central bank raises rates, many individuals, businesses, and even governments will be unable to manage their debt. Businesses will also learn they were misled by low rates into making unwise investments, creating a short-term boom, a bubble, and a crash.
The most pernicious Fed-created bubble is the government bubble. The Fed’s willingness to facilitate continued increased spending on war and welfare leads to massive deficits. The increased spending and the low interest rates necessary to monetize the debt will inevitably lead to a bursting of the government bubble, followed by a major economic crisis.
The only reason the government bubble has not yet burst is the dollar remains the world’s reserve currency. However, the dollar could soon lose that status.
