The debt the US government has piled on the three last months, added to what it already has, will surely sink the economy. From David Stockman at lewrockwell.com:
The eruption of government red ink literally defies imagination. The deficit figure topped $863 billion during the month of June alone.
Indeed, the number is so massive that it’s hard to put it in context. But consider this: When your editor joined the Reagan campaign in the summer of 1980, the public debt was also $863 billion and it had taken 192 years and 39 presidents to get there.
So during the last 30 days, the clown brigade which passes for a government in Washington has actually borrowed nearly two centuries worth of debt!
Indeed, the numbers for June are so bad as to give ugly an entirely new definition:
- June receipts of $242 billion were down by 28% or –$92 billion from last year;
- June outlays totaled $1.105 trillion, representing a +$713 billion or 182% increase from last year;
- Leading the charge was SBA outlays of $511 billion compared to $80 million last year – and, yes, that’s the PPP boondoggle and it amounts to a 4,400% gain;
- Not far behind was unemployment benefits at $116 billion compared to $2 billion last year;
- There was also a $70 billion increase in the cost of student loans owing to CARES act repayment deferrals and an adjustment for massively higher student loan defaults in the future than had been previously assumed;
- And the red ink total for June, which is usually a low deficit month due to estimated tax payments, rose from $8 billion last year to the aforementioned $863 billion.
The US government’s enemies won’t have to lift a finger against it. They can just wait for it to go bankrupt. From Lawrence Wittner at antiwar.com:
In late May of this year, President Donald Trump’s special envoy for arms control bragged before a Washington think tank that the U.S. government was prepared to outspend Russia and China to win a new nuclear arms race. “The president has made clear that we have a tried and true practice here,” he remarked. “We know how to win these races and we know how to spend the adversary into oblivion.”
This comment was not out of line for a Trump administration official. Indeed, back in December 2016, shortly after his election, Trump himself proclaimedthat the United States would “greatly strengthen and expand” the US government’s nuclear weapons program, adding provocatively: “Let it be an arms race. We will outmatch them at every pass and outlast them all.” In a fresh challenge to Russia and China, delivered in October 2018, Trump again extolled his decision to win the nuclear arms race, explaining: “We have more money than anybody else, by far.”
And, in fact, the Trump administration has followed through on its promise to pour American tax dollars into the arms race through a vast expansion of the US military budget. In 2019 alone (the last year for which worldwide spending figures are available), federal spending on the US military soared to $732 billion. (Other military analysts, who included military-related spending, put the figure at $1.25 trillion.) As a result, the United States, with about 4 percent of the world’s population, accounted for 38 percent of world military spending. Although it’s certainly true that other nations engaged in military buildups as well, China accounted for only 14 percent of global military spending that year, while Russia accounted for only 3 percent. Indeed, the United States spent more on its military than the next 10 countries combined.
Just in case you’re keeping score, here’s the latest on debt. From Wolf Richter at wolfstreet.com:
US National Debt Spiked by $1 trillion in 5 weeks to $26 trillion. Fed monetized 65%. Business debts spike to high heaven.
Trillions are now whooshing by at a breath-taking pace. The US gross national debt – the total of all Treasury securities outstanding – jumped by $1 trillion over the past five weeks, from May 4 through June 8, and by $2.5 trillion for the 11 weeks since March 23.
The total US national debt outstanding has reached $26 trillion, according to the Treasury Department. I’ve been fretting about this debt on my site since 2011. In recent years, I innocently added a green upward arrow with “Debt out the wazoo” to my gross-national-debt charts, unaware that this tongue-in-cheek label would turn into a factual, data-based technical term:
And think about this: The huge mountain of debt that took decades to grow to this gargantuan size has exploded by another 10% in just 11 weeks.
What do you do if you have a mountain of debt you can’t pay? Go deeper into debt! From Michael Snyder at endoftheamericandream.com:
Very few people are talking about it, and even fewer are bothering to object, but by borrowing and spending so much money our politicians are essentially feeding America’s financial future into a wood chipper. It took from the founding of our country all the way to 1981 before the U.S. national debt reached one trillion dollars. Incredibly, we just added more than a trillion dollars to our national debt in less than a month. On April 5th, we were 23.9 trillion dollars in debt, and by May 4th we were 25 trillion dollars in debt. Fear of the coronavirus has caused nearly all of our politicians to suddenly become socialists, and we are being told that trillions more in spending may be coming. This is complete and utter lunacy, and we are leaving future generations of Americans with a mountain of debt that would absolutely crush them. But of course our society may not even last too much longer at the rate we are going. For years I have been loudly warning that our absurd national debt is an existential threat to America’s future, but at this point both major political parties have completely abandoned any sense of fiscal responsibility. Now our national debt is rapidly speeding toward the 26 trillion dollar mark, and the House of Representatives just passed a bill that would borrow and spend an additional 3 trillion dollars that we do not currently have…
Last week, House Democrats unveiled their latest pandemic-relief package. The bill combines aid for families, a bailout for struggling cities and states, and additional funds for testing, tracing, and hospitals. The price tag is about $3 trillion—and it comes just weeks after the president signed an economic-relief package worth about $2 trillion.
Since we are destroying the nation anyway, why don’t we make the grand total a nice round 10 trillion dollars like the progressives at the Atlantic are suggesting?
After all, we added close to 10 trillion dollars to the national debt during the Obama years and hardly anyone seemed to mind.
Of course Trump is trying to outdo Obama. We have already added more than 5 trillion dollars to the national debt while he has been in office, and it looks like more “coronavirus relief bills” could be on the way.
Yes, borrowing and spending money that we do not have gives us an economic boost in the present.
Debt is being destroyed faster than it can be created by the Federal Reserve and the government. From James Howard Kunstler at kunstler.com:
The restless public, cooped up and idled in springtime’s flowering, have watched Wall Street doing just fine while they see the approaching sunset of their own much more modest Paycheck Protection Program and coronavirus relief checks. Late last week, the Dow Jones shot up 455 points the same day that the government announced the worst unemployment numbers since the lows of the Great Depression. Are there two economies in this country? One for people who expect to work for pay, and another for bankers who play shady games with money and receive extravagant bailouts when their games don’t pan out?
Kind of looks like it, a little bit. That tangled pile of cognitive dissonance is liable to catch fire soon like an overactive compost heap as the promised opening-up of America commences and tens of millions of able adults discover that their old jobs, vocations (and paychecks!) will never re-open, not to mention health care plans and pensions. God help us if the stock markets are still chugging up when that recognition sweeps the land.
Never before has the US government caused a recession, or depression, simply by shutting down the economy. From David Stockman at davidstockmanscontracorner.com via lewrockwell.com:
Based on the shocking 6.6 million of new unemployment claims, we’d bet they’ll be some explosive political fireworks soon in this country about Covid-containment versus keeping the main street economy alive. There have now been an unprecedented, off-the charts 9.96 million new unemployment claims in the last two weeks.
For point of reference, it took fully 28 weeks to generate the same level of cumulative new claims after the beginning of the Great Recession. During that interval, the largest weekly number was 387,000 during the week of March 29, 2008.
Even when you scroll forward (not shown) to the worst week after the Lehman Bankruptcy meltdown commenced on September 15, the peak number was only 665,000 during the week of March 28, 2009. So today’s new claims number was 10X higher!
Debt will only take you so far and it looks like global debt is just about out of gas. From David Stockman at peakprosperity.com:
The past 30 years of False Prosperity is over
The coronavirus is now exposing a far more deadly disease: Namely, the poisonous brew of easy money, cheap debt, sweeping financialization and unbridled speculation that has been injected into the American economy by the Fed and Washington politicians.
It has turned Wall Street into a dangerous gambling casino while leaving Main Street buried under mountainous debts, faltering investment in growth and productivity and the hand-to-mouth economics of spending more than you earn.
It has also left the American economy exceedingly vulnerable to external shocks. That’s because 80% of households have no appreciable rainy day funds and businesses have hollowed out their balance sheets and artificially extended their supply chains to the four corners of the earth in order to goose short-run profits and share prices.
However, this unprecedented fragility is becoming evident as public health authorities around the world aggressively move to contain the Covid-19 contagion. This will mean separating workers from their workplaces, consumers from the malls, diners from the restaurants, travelers from the airlines, hotels and resorts and much more like and similar disruptions to the supply-side of the economy.
In short, the world’s supply chains are buckling and freezing-up, thereby causing production and incomes to fall abruptly. In turn, shrunken incomes and cash flows will pull the legs out from under the edifice of debt and speculation that has been piled atop the American economy.
Posted in banking, Business, Civil Liberties, Collapse, Debt, Economics, Economy, Financial markets, Foreign Policy, Geopolitics, Governments, History, Investing, Money, Politics
Tagged CoVid-19 coronavirus, National Debt, Supply Chains, Warfare State, welfare state
America’s debt will inflict misery on Americans for this and many generations to come. From John W. Whitehead at rutherford.org:
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.” ― Frédéric Bastiat, French economist
Let’s talk numbers, shall we?
The national debt (the amount the federal government has borrowed over the years and must pay back) is $23 trillion and growing.
The amount this country owes is now greater than its gross national product (all the products and services produced in one year by labor and property supplied by the citizens). We’re paying more than $270 billion just in interest on that public debt annually. And the top two foreign countries who “own” our debt are China and Japan.
The national deficit (the difference between what the government spends and the revenue it takes in) is projected to surpass $1 trillion every year for the next 10 years.
The United States spends more on foreign aid than any other nation ($50 billion in 2017 alone). More than 150 countries around the world receive U.S. taxpayer-funded assistance, with most of the funds going to the Middle East, Africa and Asia.
Meanwhile, almost 60% of Americans are so financially strapped that they don’t have even $500 in savings and nothing whatsoever put away for retirement, and yet they are being forced to pay for government programs that do little to enhance or advance their lives.
Folks, if you haven’t figured it out yet, we’re not living the American dream.
We’re living a financial nightmare.
The U.S. government—and that includes the current administration—is spending money it doesn’t have on programs it can’t afford, and “we the taxpayers” are the ones who will pay for it.
The deficit and the national debt won’t matter until they matter. From Tyler Durden at zerohedge.com:
The gaping US budget deficit hole is getting bigger with each passing month.
Earlier today, the US Treasury announced that in January (the fourth month of fiscal 2020), the US spent $32.6 billion more than it pulled in, resulting in a deficit that was materially worse than the $11.5BN expected, and also the biggest January deficit since 2011, when the US government spent a net of $49.8 billion.
Total December spending of $405 billion, was 8.8% higher than a year earlier, with the biggest outlays for the month as follows: social security ($91BN), medicare ($87BN), national defense ($53BN), Health ($49BN), Income Security ($39BN), Net Interest ($32BN)and so forth. Meanwhile, receipts increased by a slightly higher 9.5%, from $340BN to $372.3BN, thanks to $217BN in individual income taxes, and $121BN in Social insurance and retirement receipts.
Politicians bloviate, time marches on, and the nation edges ever closer to default. From Tho Bishop at mises.org:
Last night’s State of the Union was particularly noteworthy for its showmanship. Scholarships were given away, medals were awarded, families reunited. At a time when national politics is bad theater, President Trump is clearly its most gifted star.
Trump also knows what sells. As a political figure, he’s motivated not by any consistent ideology, but rather by transactional legislation. Following the performance, an MSNBC pundit noted that the speech was a “microtargeted ad” to various demographics aimed at expanding his base before next year’s election.
Combined with his Super Bowl ads highlighting criminal justice reform, his focus on charter schools and honoring a hundred-year-old Tuskegee airman are aimed at eroding away the Democrats’ 90 percent control of black voters. The cameo by Venezuela opposition leader Juan Guaidó was an appeal to Hispanic families who have fled communist regimes—perhaps a poke at Bernie Sanders. Paid family leave, a policy focus of his daughter, is intended to help him with suburban women.
What doesn’t sell? Fiscal responsibility.
The political equivalent of Crystal Pepsi, the Republican Party has given up its long-standing façade of budgetary restraint. As Donald Trump told donors earlier this year, “Who the hell cares about the budget?”