"Cap’n Biden's Trillions"
Full speed head on election year spending...
by Bill Bonner
Youghal, Ireland - "Here’s a shocker. A high government official – Jerome Powell – is trying to warn Congress that it is headed over a fiscal waterfall. Business Insider: "America is racking up dangerous amounts of debt because of its excessive spending, and future generations are likely to suffer the consequences, Jerome Powell said. "The US federal government's on an unsustainable fiscal path," the Federal Reserve chair said in a "60 Minutes" interview broadcast on Sunday. "The debt is growing faster than the economy."
Fiscal deficits over the past four years alone have totaled about $9 trillion, which has helped to more than triple the national debt to a record $34 trillion in the past two decades, Treasury data shows. ‘Unsustainable’ means it can’t go on. But it’s already gone on for a long, long time. Since 1970, US GDP rose from $5 trillion to $25 trillion – a five times increase. US debt meanwhile rose from $350 billion to $34 trillion – or nearly a 100x increase.
This will not come as a shock to anyone. Everyone knows it. But it has gone on for so long, most people – if they think about it at all – must think it is perfectly sustainable. After all, it’s been this way for half a century.
A Trillion Here…What is new about this…is not really new at all. It’s just the pattern of fiscal tomfoolery holding steady. It begins with small deficits….allowing spending to rise too. It wasn’t until 1982 that US debt went over $1 trillion. It took another 27 years, until 2009, to increase the debt by $10 trillion.
Gradually the deficits increase…and then, all of a sudden, they are mammoth. From 2009 to today – just 15 years – the debt has increased by $22 trillion. And now, based on the first 5 months of this fiscal year, the deficit is headed for around $2.5 trillion…which will be added to the national debt.
What Chairman Powell is signaling is not a change in direction, but a change in speed. The direction was set in 1971 when the US switched to a fake money. It was slow going at first, unlearning all of the lessons of the real money world. The wisdom of countless generations had been distilled as instincts: …a penny saved is a penny earned…waste not, want not... a borrower nor a lender be…
All of this ‘common sense’ had to be replaced with uncommon new habits. Balance the budget? Cut out unnecessary spending? Turn the lights off when you leave a room? Who does that anymore? In this new and altogether remarkable world, deficits didn’t matter. Nutty? Yes. And finally, someone – other than ourselves – is spreading the alarm.
A Trillion There…Alan Greenspan. Ben Bernanke. Janet Yellen. None of them thought debt was worth mentioning. And so, while the men and women at the helm changed…no course correction was made. The ship just went further and further towards the lip of the financial world, where economies plunge into chaos and catastrophe. And now what?
This warning will come like a fire-alarm test in a cruise ship. No way are people going to go out onto a cold deck in their underwear. ‘The ship has never sunk before,’ they’ll say to themselves; ‘it won’t be this time either.’
Meanwhile, it’s full speed ahead. Cap’n Joe Biden will spend as much as possible in preparation for the November election. Money for Israel. Money for the Ukraine. Money for the chip industry. Money for the firepower industry. Money for DEI and WTF. Money for everything. Money for everyone. The money is already flowing all over the place. Tickets to the Superbowl, for example, are edging towards $10,000.
But wait. What if Mr. Trump wins? Ahem.
The Other ‘T’ Word: This is the same Donald Trump who pestered Jerome Powell to lower interest rates…to make it easier to borrow…back in 2017. And this is the same Donald Trump who ballooned up the biggest deficit in US history – over $3 trillion. He now says that if he is elected, one of his first acts will be to fire Jerome Powell. Barrons: "Trump Says He Would Replace 'Political' US Fed Chair Powell."
"In an interview published Friday, Trump accused Powell, who he as president first appointed to run the independent US central bank, of being "political," suggesting Powell may move ahead with interest rate cuts to help the Democratic party win reelection. "I think he's going to do something to probably help the Democrats," Trump said in an interview with Fox Business published on Friday, referring to the upcoming presidential elections in November.
Cutting rates is just what Powell has not done. Yet. Instead, he said he wanted to see inflation firmly at his 2% target level before cutting rates…and he has warned Congress and the public that this borrowing, printing, and spending will have to be brought under control. But Trump is right; if he sticks with his positions, and really wants to bring overspending under control, Powell will have to go."
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Full screen recommended.
And on the Good Ship "US Economy", we're the band...
Folks, it has been a privilege playing with you.
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