The Only Question

16 Oct

$20 TRILLION National Debt! [courtesy Google Images]

$20 TRILLION National Debt!
[courtesy Google Images]

On September 30th, A.D. 2016, the U.S. government closed out the 2016 fiscal year with an “official” National Debt of $19,573,444,713,936.79.

Makes me laugh.

Government can calculate the U.S. National Debt to the penny. How responsible!

And yet, government has no idea what happened to $6.5 trillion that was given to the Pentagon and subsequently disappeared.

In any case, the National Debt grew by $1,422,827,047,452.46 ($1.4 trillion) in fiscal 2016. That averaged out to over $100 billion in deficit spending per month.

That annual deficit spending increase has been a de facto $12,000 subsidy for every American household.

The fiscal 2016 deficit spending (debt) amounts to roughly 7.5% of the entire US economy. Without that 7.5% in debt-based “stimulation,” where do you suppose the economy would be right now?

In fact, fiscal 2016 had the third largest yearly increase in government debt in US history. The only two previous years in which the debt increased even more were during the financial crisis of the Great Recession. (The top three deficit spending years occurred during the Obama administration.)

There was no reported financial crisis in 2016—but there is an upcoming presidential election.

The enormous increase in national debt has subsidized the U.S. economy.

The official total National Debt (almost $20 trillion) amounts to a $165,000 subsidy per American household. Where would your household be if it had to pay your $165,000 “fair share” of the National Debt? Where would your household be if you hadn’t received that $165,000 “subsidy”?

How much longer can government continue to keep the U.S. economy on life support with $100 billion/month subsidies?

Where will the economy go if that subsidy is reduced or even stopped? Recession? Depression?

Was the $1.4 trillion deficit-spending subsidy for fiscal 2016 largely based on government’s determination to prevent a depressed economy that might adversely affect the election of Hillary Clinton and/or the reelection incumbent, “establishment” politicians?

If so, what do you suppose will happen to that subsidy once the November election is over? How soon might we expect government to cut its appetite for more deficit spending?

First quarter of next year? Second?

Q: What happens to the economy if/when government stops borrowing to subsidize the economy?

A: The economy tanks.

The U.S. economy is not running on its own strength. It is, instead, on life support provided by currency that government has borrowed and injected into the economy.  If the borrowing falls, so will government’s deficit spending. If deficit spending falls, so will the U.S. economy.

Note that for the past year, the Federal Reserve and other central banks have repeatedly declared that they can do no more with their monetary policies (interest rates and currency supply) to stimulate the economy—and therefore, the burden of economic stimulation must now be shifted to government’s fiscal policy (tax rates and government spending).

Do you believe that the central banks have exhausted their monetary resources in a vain attempt to stimulate the U.S. and global economies? Do you believe that it’s now strictly up to government(s) to stimulate economies with fiscal policies of reduced taxation and increased spending?

Do you believe that while the Federal Reserve has been working mightily to stimulate the U.S. economy with monetary policies, the U.S. government has been sitting on the sidelines and offering little assistance by way of fiscal policies?  If so, what the heck do you suppose government’s deficit spending of $1.4 trillion during fiscal 2016 has been if not evidence of an active fiscal policy of increased government spending?

My point is that, while the Fed says it’s done all it can and it’s now up to government fiscal policy to save the economy, the Fed has implied that the government has been doing nothing and it’s time for government to step up.  But, au contraire, mon ami.  

The government’s fiscal policy of deficit spending has been pumping billions per year into the U.S. economy at record rates ever since the onset of the Great Recession.   Thus, the Fed is lying or mistaken insofar as it implies that government has, so far, neglected to adjust fiscal policy to end the recession.

If government has already been busting its hump to borrow and spend more (in the form of deficit spending) to stimulate the U.S. economy, how much more “fiscal policy” can we expect from the government?  I’d say, Not much.  In fact, there’s a good chance that government’s deficit spending will be cut in A.D. 2017 and therefore we may see significant’s less “fiscal policy” intended to stimulate our economy.

If it’s true that:  1) the Fed’s ability to stimulate the U.S. economy with monetary policy has been exhausted; and 2) the government’s ability to stimulate with fiscal policy is diminished or perhaps even exhausted–then it follows that, so far, all of the Fed’s horsemen (monetary policies) and all of the government’s men (fiscal policies) have proved insufficient to put our Humpty-Dumpty economy back together again.

Given that government has already and repeatedly engaged in record-setting deficit spending over the past seven years, odds are that deficit spending (based on borrowing) will be less in fiscal 2017 than it was in fiscal 2016.

How is the economy likely to react if it gets no further stimulus from monetary policy (the Fed claims they’ve already done all they can) and suffers an actual loss of government’s fiscal policy stimulus (less deficit spending) in fiscal 2017 (which, incidentally, is not an election year)?

Will the economy most likely go up or down?

If government borrowing and deficit spending decline, what parts of the U.S. government budget are most likely to suffer cutbacks?

So-So Security and Medicare now comprise the largest parts of annual deficit. They consume the majority of US tax revenue and force government to borrow unsustainable sums of currency, even in good times.  Worse, their costs are rising.

Neither program is properly funded. Some analysts claim that government will ultimately need to borrow $42 trillion to make these programs solvent.

$42 trillion more debt?!

On top of the current $20 trillion in National Debt?!

To fully fund So-So Security and Medicare we have to triple the National Debt?

There’s no way that’s going to happen.

Therefore, So-So Security and Medicare can’t (and therefore, won’t) keep government’s promises.

It follows that if/when government’s access to credit is reduced and government spending is cut, So-So Security and Medicare will be among the first casualties.

It’s inevitable.

The only question is When.


If you’re hoping government will provide you with full So-So Security or Medicare payments even five years from now, your hope may be vain.

If you’re hoping government will continue to indirectly subsidize your household with another $12,000 in deficit spending in fiscal 2017, that hope will almost certainly be dashed.

Government is broke. Insolvent. Bankrupt. That’s been true since at least A.D. 1971 when Nixon closed the gold window and refused to redeem foreign-held dollars with gold. Arguably, it’s been true since A.D. 1933 when Roosevelt seized the gold and refused to redeem domestic dollars with gold. Government has successfully danced around and evaded that truth for decades.  But it’s been bankrupt, just the same.

Sooner or later, it will become impossible to ignore government’s bankruptcy, the National Debt will hit the fan, and the U.S. and world economies will suffer a catastrophic failure.

The U.S. and global economies are houses of cards. Their destiny is to fall. That destiny is inevitable.

The only question is When.


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9 responses to “The Only Question

  1. Oliver Medaris

    October 17, 2016 at 11:39 PM

    Maybe it’s time for a worldwide Jubilee year!! What would happen if all debts were forgiven?
    Maybe it’s time to make only gold or silver coin a tender in payment of debts on the same day!!
    Maybe it’s time for all of us to unite as if we were all one person. We could even Love our friend as we Love ourselves. Maybe we could DECLARE PEACE … Rather than War in These States of ours.
    what if in the first 100 days of our new President’s term he declared peace?
    Or we could just nuke “em all and be the only people on this planet…

  2. Adask

    October 18, 2016 at 2:14 AM

    What would happen if we had a Jubilee and canceled all the debt? Well, as I’ve tried to explain repeatedly on this blog, one man’s debt is another man’s asset. For every $1 trilllion in National Debt there’s a correlative $1 trillion in US bonds that are being held as paper assets by banks, pension funds, etc. If we cancel the debt, we must also cancel the correlative paper debt-instruments (U.S. bonds). If we cancel $1 trillion in debt we must also cancel $1 trillion in paper assets. If we cancel $20 trillion in National Debt, we must also cancel $20 trillion worth of U.S. bonds.

    I doubt that the U.S. and even global economies could withstand the cancellation of $20 trillion worth of U.S. bonds.

    Point: We can’t pay the debt, and we can’t cancel the debt. What are we going to do?

    A: crash.

  3. Oliver Medaris

    October 18, 2016 at 12:28 PM

    If we had no money at the same day that we owed no money, how much money would we owe?
    0-0=0 The same thing happens to me each month. Once I pay my rent & bills I have no money & I owe no money. 0-0=0 this would also balance the budget for a 19 trillionth of a second.If i made a penny a week & spent a penny a week I’d be breaking even for as long as this occured. But if I planted a tomato plant & it survived it would profit me more than a penny. It’s just a reset. a good time to start gold & silver coins. If all paper money would buy nothing tomorrow we’d still have houses,cars, tomatoes, beef,electricity, and all physical things we own today. The freeze dried food people could eat until the barter system opened the grocery stores. The farmers could eat til the grocery stores could barter barter for some Constitutional money.
    Use your imagination to fill in ALL the rest of the process. Instead of dismissing it without a thought ask yourself can Your G-d is creative enough (Pun intended) to make it work. not only would we start Constitutional money again it would be the Money G-d created in the first place.

  4. Adask

    October 18, 2016 at 12:40 PM

    If government could cancel all of the “official” National Debt of $20 trillion, it would also void $20 trillion in U.S. Bonds. The loss of $20 trillion in debt and $20 trillion in paper assets might seem like a “fair trade” to some. However, I think you have to remember that we live in a fractional reserve banking system that allows US banks to lend up to 9X the face value of whatever collateral the banks hold in their vaults. This implies that if half ($10 trillion) of the US bonds “backing” the $20 trillion National Debt were being held in bank vaults as collateral under 9X fractional reserve banking, it’s conceivable that that banks might’ve loaned out up to $90 trillion for consumer loans, building new factories, investing in the stock markets, etc. If that were true, the cancellation of $10 trillion in National Debt could lead to the cancellation of $10 trillion in U.S. bonds which might cause banks to call in up to $90 trillion in loans that were based on the $10 trillion US bond “collateral”.

    Even if the fractional reserve banks were only lending 3X the amount of collateral held in their vaults, if $10 trillion in debt and US bonds were cancelled, $30 trillion in bank loans might have to be called in. I don’t think the US or global economies could withstand losses of that magnitude.

  5. Oliver Medaris

    October 18, 2016 at 12:41 PM

    One man’s debt is another man’s Potential asset. You left out a word. If I owe rent, my landlord can’t buy anything at the grocery with what I never pay him. He might be able to convince a man with a silver dollar to loan it to finance buying a tomato if he promised to give him back $1.06 in a month. (bank representation). Usury.

  6. Oliver Medaris

    October 18, 2016 at 12:43 PM

    Fractional. did you mean Fictional??

  7. Oliver Medaris

    October 18, 2016 at 12:51 PM

    If G-d is on our side who, what need I fear? Fictional bankers? Really?Are they going to place a lien on Heaven & the universe? Should we warn G-d not to go through with anything like this?
    ? Will the Bankers get Him? Poor G-d.Formerly omnipotent. Now he owes the Bank god.

    • cathy baldwin

      October 20, 2016 at 1:38 AM

      Oliver, yes it may be that He is quite worried and shaky on just what to do. He may need some counsel. Those big important rich men and all. LOL.

  8. dog-move

    October 18, 2016 at 2:24 PM

    this whole thing must continue to infinity, it cannot stop, the momentum cannot stop,everyone on the planet must keep the shuffle moving foward, no jubilee, no break for the poor, just higher and higher cost to live. i tell folks the debt will never be paid down, you better hope this thing keeps on to the moon, mars, even higher or the collapse will finally arrive. 20 trillion is a speed bump along the way. enjoy the ride.


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