Sunday, February 7, 2016

In Case You Missed It - A New Debt Milestone

We are in uncharted waters.  Within the last few days, the US National Debt, as tracked by the US Debt Clock, exceeded 19 Treel-yun Dollars. 

Every box has an explanation at the source for those unfamiliar with all the terms.  No nation in the history of the world has been this indebted.  My take is that this doesn't stop.  None of the candidates left on the Stupid side has seriously addressed getting control of this monster, and the Evil Party side is actively advocating making it worse.  They're gonna ride this mother into the ground. 


  1. We long ago passed the point of no return in regards to the debt.
    It's simply not possible to pay it. Default in some fashion is
    inevitable. It may be that those in Mordor on the Potomac know this
    and simply don't care. They plan on doubling down and getting as rich as they personally can till the wheels fall off then retreating to their bunkers.

  2. A trap has to be seductive and fool the victim. A really interesting trap to catch monkeys is to put some of their favorite food inside a small hole in a hollow tree. The hole is just large enough for the monkey to put it's hands in but once it has a handful of the food it cannot remove it's hand. Of course all the monkey would have to do is drop the food and it could run away. But simple greed completes the effectiveness of the trap. The hunter runs up and quickly captures the monkey before the monkey can realize what has happened.

    The U.S. voters and politicians were trapped by our greed. It's too late. $19 trillion is an unbelievable number and we cannot ever pay it back. But in addition to that we cannot even stop spending more than we take in. Just that alone would be a huge victory. If we could simply stop borrowing money and spend no more than we take in that would be huge. There is a third problem and that is the interest. Today interest rates are low but as sure as the sunrise someday soon we will see inflation and increasing interest rates. Pick a nice round interest rate like 10% and calculate the interest on $19 trillion. It isn't pretty.

    I don't know how this will be dealt with but there is an incredibly simple was: Simply print up (technically nothing is actually printed) $19 trillion and buy back all the loans/debt/bonds/notes. Simple as that and all obligations to debt holders are met and we would owe nothing. The biggest problem with this solution is our politicians and their inability to work together.

  3. I don't think we can simply create 19 trillion dollars and buy back all our debt. The debt holders in China or where ever are all aware that money isn't worth anything. It has to be done much more slowly and gradually, and you run the permanent risk that they lose faith in our money.

    No fiat money system can survive if the majority of users suddenly lose faith in it.

    On the other hand, we're in a dollar bull market now, and the dollar has gone up over 30% in the last few years - against a lot of other fiat currencies that really aren't worth anything, either. So it hasn't happened - yet - that holders of the dollars think they're worthless. Now, I think this is what I call, "the least disgusting girl at the dance theory". They don't really like dollars, they're just less disgusting than Euros or Rubles or whatever.

    But, yeah, the guys in power know the system is going to collapse. I recall quoting Ted Kennedy saying that in my first real post here back in 2010.

    Peggy Noonan wrote in an October 2005 column ( here ) about a cocktail party story from Ted Kennedy’s nephew. “Everyone was laughing. Then, writes Mr. Lawford, Teddy “took a long, slow gulp of his vodka and tonic, thought for a moment, and changed tack. ‘I’m glad I’m not going to be around when you guys are my age.’ I asked him why, and he said, ‘Because when you guys are my age, the whole thing is going to fall apart.’

  4. Just out of curiosity, what's your prediction on when the debt will go parabolic due to the snowball effect of interest. I realize I'm asking a rather difficult question, but what do you think?

    1. I don't think it's predictable. Too many factors are involved and most of them depend on politicians and other semi-rational people.

      All the currencies in the world rise and fall like leaves floating in a flood. No currency is anchored to anything. Could they all collapse? Could they somehow create a logjam and hold themselves up? I think that's what the central planners want.

      Wish I could tell you.

  5. We absolutely can simply create 19 trillion dollars and buy back all our debt. We actually have been doing it for the last 7 years. The Fed now owns most of our national debt and the did it by creating money out of thin air. China is one of the big owners in our debt but pales by how much we own. All federal debt is payable in dollars at the discretion of the government and the owner of the debt has virtually no recourse to the fed. That is we can recall the loans, pay them off or extend them and all the owner of the bonds/notes can do is 'take it' or sell it on the private market. The FED holds all the cards. This is not a new idea, I believe it was about 7 years ago the suggestion was made to mint ten $1 trillion coins of platinum (the face value would be $1 trillion but the bullion value would be about $2000) and use them to buy back the debt. This would be a simple thing to do but full of political landmines which is why politicians would balk. It would essentially inflate or money but that would be SOOO much better than default.

    This debt is a real problem, Obama has screwed us. It's gonna take awhile but when this is over history will not look favorably on Obama, the Democrats AND the Republicans for what they have done. Watch Venezuela.

    The real problem is what we choose to do next. What we need to do is stimulate business and limit the ability of other countries to use us as a dumping ground for their products. We need to repair and build up our economy.

  6. What makes the issue of our debt interesting and difficult to predict is that we aren't the only ones in this predicament. Most nations are in far over their heads also. In fact the dollar is doing fairly well
    compared to most other currencies...this has been in part due to energy. Now that the price of oil is tanking and American production is faltering things can start getting more dicey.

    Our situation is often compared to the German Weimar republic where a wheelbarrow full of Marks would not buy a loaf of bread. But at that time most other industrial nations were not floating in a sea of debt so Germany was up the creek with no paddle. Now almost ALL industrial nations carry a massive debt load and huge liabilities. So in a sense we are in uncharted territory. If everyone holds their breath and turns a blind eye to the oceans of debt this charade could actually go on for quite a while. But all it would take is one country of significant means demanding their debt be paid off with something other than officially printed toilet paper and all hell could break lose.