A Question from Mikey
5:46 PM Tuesday, March 29, 2022
Mikey assumes the interest on US debt will increase dramatically, which will lead to even more debt... In other words, a snowball effect that creates a stagflation environment! (NOT GOOD)
My argument is that we are in uncharted inflationary conditions the likes we have not seen since the 1970's, but our current conditions are far worse than the 70's and the FED has NO economically sound options to work with.
The U.S. national debt has just eclipsed $30 trillion, and the country is faced with a debt/deficit crisis that can only be resolved via unprecedented levels of inflation.
The last 10 years or so (really the last 20 or so) have seen our government act like drunken sailors, blindly haphazardly spending (debt) with no regard for the future of our home and children.
As a layperson looking for an analogy to explain our situation, only one comes to mind. The United States looks and feels like a mafia exploitation scheme where the Mob attains (does not mean buy) controlling interest in a good legal business (United States of America) that produces above average cash-flow, good credit, good reputation and brand, diverse assets, fully funded pension funds, large market share (captured audience), ignorant board of directors, ambitious and greedy managers and most of ALL naive gullible shareholders!
Controlling interest means board control and the MOB runs the business!
BUT, the Mob does not care about the business as a "profitable sustainable entity", they care only about "bleeding" the business for all they can, like:
- siphoning cash,
- steeling pension accounts,
- creating fraudulent vendors (AP) to pay themselves, friends and family
- steeling assets,
- exploiting employees,
- exploiting stockholders,
- gouging customers,
- cooking the books,
- exploiting the once good name and reputation of the business in support of illegal and criminal markets, and
- all other forms of financial exploitation in support of a criminal enterprise that benefits the criminals while;
- destroying every bit of a legally sound, socially beneficial business until nothing else can be extracted as a business,
- then they BURN the buildings down to collect the Insurance money,
- then SELL the land!
Only then will they move on! The shitstorms, chaos, death and destruction is Meaningless to THEM.
There are consequences to the fiscal and monetary policy decisions made over the last 15 + years. 15+ years of unbounded money supply growth and ultra-low interest rates that have put the U.S. at a breaking point.
Today, inflation in the U.S. is roaring and at levels not seen since the early 1980's when the Fed Funds rate was 8-10%.
The problem, to contain today's inflation, the Fed will need to raise rates to mid-single digits, but how can they afford to do that since it would eventually increase the interest on the debt from $300-$400 billion to well over $1 trillion?
In 2001, the U.S. Government was paying ~6.5% interest on its debt. Over the last 20 years, the average interest paid has steadily declined, hitting ~1.6% last year. The biggest beneficiary of the ultra-low interest rate environment in the U.S. has been the federal government. As rates remain at rock bottom levels, interest on the debt is quite manageable. Actually, thanks to cheap money, the government is paying less as it borrows more.
However, there would always come the point when it would be time to pay the piper, and we have reached that moment.
Within the last week I've read about Ecuador's financial turmoil and their bold attempt to stabilize the economy by adopting Bitcoin as a government sanctioned currency. Ecuador abandoned their native currency many years ago in favor of the dollar (read The Economic Hit Man). Comments from the MSM, politicians and economists about Ecuador and many other countries, suffering economic hardship are all the same: "there would always come the point when it would be time to pay the piper, and we have reached that moment."
The 99 percent of us suffering the consequences of bad fiscal and monetary policy do care but have NO control. Many of the 99% may believe they have some control due to being in Congress or The White House, but they don't (smoke, mirrors, ego and corruption). Those that have control do NOT care.
Good question!
Connecting the dots is not easy but it can be done. Who believes that individual U.S. elected government officials (since late 70's) actually have the ability to make fundamental change, benefiting US Citizens?
The time period between JFK's death and Carters last year in office should be considered experimental, in-flux or transitional. Prior to JFK's death, individual elected officials had real power. That power became drastically eroded during the transition years and fundamentally lost as Neo-liberalism morphed into Inverted Totalitarianism from Regan to present day.
Political party is a meaningless concept at the control level.
Party ideologies represent themes like in reality TV shows, WWE wrestling and SNL "point/counter-point". It doesn't mater and designed to preoccupy and distract while others work behind the scenes.