U.S. Plunges Into Death Trap

Abandon Hope, All Ye Who Enter [The Daily Reckoning] June 19, 2024 [WEBSITE]( | [UNSUBSCRIBE]( U.S. Plunges Into Death Trap Annapolis, Maryland [Brian Maher] BRIAN MAHER Dear Reader, The United States government debt runs presently to $34.8 trillion — and gallops by the second, by the minute, by the hour, by the day. Dr. Paul Krugman believes he holds the solution. He believes it would bring an overall stability to the predicament. In the good doctor’s telling: Congress need merely nick deficits 2.1% each year for the following 30 years. The Congressional Budget Office projects that the United States debt-to-GDP will scale an economy-sapping 166% by 2054. Yet if Congress takes aboard his guidance, 2054’s debt-to-GDP ratio would equal today’s debt-to-GDP ratio — a manageable menace. Fat Chance Yet will Congress execute even a modest budget nicking? We are far from convinced that it will. Nor is Mr. Andrew Wilford of the National Taxpayers Union Foundation. From whom: [Krugman’s proposal] translates to reductions of over $45 trillion, or more than 40 percent of the projected deficit over that period. This year alone, Congress would have to cut $782 billion from the deficit — just slightly less than our entire national defense budget. Congress struggles just to avoid increasing the deficit every year, imagining that it can easily find the willpower to cut the equivalent of the military budget on a permanent basis is ludicrous. And even if such willpower existed, it would do nothing to reduce our debt-to-GDP ratio or leave us any room to respond to unexpected fiscal challenges or crises. Former colleague David Stockman directed the Office of Management and Budget under Ronald Reagan. David discovered that the slenderest budget item is sealed deep within fortress walls. It is ringed by armed guards. And they are ready to repel any invader. Forget About It For example: David proposed shuttering the national endowments for the arts and humanities and the Corporation for Public Broadcasting. They were not proper functions of the federal government, David argued. And there was more than ample private philanthropy to make any shortages good. David says the combined budgets of these programs amounted to a mere six hours of federal spending annually. Six hours of spending — out of a 365-day calendar! But closing out those six hours proved impossible. David was poor Sisyphus pushing his rock eternally uphill… only to have it roll eternally downhill upon him. David says not even Reagan would cancel these slight draws upon the Treasury. It’s Hopeless David ultimately submitted a modest 25% trimming to Capitol Hill. Would Capitol Hill accept this 25% trim? It would not. It ceded David “maybe an 8% reduction for a couple of years until the various K Street lobbies and assorted forces of high-toned culture completely restored the funding.” That is, no elimination. Not even a 25% trim — but an 8% nicking — and a temporary nicking at that. [*** ATTENTION NEEDED *** ASSESSMENT STATUS: INCOMPLETE]( This automated message is for you. Our systems indicate that you did not complete [your 2 minute trading assessment]( that’s required to join our newest wealth club. We can only let 50 people in today… and spots are filling up fast. There’s still time left to complete your assessment and secure your spot! [Click Here To Complete This 2 Minute Assessment]( Here is a question: If you cannot even put a sustained 8% nick in the national endowments for the arts and humanities or the Corporation for Public Broadcasting… how are you going to get true cuts anywhere else? Here is the shortened answer: You cannot. Here is the lengthy answer: You cannot. Thus we heave Dr. Krugman’s modest proposal into our hellbox. Into the Debt/Death Trap We are convinced the United States is ensnared with a debt trap. It cannot wriggle free. Imagine a fellow… This is a wastrel sunk impossibly in debt — credit card debt in our example. Spiraling interest payments begin to swamp him. He must take on an additional credit card in order to satisfy interest payments on the original. Yet he must soon take on another credit card… to service the interest on the card he previously took on… which he took on to service the interest on the first. That is, he must borrow money to service previously borrowed money. Reduce the thing to its essentials and you will find: The money he borrows is dead money. It lacks all productive purpose. He is merely shoveling it into a roaring fire. Before he knows what has struck him… he is undone… bankrupt. Well friend, here you have the government of the United States. Snowballing Debt It is the reckless and improvident fellow just described — who opens new credit cards to service the interest on existing ones — who is the slave of nonproductive debt. Projected interest payments on the nation’s debt presently will likely exceed $892 billion this year. They will likely increase year upon year. The nation is far along the ruinous path. How far down the ruinous path has the United States strayed? Mr. Alasdair Macleod, economist: The day of reckoning for unproductive credit is in sight… Malinvestments of the last 50 years are being exposed by the rise in interest rates, increases which are driven by a combination of declining faith in the value of major currencies and contracting bank credit. The rise in interest rates is becoming unstoppable… The interest bill is already growing exponentially… Clearly, it won’t take much more of a credit squeeze and the increasing likelihood of a buyers’ strike to push the interest bill to over $1.5 trillion… [Secret Gold Back currency RUINING Biden’s plans for a digital dollar?]( [Click here for more...]( There is a secret currency that’s beginning to spread across America. You only have a limited time to claim one of these “Gold Dollars” for yourself. You’ll receive one of these [“Gold Dollars” as a FREE gift]( once you upgrade your account… [Click Here To Watch This Short 2 Minute Video]( Irrespective of central bank policy, the shortage of credit is driving borrowing rates higher, and the cost of novating maturing debt is rising, if the credit is actually available — which increasingly is rarely the case. It is an old-fashioned credit crunch, not really seen since the 1970s. And it has only just started… The big picture is of an asset bubble which has come to an end. And by any standards, this one was the largest in recorded history. It is our sincere hope this fellow is wrong. It is our profound fear this fellow is correct. The Fed’s Out of Tricks Yet cannot the Federal Reserve and its brother central banks reach into the deep trick bag into which they reached last decade — interest rate suppression, quantitative easing and the rest? Will not these magic tricks prove adequate next time? No says Mr. Macleod. Thus we are informed: The era of interest rate suppression is over. G7 central banks are all deeply in negative equity, in other words technically bankrupt, a situation which can only be addressed by issuing yet more unproductive credit. These are the institutions tasked with ensuring the integrity of the entire system of bank credit. This is not a good background for a dollar-based global credit system that is staring into the black hole of its own extinction. Just so. Yet with the highest respect, sir, we have heard this “doom and gloom” before. In fact, we have heard it issue from an orifice upon our very face, the one directly beneath the nasal base. For three decades — at least — these cries have come issuing. And for three decades it has been cries of wolf. In each instance the financial system has been knocked horizontal… it has shortly regained the vertical. Whether under its own steam or assistance from the financial authorities, it has gotten up. Why should next time prove different? Why This Time Is Different Here Mr. Macleod inform us why “this time is different”: This time, the Global South, the nations standing to one side of all this but finding their currencies badly damaged by unfavorable comparisons with a failing dollar, a dollar forced into higher interest rates in a world that knows of nowhere else to go — this non-financial world is on the edge of abandoning American hegemony for a new model emerging from Asia… The pressure for a whole new monetary system for the emerging nations is increasing… There is only one answer, and that is to abandon the dollar. Thus the United States confronts the wages of its monetary and fiscal sins. It has cast all restraint to the scattering winds. It has sacrificed the morrow upon the altar of the present. And it has made its dollar headache the world’s migraine. We hazard the world — in turn — will make that dollar the United States’ migraine… Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: Gold is trading at record levels. It’s getting harder and harder for the average American to get their hands on physical gold. [click here for more...]( But Jim Rickards is adamant about the importance of building a physical gold portfolio — especially in the desperate times we’re heading into. [That’s why he wants to send you a Goldback.]( This is a sheet of real gold that has historically increased in value at TWICE the rate of the spot price of gold. It’s one of the most valuable ways to hold what Jim believes is the safest asset in the world. [Click here to learn how to get yours.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Brian Maher] [Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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