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Foreigners Are Dumping U.S. Debt At A Record Pace And Our $20 Trillion National Debt Is Poised To Become A Major Crisis

Dollar Spiral - Public DomainWhile most of the country has been focused on the inauguration of Donald Trump, a very real crisis has been brewing behind the scenes. Foreigners are dumping U.S. debt at a faster rate than we have ever seen before, and U.S. Treasury yields have been rising. This is potentially a massive problem, because our entire debt-fueled standard of living is dependent on foreigners lending us gigantic mountains of money at ultra-low interest rates. If the average rate of interest on U.S. government debt just got back to 5 percent, which would still be below the long-term average, we would be paying out about a trillion dollars a year just in interest on the national debt. If foreigners keep dumping our debt and if Treasury yields keep climbing, a major financial implosion of historic proportions is absolutely guaranteed within the next four years.

One of the most significant aspects of the “Obama legacy” is the appalling mountain of debt that he has left behind. As I write this article, the U.S. national debt is sitting at 19.944 trillion dollars. During Obama’s eight years, a staggering 9.3 trillion dollars was added to the national debt. When you break that number down, it comes to more than a hundred million dollars every single hour of every single day while Obama was living in the White House. In just two terms, Obama added almost as much to the national debt as all of the other presidents before him combined.

What Obama and the members of Congress that cooperated with him have done to future generations of Americans is beyond criminal.

Unfortunately, hardly anyone is talking about this right now, but the consequences are about to start catching up with us in a major way.

The only possible way that our game of “borrow, spend and stick future generations with the bill” can continue is if the rest of the world participates. In other words, we need them to continue to buy our debt.

Unfortunately for us, a major shift is now taking place. According to Zero Hedge, the most recent numbers that we have show foreigners dumping more than 400 million dollars of U.S. debt over the past 12 months…

The wholesale liquidation of US Treasuries continued in November, when according to the just released TIC data, foreign central banks sold another $936 million in US paper in November 2016, which due to an offset of $892 million in buying one year ago, means that for the 12 month period ended November, foreign central banks have now sold a new all time high of $405 million in the past 12 months, up from a record $403 million in LTM sales as of one month ago.

This isn’t a catastrophic emergency just yet, but if we continue down this road we will eventually get there. The only way that the U.S. government can continue on with business as usual is if it can continue to borrow billions upon billions of dollars at ultra-low interest rates. Now that Treasury yields are rising, some people are beginning to get quite nervous

As we pointed out one month ago, what has become increasingly obvious is that both foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US paper, is liquidating their holdings at a disturbing pace, something which in light of the recent surge in yields to over 2 year highs, appears to have been a prudent move.

In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia and other petroleum exporting nations, it is to provide the funds needed to offset the drop in the petrodollar, and to backstop the country’s soaring budget deficit. In all cases, it may suggest concerns about a spike in future debt issuance by the US, especially now under the pro-fiscal stimulus Trump administration.

Someday historians are going to look back in horror at what took place during the Obama years.

The amount that was added to the national debt during his years comes to “approximately $75,129 for every person in the United States who had a full-time job in December”. There is no possible justification for this. But because there haven’t been any catastrophic consequences so far, most people assume that this theft from future generations of Americans must be okay.

In a previous article, I explained that government debt greatly stimulates the economy. If we had not borrowed and spent 9.3 trillion dollars over the past eight years, we would be in the worst economic depression in U.S. history right now.

But most people don’t understand this. They don’t get the fact that we are living way, way above our means. And they also don’t get the fact that the only way that Donald Trump can keep the party going is to borrow and spend just like Obama was doing.

And even with all of Obama’s recklessness, he was still the only president in all of U.S. history not to have a single year when U.S. GDP grew by at least three percent. The following comes from the Hill

Despite the trillions of dollars in government spending pumped into the economy every year under Obama, America has never once enjoyed an annual GDP growth rate at 3 percent or higher, making Obama the least successful president—at least when it comes to economics—in modern history.

A historically sluggish GDP isn’t the only concern worth mentioning. Under Obama’s tenure, average annual food stamp enrollment has risen by more than 15 million (compared to 2008). The home ownership rate is the lowest it has been since 1995, the earliest year provided in the U.S. Census Bureau’s most recent report. The Bureau of Labor Statistics reports more than 590,000 Americans say they are not in the labor force because they are discouraged, a figure that’s 26 percent higher than even the worst annual average under George W. Bush. Additionally, the employment-population ratio has been continuously below the 60-percent threshold under Obama; the last time it was this low was 1985.

Now that Donald Trump is president, he is going to have some very hard choices in front of him.

If Donald Trump and the Republicans stop borrowing and spending so much money, the economy will immediately start suffering.

But if they do continue down the same path that Obama put us on, it is a recipe for national suicide.

So either we take our medicine now, or we risk completely destroying the bright future that our children and grandchildren were supposed to enjoy.

Wake up America, because time is running out.

19.4 Trillion Dollars In Debt – We Have Added 1.1 Trillion Dollars A Year To The National Debt Under Obama

Debt Debt And More Debt - Public DomainIn 2006, U.S. Senator Barack Obama’s voice thundered across the Senate floor as he boldly declared that “increasing America’s debt weakens us domestically and internationally. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”  That was one of the truest things that he ever said, but just a couple of years later he won the 2008 election and he turned his back on those principles.  As I write this article, the U.S. national debt is sitting at a grand total of $19,402,361,890,929.46.  But when Barack Obama first entered the White House, our federal government was only 10.6 trillion dollars in debt.  That means that we have added an average of 1.1 trillion dollars a year to the national debt under Obama, and we still have about six more months to go.

Even though Barack Obama is on track to be the first president in all of U.S. history to not have a single year when the U.S. economy grew by 3 percent or better, many have still been mystified by the fact that the economy has been relatively stable in recent years.

But the explanation is rather simple, actually.  Anyone can live like a millionaire if the credit card companies will lend them enough money.  You could even do it yourself.  Just go out and apply for as many credit cards as possible and then spend money like there is no tomorrow.  In no time at all, you will be living the high life.

Of course many of you would immediately object that a day of reckoning would come eventually, and you would be right.  Just like for those that abuse credit cards, a financial day of reckoning is coming for America too.

In the United States today, our standard of living is being massively inflated by taking trillions of dollars of future consumption and moving it into the present.  The politicians love to do this because it makes them look good and they can take credit for an “economic recovery”, but what we are doing to our children and our grandchildren is beyond criminal.

On average, we are stealing more than 100 million dollars from future generations of Americans every single hour of every single day.  We are complete and utter pigs, and yet most Americans don’t see anything wrong with what we are doing.

At this point, our national debt is more than 30 times larger than it was just 40 years ago, and many (including myself) have argued that it is now mathematically impossible for the U.S. government to ever pay off all of this debt.

The only thing that we can do now is to keep the party going for as long as possible until the day of reckoning inevitably comes.

Under Obama, our national debt will come close to doubling.  What that means is that during Obama’s eight years we will accumulate almost as much debt as we did under all of the other presidents in U.S. history combined.

Right now, the U.S. government is responsible for about a third of all the government debt in the entire world.  Fortunately the financial world continues to lend us gigantic mountains of money at ridiculously low interest rates, but if that were to ever change we would be in an enormous amount of trouble very rapidly.

For instance, if the average rate of interest on U.S. government debt simply returns to the long-term average, we would very quickly find ourselves spending more than a trillion dollars a year just in interest on the national debt.

And as the Baby Boomers age, our “unfunded liabilities” threaten to absolutely swamp us.  By the year 2025, it is being projected that “mandatory” federal spending on “unfunded liabilities” such as Social Security, Medicaid and Medicare plus interest on the national debt will exceed total federal revenue.  What that means is that we will spend every penny we bring in before a single dollar is spent on the military, homeland security, paying federal workers, building roads and bridges, etc.

In recent years the Federal Reserve has also had a “buy now, pay later” mentality.

While Obama has been in the White House, the size of the Fed balance sheet has grown by about two and a half trillion dollars.  The goal has been to artificially pump up the economy, but when the Federal Reserve creates money out of thin air it is actually a tax on all of us.  The purchasing power of every dollar that we will spend in the future has been diminished thanks to the Fed, but most Americans don’t understand this.

What most Americans want is for someone to “fix things” in the short-term, and not much consideration is ever given to the long-term damage that is being done.

I know that the phrase “trillion dollars” is thrown around a lot these days, and to a lot of people it doesn’t have a whole lot of meaning anymore.  But the truth is that it is an absolutely enormous amount of money.  In fact, if you went out right this moment and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

A final example of our “buy now, pay later” mentality can be seen in our ridiculously bloated trade deficit.  We consume far more than we produce as a nation, and we buy far more from the rest of the world than they buy from us.  As a result, tens of thousands of businesses and millions of good paying jobs have gone overseas, and many of our formerly great manufacturing cities are now vast industrial wastelands.  Our economic infrastructure has been gutted at a pace that is staggering, and yet most Americans still don’t understand what has been done to them.

If you visit your typical “big box” retail store today, where is most of the stuff made?  Instinctively, most of you would answer “China”, and that is not too far from the truth.

We buy far, far more stuff from China then they buy from us.  This makes them steadily wealthier, and it makes us steadily poorer.  Unfortunately, our trade deficit with China has gotten much, much worse while Barack Obama has been in the White House.

At the end of Barack Obama’s first year in office, our yearly trade deficit with China was 226 billion dollars.  Last year, it was more than 367 billion dollars.

Are you starting to see a trend?

Our long-term economic and financial problems have greatly accelerated under Barack Obama, but our leaders feverishly work to make things look okay in the short-term and so most Americans don’t notice what is happening.

Unfortunately, this Ponzi scheme cannot go on forever and a day of reckoning is coming.  And when it arrives, the pain that it is going to cause for ordinary Americans is going to be far greater than most of us would dare to imagine.

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