Government Debt

Credit Card Nation: Why The Facebook Killer And The U.S. Congress Have A Great Deal In Common

Most Americans have seemingly convinced themselves that as a society we will never pay a great price for going into so much debt and that we will never pay a great price for the horrendous crimes against humanity that we are committing on a daily basis.  If you don’t understand what I am talking about, just keep reading the rest of this article.  Just as there are consequences for our actions individually, so there are also consequences for our actions as a society.  And although our national day of reckoning has been put off for quite some time, when it does finally arrive the pain is going to be absolutely unimaginable.

Just recently, I was astounded to learn that the total amount of credit card debt in the United States has crossed the trillion dollar mark.  It boggles my mind that so many Americans could be so foolish, because credit card debt is one of the worst forms of debt in existence, and financial experts all over the country have spent an extraordinary amount of time and energy trying to get this message across to people.

But even though people know that going into credit card debt is bad, they just keep on doing it anyway.  We have become a “buy now, pay later” society that gives very little consideration to long-term consequences.

On a national level, we are now nearly 20 trillion dollars in debt, and a historic showdown over government spending and debt threatens to absolutely paralyze the federal government at the end of this month.  At this point many believe that it will be virtually impossible for Congress to avoid a government shutdown on April 29th, and once it begins Donald Trump’s entire agenda will come to a complete and total crashing halt until the crisis is resolved.  The following comes from David Stockman…

In the meanwhile, everything else — health care reform, tax cuts, infrastructure — will become backed-up in an endless queue of legislative impossibilities. Accordingly, there will be no big tax cut in 2017 or even next year. For all practical purposes Uncle Sam is broke and his elected managers are paralyzed.

The Treasury will be out of cash and up against a hard stop debt limit of $19.8 trillion in a matter of months. But long before that there will be a taste of the Shutdown Syndrome on April 28 owing to the accumulating number of “poison pill” “riders” to the CR.

These include the virtual certainty of riders to the House bill to “defund” Planned Parenthood and sanctuary cities. Other extraneous amendments will also possibly include funds demanded by the White House to start the Mexican Wall, enhance deportations and fund some of Trump’s $54 billion defense increase.

I am so glad that Stockman mentioned Planned Parenthood, because the decision whether or not to continue funding Planned Parenthood is going to be one of the central issues of this upcoming crisis.

Currently, the U.S. government gives Planned Parenthood roughly $500,000,000 a year.  By law, none of that money is supposed to be used to provide abortions, but everyone knows what the real deal is.

Some Planned Parenthood clinics do provide other services, but at the end of the day Planned Parenthood’s core business is abortion.  In fact, since Roe v. Wade was decided in 1973 they have killed far more babies than anyone else in the United States by a very wide margin.

And for decades, the U.S. government has been the number one source of funding for Planned Parenthood.  In fact, there are questions as to whether or not Planned Parenthood would be able to continue as a viable business without money from the federal government.

Over the years, when members of Congress have voted to shower Planned Parenthood with hundreds of millions of dollars a year, they have not done it in the heat of the moment.  Rather, their votes have been the result of cold, calculated decision-making processes.

In other words, the members of Congress that have been voting to keep funding Planned Parenthood year after year have the blood of millions of dead children on their hands, and there is very little difference between them and Facebook killer Steve Stephens.

When Stephens broadcast the cold-hearted murder of a 74-year-old man on Facebook on Sunday, he instantly became a worldwide celebrity.  And even though most people in the country have now seen his face, he continues to somehow elude authorities.

What Stephens has done is absolutely horrific, and when he is finally caught he will pay greatly for his crimes.

Just like Stephens, America is on the run today.  We keep thinking that we will never have to pay a price for the tens of millions of children that we have killed, and our government continues to fund the slaughtering of the innocents that goes on every single day in this nation.

But now Congress is going to be given one more chance to make the right decision.

The Republicans have control of the White House, the Senate and the House of Representatives.  They have the power to defund Planned Parenthood, but it is going to take a tremendous amount of resolve.

That is because under the current rules it is going to take 60 votes to get a spending agreement through the Senate, and so the Republicans will need at least 8 Democratic votes to get any bill to Trump’s desk.

Sadly, the Democrats are pledging to stretch out a government shutdown indefinitely if Republicans try to defund Planned Parenthood.

So what will the Republicans do?  Well, they could change the rules in the Senate to require only a simple majority vote on spending bills, and that would essentially be the “thermonuclear option”.

Or they could give in, but if they do that it would likely mean that Planned Parenthood will never be defunded, because the Republicans will never have a better opportunity than they do right now.

And I have a feeling that is what is going to happen.  I have a feeling that the Republicans are going to give in at some point and agree to keep giving Planned Parenthood half a billion dollars a year.

If that is indeed what happens, both the Democrats and the Republicans that help pass such a bill will be cold-blooded killers just like Facebook killer Steve Stephens, only those Democrats and those Republicans will have far more blood on their hands than Stephens does.

Most people do not realize this, but without a doubt this is one of the most critical moments in modern American history.  And if the funding of Planned Parenthood continues, I have a feeling that is going to mean that our national day of reckoning is much closer than most people would dare to imagine.

If we do not stop what we are doing, someday our crimes will catch up to us, and the debt that we will owe at that point will be far beyond what we can bear to pay.

The Debt Crisis Of 2017: Once Their Vacation Ends, Congress Will Have 4 Days To Avoid A Government Shutdown On April 29

April 2017 could turn out to be one of the most important months in U.S. history that we have seen in a very long time.  On April 6th, Donald Trump attacked Syria on the 100th anniversary of the day that the U.S. officially entered World War I, and now at the end of this month we could be facing an unprecedented political crisis in Washington.  On Friday, members of Congress left town for their two week “Easter vacation”, and they won’t resume work until April 25th.  What this means is that Congress will have precisely four days when they get back to pass a bill to fund government operations or there will be a government shutdown starting on April 29th.

Up to this point, there has been very little urgency by either party to move a spending bill forward.  It is almost as if everyone is already resigned to the fact that a government shutdown will happen.  The Democrats will greatly benefit from a government shutdown because they can just blame the entire mess on the Republicans.  But for the GOP, this is essentially the equivalent of political malpractice.

To me, there is simply no way that Congress is going to be able to agree on a bill that funds the entire government in just four days.  And it turns out that this upcoming deadline comes exactly on the 100th day of Trump’s presidency…

The U.S. government is poised to shut down on Day 100 of Donald Trump’s presidency, unless Congress can pass a new spending bill or a continuing resolution before the current one expires on April 28.

Since Congress is currently on a two-week recess, there will be a sense of urgency to get a new bill passed once they reconvene on April 25. Leaders in both chambers would have four days to craft a new proposal that each side can agree on and get it on the president’s desk for Trump to sign.

If the Republicans control the White House, the Senate and the House of Representatives, why will it be so difficult to get an agreement on a spending bill?

Well, first of all, look at how difficult it was for the Republicans to agree on a bill to repeal and replace Obamacare.  At this point, it doesn’t look like that is going to happen at all.

More importantly, any bill to fund the government is going to require 60 votes in the Senate.  The “nuclear option” that the Republicans just used to push the Gorsuch Supreme Court nomination through is not available in this case under current Senate rules because a spending bill of this nature would not qualify.

So the Democrats have leverage, and they plan to use it to the maximum.  Senate Minority Leader Chuck Schumer is already promising to block any spending bill that includes funds for a border wall or that defunds Planned Parenthood…

The threat from Senate Minority Leader Chuck Schumer and other Democratic leaders sets up a climactic first showdown with the president, particularly with their inclusion of Trump’s signature border wall proposal.

“If Republicans insist on inserting poison pill riders such as defunding Planned Parenthood, building a border wall, or starting a deportation force, they will be shutting down the government and delivering a severe blow to our economy,” Schumer said in a statement.

Up until now, Trump hasn’t needed Democratic votes to stock his cabinet or advance the repeal of Obamacare, but a spending bill keeping the government open is subject to a 60-vote threshold in the Senate.

Do you understand what this means?

President Trump is going to be under an immense amount of pressure to end the government shutdown once it begins, but to do so will mean that he has to give up his goal of getting a border wall.

Do you think that Trump will just throw in the towel and forget about his beloved border wall after giving countless speeches promising one?

It is a game of chicken between Trump and the Democrats, and I don’t think that either side will give in easily.

Of even greater importance is the debate over the funding of Planned Parenthood.

There are members of the Freedom Caucus that will absolutely not vote for any spending bill that includes funding for Planned Parenthood.  But without the Freedom Caucus, there aren’t enough Republican votes to get a spending bill through the House of Representatives.

Alternatively, Senate Minority Leader Chuck Schumer is vowing that his party will block any funding bill that attempts to defund Planned Parenthood in the Senate.

If Planned Parenthood is not defunded now, it never will be defunded.  This is one of the most pivotal moments in recent U.S. political history, and the outcome is going to have extraordinary consequences for our nation.

For those that are optimistic that there will not be a government shutdown, do you actually expect me to believe that this battle over the funding of Planned Parenthood will somehow get resolved in just four days?

Give me a break.

And of course there are dozens of other major issues that have to be resolved as well.  For example, Senator McCain is promising note to vote for any bill unless it includes an enormous increase in military spending, while many Senate Democrats would be very much against such a move.

I don’t see any way that a government shutdown is going to be avoided at this point, and the longer it goes on the more financial markets are going to get rattled.

Meanwhile, we continue to get even more signs that a substantial slowdown has begun for the U.S. economy.  Last week, we learned that only 98,000 jobs were added in March, and that was only about half of what most analysts were expecting.

And since it takes approximately 150,000 jobs a month just to keep up with population growth, that means that we are losing ground.

At the same time, the Atlanta Fed’s GDPNow forecasting model is now projecting that U.S. GDP growth for the first quarter of 2017 will be just 0.6 percent on an annualized basis.

That is absolutely pathetic, and as I have said before, I wouldn’t be surprised at all if we actually end up with a negative number for the first quarter.

If we do indeed get a negative number for the first quarter and that is followed by another negative number for the second quarter, that will mean that a new recession has already started right now but we just haven’t gotten official confirmation yet.

And lots of other things are already happening which have not happened since the last recession.  For instance, this is the first time since the last financial crisis when there has been no growth for commercial and industrial lending for at least six months.

In addition, commercial bankruptcies spiked during the last recession, and now it is happening again…

Commercial bankruptcy filings, from corporations to sole proprietorships, spiked 28% in March from February, the largest month-to-month move in the data series of the American Bankruptcy Institute going back to 2012.

Of course consumer bankruptcies are rising at an alarming rate as well.  The following comes from Wolf Richter…

In December, bankruptcy filings rose 4.5% from a year earlier. In January they rose 5.4%. It was the first time consumer bankruptcies rose back-to-back since 2010. I called it “a red flag that’ll be highlighted only afterwards as a turning point.”

In March, consumer bankruptcy filings rose 4% year-over-year, to 77,900, the highest since March 2015, when 79,000 filings occurred, according to the American Bankruptcy Institute data.  The turning point has now been confirmed.

If you would like, I could keep talking about the bad economic news for a couple thousand more words.  U.S. credit card debt has just surpassed the one trillion dollar mark, a major crisis has arrived for the U.S. auto industry, thousands of retail stores are closing all over America, our pension funds are underfunded by trillions of dollars, and the U.S. national debt is now sitting at a grand total that is just shy of 20 trillion dollars.  The only reason that we have not crossed that 20 trillion dollar mark yet is because the debt ceiling deadline has already passed, and that is another thing that Congress needs to address very quickly if they want to avoid a major crisis.

Needless to say, the last thing that we need at this point is another war or two on top of everything else.

Unfortunately, a U.S. aircraft carrier strike group headed by the USS Carl Vinson is heading toward North Korea right at this moment, and Russia and Iran are promising to “respond with force” to any new U.S. attacks on Syria.  I will be writing quite a bit more about all of this on End Of The American Dream later today.

Those that were hoping for some sort of “reprieve” under Donald Trump can forget all about that now.  The pace of global events is really starting to accelerate, and the U.S. is already in a more precarious position than it was at any point in 2016.

The clouds have been building for a very long time, and now the storm is almost upon us.  I hope that you have been getting prepared, because a day of reckoning for the United States of America is closing in very rapidly.

The Debt Ceiling Deadline Has Passed, And Now The Biggest Test Of Donald Trump’s Presidency Begins…

Trump First Weekly Address - Public DomainOn Wednesday, the temporary suspension of the debt ceiling ended, and so now the federal government is not going to be able to go into any more debt until the debt ceiling is raised.  For the moment, the Trump administration can implement “emergency measures” to stay under the debt limit, but it won’t be too long before we get to a major crisis point because the federal government is quickly running out of cash.  Already, the U.S. Treasury has less cash on hand than Apple or Google, and that cash balance is going to keep on dropping until the debt ceiling is finally lifted.

You may remember that the debt ceiling became a major issue a couple of times during the Obama years.  Last time around, Barack Obama and the Republicans in Congress agreed to a horrendous deal which suspended the debt ceiling until several months after the 2016 election…

Since President Barack Obama signed the “Bipartisan Budget Act” on Nov. 2, 2015 there had been no legal limit on the amount of money the federal government could borrow until now. That law included a section entitled “Temporary Extension of Public Debt Limit.” It said that the law imposing a limit on the federal debt “shall not apply for the period beginning on the date of the enactment of this Act and ending on March 15, 2017.”

During the 16 and a half months between the signing of that deal and today, the U.S. national debt rose by a whopping $1,414,397,000,000.

But now the U.S. national debt will not be allowed to rise by another penny until the debt ceiling is raised or suspended once again.

The Trump administration is pushing hard to get the debt ceiling raised, and this is a complete reversal from how Donald Trump felt about the debt ceiling back in 2013.  The following comes from the L.A. Times…

Trump sided with hard-liners in 2013, publicly opposing an increase. “I cannot believe the Republicans are extending the debt ceiling — I am a Republican & I am embarrassed!” he tweeted then.

Trump was actually right about the debt ceiling in 2013, and he is wrong now.

We simply cannot afford to keep adding trillions of dollars to the national debt.  What we are doing to future generations of Americans is beyond criminal, because we are literally destroying their future just so that we can enjoy an inflated standard of living that we do not deserve today.

Treasury Secretary Steven Mnuchin has already begun to implement “extraordinary measures” to keep us under the debt ceiling.  The first step that was taken was the suspension of the sale of SLGS securities…

“Today,” Mnuchin wrote, “Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities. SLGS are special-purpose Treasury securities issued to states and municipalities to assist them in conforming to certain tax rules. These securities count against the debt limit. The suspension of SLGS sales will commence on March 15, 2017, and continue until the debt limit is either raised or suspended. As in the past, it is likely Treasury will utilize additional extraordinary measures.”

The federal government will be able to keep going for a little while by implementing such “extraordinary measures”, but the Treasury cash balance is going to continue to dwindle and at some point a major squeeze is going to happen.

As things get tighter and tighter, the Trump administration will become increasingly desperate to get the debt ceiling raised.  As I wrote about yesterday, the key for Trump is going to be finding 218 votes in the House of Representatives that will be willing to go along with him.

You would think that since Republicans control the House that this should be easy, but the truth is that there are a lot of conservative Republicans that are not inclined to agree to a debt ceiling increase without substantial accompanying budget cuts.

The proposed budget that Trump released this week is getting a lot of criticism from the left for cuts to social programs, but the truth is that it actually doesn’t reduce the deficit at all…

President Trump’s “skinny” budget blueprint for 2018 features a proposed $54 billion increase in defense spending and an equal number of spending cuts from the smallest part of the federal budget.

That means his changes won’t add to next year’s projected $487 billion deficit. But they won’t reduce it, either.

And remember, that “$487 billion” figure is just for show.  During the Obama years the U.S. national debt increased by an average of well over a trillion dollars a year, and that is almost certainly going to continue for years to come as long as the debt ceiling is raised.

Republicans are supposed to be the party of fiscal responsibility.

So now is their big test.

If they raise the debt ceiling and continue adding more than a trillion dollars a year to the national debt, they will lose all credibility with conservative voters on fiscal issues.

But if they try to force the federal government to start living within its means that is going to severely harm the economy in the short-term.

Donald Trump is going to have to try to figure out a way to navigate this crisis.  He has already promised that he will not touch Social Security and Medicare, and those are the two biggest drivers of our budget deficits.  In fact, it is being projected that entitlement spending and interest on the debt will eat up every single penny that the federal government takes in within 20 years.

So if Trump won’t touch the big entitlement programs, where will he possibly find enough cuts to satisfy the fiscal conservatives in Congress?

Without them, Trump does not have enough votes to raise the debt ceiling.

In addition, many of the conservatives in Congress absolutely hate the new Republican health care plan, and they hope to use this debt ceiling crisis as leverage to change the bill.

If Trump can’t work out something with conservatives, perhaps he could turn to the Democrats.  But most Democrats are extremely resistant to work with him on anything after all that has been said and done, and so for Trump to get a deal with them he would have to make extreme concessions.

This represents the biggest political test for the Trump presidency so far, and if we get down the road a couple of months and nothing gets done, this debt ceiling crisis could spark the kind of financial crisis that I describe in my novel entitled “The Beginning Of The End“.

Barack Obama pushed things right to the brink a couple of times, but he was savvy enough politically to never let things go over the edge.

Now it is Trump’s turn, and somehow he has got to find a way to get the debt ceiling raised without making extremely deep compromises that would gut the rest of his agenda.

And he had better get to work on this quickly, because time is running out and the clock is ticking…

$21,714 For Every Man, Woman And Child In The World – This Global Debt Bomb Is Ready To Explode

Debt Bomb Globe - Public DomainAccording to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.  Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number.  If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.

So if you have a family of four, your family’s share of the global debt load would be $86,856.

Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe.  Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all.  So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher.

Of course global debt repayment will never actually be apportioned by family.  The reason why I am sharing this example is to show you that it is literally impossible for all of this debt to ever be repaid.

We are living during the greatest debt bubble in the history of the world, and our financial engineers have got to keep figuring out ways to keep it growing much faster than global GDP because if it ever stops growing it will burst and destroy the entire global financial system.

Bill Gross, one of the most highly respected financial minds on the entire planet, recently observed that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.

And he is precisely correct.  Everything might seem fine for a while, but one day we are going to hit the wrong bump at the wrong time and the whole thing is going to go KA-BOOM.

The financial crisis of 2008 represented an opportunity to learn from our mistakes, but instead we just papered over our errors and cranked up the global debt creation machine to levels never seen before.  Here is more from Bill Gross…

My lesson continued but the crux of it was that in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities.

There is always a price to be paid for going into debt.  It mystifies me that so many Americans seem to not understand this very basic principle.

On an individual level, you could live like a Trump (at least for a while) by getting a whole bunch of credit cards and maxing all of them out.

But eventually a day of reckoning would come.

The same thing happens on a national level.  In recent years we have seen examples in Greece, Cyprus, Zimbabwe, Venezuela and various other European nations.

Here in the United States, more than 9 trillion dollars was added to the national debt during the Obama years.  If we had not taken more than 9 trillion dollars of consumption and brought it into the present, we would most assuredly be in the midst of an epic economic depression right now.

Instead of taking our pain in the short-term, we have sold future generations of Americans as debt slaves, and if they get the chance someday they will look back and curse us for what we have done to them.

Many believe that Donald Trump can make short-term economic conditions even better than Obama did, but how in the world is he going to do that?

Is he going to borrow another 9 trillion dollars?

A big test is coming up.  A while back, Barack Obama and the Republican Congress colluded to suspend the debt ceiling until March 15th, 2017, and this week we are going to hit that deadline.

The U.S. Treasury will be able to implement “emergency measures” for a while, but if the debt ceiling is not raised the U.S. government will not be able to borrow more money and will run out of cash very quickly.  The following comes from David Stockman…

The Treasury will likely be out of cash shortly after Memorial Day. That is, the White House will be in the mother of all debt ceiling battles before the Donald and his team even see it coming.

With just $66 billion on hand it is now going to run out of cash before even the bloody battle over Obamacare Lite now underway in the House has been completed. That means that there will not be even a glimmer of hope for the vaunted Trump tax cut stimulus and economic rebound on the horizon.

Trump is going to find it quite challenging to find the votes to raise the debt ceiling.  After everything that has happened, very few Democrats are willing to help Trump with anything, and many Republicans are absolutely against raising the debt ceiling without major spending cut concessions.

So we shall see what happens.

If the debt ceiling is not raised, it will almost certainly mean that a major political crisis and a severe economic downturn are imminent.

But if the debt ceiling is raised, it will mean that Donald Trump and the Republicans in Congress are willingly complicit in the destruction of this country’s long-term economic future.

When you go into debt there are consequences.

And when the greatest debt bubble in human history finally bursts, the consequences will be exceedingly severe.

The best that our leaders can do for now is to keep the bubble alive for as long as possible, because what comes after the bubble is gone will be absolutely unthinkable.

March 2017: The End Of A 100 Year Global Debt Super Cycle Is Way Overdue

Global Debt Super Cycle - Public DomainFor more than 100 years global debt levels have been rising, and now we are potentially facing the greatest debt crisis in all of human history.  Never before have we seen such a level of debt saturation all over the planet, and pretty much everyone understands that this is going to end very, very badly at some point.  The only real question is when it will happen.  Many believe that the current global debt super cycle began when the Federal Reserve was established in 1913.  Central banks are designed to create debt, and since 1913 the U.S. national debt has gotten more than 6800 times larger.  But of course it is not just the United States that is in this sort of predicament.  At this point more than 99 percent of the population of the entire planet lives in a nation that has a debt-creating central bank, and as a result the whole world is drowning in debt.

When people tell me that things are going to “get better” in 2017 and beyond, I find it difficult not to roll my eyes.  The truth is that the only way we can even continue to maintain our current ridiculously high debt-fueled standard of living is to grow debt at a much faster pace than the economy is growing.  We may be able to do that for a brief period of time, but giant financial bubbles like this always end and we will not be any exception.

Barack Obama and his team understood what was happening, and they were able to keep us out of a horrifying economic depression by stealing more than nine trillion dollars from future generations of Americans and pumping that money into the U.S. economy.  As a result, the federal government is now 20 trillion dollars in debt, and that means that the eventual crash is going to be far, far worse than it would have been if we would have lived within our means all this time.

Corporations and households have been going into absolutely enormous amounts of debt as well.  Corporate debt has approximately doubled since the last financial crisis, and U.S. consumers are now more than 12 trillion dollars in debt.

When you add all forms of debt together, America’s debt to GDP ratio is now about 352 percent.  I think that the following illustration does a pretty good job of showing how absolutely insane that is…

If your brother earns $100,000 in annual income and borrowed $10,000 on his credit card, he could consume $110,000 worth of stuff.  In this example, his debt to his personal GDP is just 10%.  But what if he could get more credit year after year and reached a point where his total debt reached $352,000 but his income remained the same.  His personal debt-to-GDP ratio would now be 352%.

If he could borrow at super low interest rates, maybe he could sustain the monthly loan payments. Maybe?  But how much more could he possibly borrow?  What lender would lend him more?  And what if those low rates began to rise?  How much debt can his $100,000 income cover?  Essentially, he has reached the end of his own debt cycle.

The United States is certainly not alone in this regard.  When you look all over the industrialized world, you see similar triple digit debt to GDP figures.

When this current debt super cycle ultimately ends, it is going to create economic pain on a scale that will be unlike anything that we have ever seen before.  The following comes from King World News…

That is the inevitable consequence of 100 years of credit expansion from virtually nothing to $250 trillion, plus global unfunded liabilities of roughly $500 trillion, plus derivatives of $1.5 quadrillion. This is a staggering total of $2.25 quadrillion. Therefore, the question is not what could go wrong since it is guaranteed that all these liabilities will implode at some point. And when they do, it will bring misery to the world of a magnitude that no one could ever imagine. It is of course very difficult to forecast the end of a major cycle. As this is unlikely to be a mere 100-year cycle but possibly a 2000-year cycle. It is also impossible to forecast how long the decline will take. Will it be gradual like the Dark Ages, which took 500 years after the fall of the Roman Empire? Or will the fall be much faster this time due to the implosion of the biggest credit bubble in world history? The latter is more likely, especially since the bubble will become a lot bigger before it implodes.

And there are certainly lots of signs that a global slowdown is already beginning.  For example, global trade growth has fallen below 2 percent for only the third time since the year 2000.  On each of the other occasions, we witnessed a horrible recession take place.  For more signs that economic conditions are deteriorating, please see my previous article entitled “Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning“.

Of course much of the globe is already in the midst of a horrible economic crisis.  Brazil is in the middle of their worst recession ever, and people are literally starving in Venezuela.  A new round of debt problems has erupted in Europe, with Greece, Portugal and Italy being the latest flashpoints.

Just like in 2007, many are mocking the idea that the a major economic downturn is coming to the United States.  They believe that the ridiculously high stock market valuations of today can stick around indefinitely, and they are putting their faith in politicians.

But it won’t be too long before a new economic crisis begins in America and the kind of civil unrest that I portray in “The Beginning Of The End” erupts all across the country.

I just don’t understand why more people cannot see this.  Government debt, corporate debt and consumer debt have all been growing much, much faster than the overall economy.  Can someone please explain to me how that could possibly be sustainable in the long-term?

Someone that I considered to be a mentor but that has since passed away once said that things would seem like they would be getting better for a little while before the next crash comes.

And it turned out that he was precisely correct.  We are in a season of time when economic conditions have appeared to be getting a little bit better in the United States, and this has blinded so many people to the truth of what is about to happen to us.

Is It Just A Coincidence That The Dow Has Hit 20,000 At The Same Time The National Debt Is Reaching $20 Trillion?

Dow Fueled By DebtThe Dow Jones Industrial Average provides us with some pretty strong evidence that our “stock market boom” has been fueled by debt.  On Wednesday, the Dow crossed the 20,000 mark for the first time ever, and this comes at a time when the U.S. national debt is right on the verge of hitting 20 trillion dollars.  Is this just a coincidence?  As you will see, there has been a very close correlation between the national debt and the Dow Jones Industrial Average for a very long time.

For example, when Ronald Reagan took office in 1991, the U.S. national debt had just hit 994 billion dollars and the Dow was sitting at 951.  And as you can see from this chart by Matterhorn.gold via David Stockman, roughly that same ratio has held true throughout subsequent presidential administrations…

Dow Fueled By Debt

During the Clinton years the Dow raced out ahead of the national debt, but an “adjustment” during the Bush years brought things back into line.

The cold hard truth is that we have been living way above our means for decades.  Our “prosperity” has been fueled by the greatest debt binge in the history of the world, and we are greatly fooling ourselves if we think otherwise.

We would never have gotten to 20,000 on the Dow if Barack Obama and Congress had not gotten us into an extra 9.3 trillion dollars of debt over the past eight years.

Unfortunately, most people do not understand this, and the mainstream media is treating “Dow 20,000” as if it is some sort of great historical achievement…

The average began tracking the most powerful corporate stocks in 1896, and has served as a broad measure of the market’s health through 22 presidents, 22 recessions, a Great Depression, at least two crashes and innumerable rallies, corrections, bull and bear markets. The blue chip reading finally cracked the 20,000 benchmark for the first time early Wednesday.

During the current bull market, the second longest in history, the Dow has more than tripled since March 2009.

Since Donald Trump’s surprise election victory, the Dow has now climbed by approximately 2150 points.

And it took just 64 calendar days for the Dow to go from 19,000 to 20,000.  That is an astounding pace, and financial markets around the rest of the planet are doing very well right now too.  In fact, global stocks rose to a 19 month high on Wednesday.

So where do we go from here?

Well, if Donald Trump wants to see Dow 30,000 during his presidency, then history tells us that he needs to take us to 30 trillion dollars in debt.

Of course that would be absolute insanity even if it was somehow possible.  Each additional dollar of debt destroys the future of our country just a little bit more, and at some point this colossal bubble is going to burst.

But you can’t tell most of the “financial experts” these things.  Most of them simply believe that the “market always goes higher over time”…

The “market always goes higher over time,” Todd Morgan, chairman of Bel Air Investment Advisors. “The lesson here is that through wars, recessions, elections, impeachments, financial crises, and on and on, investing for the long term in high-quality stocks is the key to building wealth. … We are telling our clients that you can’t time the market. Think long term. Stay the course. We expect the market to see Dow 30,000 in my lifetime, and for my grandchildren to see Dow 50,000 in their lifetime.”

My hope is that the market will continue to go up.  But nobody can deny that valuations are already at absurdly high levels, and the only way that this party can keep going is to continue to fuel it with more and more debt.

But for the moment, there is a tremendous amount of optimism out there, and most experts expect the Dow to continue to set new highs.  In fact, CNBC says that whenever the Dow crosses a new threshold like this it usually means good things for investors…

CNBC looked at market data from the past 30 years and zeroed in on the times when the Dow has crossed levels like 2,000, 3,000, 4,000 … all the way up to the 19,000 level it hit in November. At those times, investors can typically expect traders to push it up even higher, according to data from Kensho. Not only does the Dow go up, but it outperforms the S&P 500 index along the way.

But as USA Today has explained, not all Americans are benefiting from this stock market rally…

The breakthrough came just four trading days into Trump’s presidency, a whirlwind in which the billionaire has reaffirmed his commitment to strengthen the U.S. economy and create more jobs and higher wages for workers. Still, nearly half of Americans have not benefited from the so-called “Trump Rally,” which has generated more than $2.2 trillion in paper gains for the Wilshire 5000 Total Stock Index since Election Day. The reason: only 52% of Americans polled by Gallup last April said they “have money invested in stocks” — the lowest stock ownership rate in the 19 years Gallup has tracked the data and down sharply from 65% in 2007 before the financial crisis.

Hopefully the good times will continue to roll for as long as possible.

But there is no possible way that they can keep going indefinitely.

For decades, our debt has been growing much faster than our GDP has.  By definition, this is an unsustainable situation.  At some point we will have accumulated so much debt that our financial system will no longer be able to hold up under the strain.

Many were convinced that we would reach that point before the U.S. national debt hit 20 trillion dollars, and yet here we are.

So how much higher can we go before the bubble bursts?

That is a very good question, and I don’t know if anyone has the right answer.

But for President Trump, this is going to present him with quite a dilemma.

Either he can keep the debt party going for as long as possible, or he can try to get us to take some tough financial medicine right now.

If an attempt is made to deal with our debt problems now, we will experience severe economic pain almost immediately.

But if the can keeps being kicked down the road, our long-term prognosis is just going to keep getting worse and worse.

And if we try to delay the inevitable indefinitely, at some point the laws of economics are going to make our hard choices for us.

So let us celebrate “Dow 20,000”, but let us also understand that it is far more likely that we will see “Dow 10,000” again before we ever see “Dow 30,000”.

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.

The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy

barack-obama-looking-into-a-mirror-public-domainBarack Obama is one of the biggest “Keynesians” of all time, but unfortunately most Americans don’t even understand what that means.  In this article, I am going to share with you the primary reason why Barack Obama has been able to prop up the U.S. economy over the past eight years.  If Barack Obama had not taken the extreme measures that he did, we would be in the midst of a historic economic depression right now.  But by propping things up in the short-term, he has absolutely demolished our long-term economic future.  But like most politicians, Obama has been willing to sacrifice the future for short-term political gain.

If you take any basic college course in economics, you are going to learn about John Maynard Keynes.  Without a doubt, Keynes was one of the most famous economists of the 20th century, and one of the things that he believed was that governments should go into debt and spend more money when an economic downturn strikes.  By injecting additional funds into the economy during a time of crisis, he believed that the severity of recessions and depressions could be reduced.  This approach ultimately become known as “Keynesian economics”, and in the post-World War II era virtually the entire world embraced it at least to some degree.  Here is more on Keynes from Investopedia…

An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression. Subsequently, the term “Keynesian economics” was used to refer to the concept that optimal economic performance could be achieved – and economic slumps prevented – by influencing aggregate demand through activist stabilization and economic intervention policies by the government. Keynesian economics is considered to be a “demand-side” theory that focuses on changes in the economy over the short run.

Keynesian economists correctly point out that there is a “multiplier effect” to government spending.  In other words, when the government spends money it ends up in the hands of ordinary people.  In turn, those people spend that money on various goods and services that they need, thus boosting overall economic activity.  And the more the money circulates, the more the economy is stimulated.  So one dollar of additional government spending does not just add one dollar to GDP.  Rather, the impact on GDP is often significantly greater than that.

Of course the bad news is that whenever the government borrows money it is stealing consumption from the future.  So we are literally destroying the future that our children and our grandchildren were supposed to have in order to make the present look a little bit brighter.

When Barack Obama entered the White House, the U.S. was in the midst of the worst financial crisis since the Great Depression.  The Bush administration had already begun to ramp up spending, but Barack Obama took “government stimulus” to ridiculous new levels.  The national debt has risen by an average of more than 1.1 trillion dollars a year while Obama has been in charge, and this fiscal year we are on pace to add more than 2 trillion dollars to the debt.

At this moment, the U.S. national debt is a whopping $19,901,545,151,126.51, and it will cross the 20 trillion dollar mark by the time Donald Trump is inaugurated on January 20th.

But when Barack Obama was inaugurated, the national debt was only 10.6 trillion dollars.  That means that we have added about 9.3 trillion dollars to the debt since that time.

So we have borrowed and spent 9.3 trillion dollars under Obama that we did not have.  But because of the “multiplier effect”, that 9.3 trillion dollars actually had a far greater impact on the U.S. economy.

Let’s be conservative and just double that number.  So that would give us an 18.6 trillion dollar overall impact on U.S. economic activity.  Spread over eight years, that comes to an average GDP impact of 2.325 trillion dollars a year.

But over the last eight years U.S. GDP has only been averaging about 16 trillion dollars a year.  So if you took away 2.3 trillion dollars a year, that would be about one-eighth of our entire economy.

In other words, without all of this debt that Barack Obama and Congress have been getting us into, we would be in the worst economic depression in U.S. history right now.

And I haven’t even factored in state and local government debt, corporate debt or household debt.  The truth is that I am not exaggerating one bit when I say that we are enjoying a debt-fueled standard of living that we simply do not deserve.

But even with all of this debt, the U.S. economy has still not been performing really well.  In fact, Barack Obama is going to be the only president in U.S. history to not have a single year when U.S. GDP grew by at least three percent.

Despite what many in the mainstream media are telling you, the reality of the matter is that Donald Trump is going to inherit an economy that is deeply troubled.  If you doubt this, please see my previous article entitled “11 Very Depressing Economic Realities That Donald Trump Will Inherit From Barack Obama“.

Donald Trump is talking about cutting taxes and reducing regulations, and all of those things are good, but ultimately those measures are not going to matter that much.

What is going to matter is what Donald Trump decides to do about our exploding debt.

If Donald Trump wants the U.S. economy to continue to remain at least somewhat stable in the short-term, he is going to have to keep piling up debt like Obama has.  Because if Trump and the Republicans decide that they want to get our debt under control, that will plunge us into a horrifying economic depression almost immediately.

But if Donald Trump continues to steal money from future generations of Americans at the same pace that Barack Obama has been doing, he will literally be destroying the future of America.  It will be a crime on a scale that is almost beyond words, and if they get a chance to do it, future generations of Americans will look back and curse him for what he has done to us.

So Donald Trump is really in a no-win situation when it comes to the economy.

The only way that he can match Obama’s performance is to do what Obama did, but by doing so he would literally be killing the future.

As a nation we have been consuming far more wealth than we produce for a very, very long time, and the only way that we have been able to do this is because we have been able to go into so much debt.

But now a day of reckoning is fast approaching, and I am not sure if Donald Trump even realizes that he will soon be faced with some incredibly heartbreaking choices.

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