Here we go again. Next stop for the national debt is $24 trillion. My guess is the debt will be closer to $30 trillion by 2021. Does it matter?
Let’s answer the question first. Then, we’ll do the math.
In 2002, in a discussion of unfunded tax cuts, it’s reported Vice President Dick Cheney told the Treasury Secretary, “You know, Paul, Reagan proved that deficits don’t matter. We won the mid-term elections, this is our due.” Treasury Secretary Paul O’Neill was speechless.
In 2009, Elaine Floyd, CFP, wrote, “There will always be plenty of investors interested in buying government securities. The appetite for U.S. Treasury obligations among foreign governments, pension plans, and private investors theoretically would allow our government to borrow many trillions of dollars. Thanks to its taxing power and high credit rating, our government’s line of credit is virtually unlimited.” (“The Financial Advisor’s Guide to Savvy Social Security Planning for Boomers,” by Elaine Floyd, CFP, Horsesmouth, LLC, pages 151-152.) Floyd might want to read this: [Foreign Central Banks Liquidate Record $405 Billion In US Treasuries As China Sells Most US Paper Since 2011].
So does government debt matter? Yes. If it didn’t, Venezuelans would be basking in their wealth. Instead, the riots are now deadly. This week, the president has raised the minimum wage by 60% and is giving away free homes. [If you want a more complete answer, click here: ContraKrugman Ep. 58 Only Idiots Worry About the National Debt.]
Today, in Venezuela, arguing government debt doesn’t matter would be absurd. Same could be said about Puerto Rico, Zimbabwe, Brazil, Argentina, Greece, Italy, Spain, Cypress, Russia, and China; just to name a few.
Now let’s guess what our national debt will be by January 1, 2021. Before Trump’s inauguration, the Congressional Budget Office (CBO) estimated national debt at $29 trillion by 2027. Backing up that estimate, the number would be $24 trillion by 2021. So this we know: the CBO will be wrong. [Learning From CBO’s History Of Incorrect ObamaCare Projections]
Let’s look at the last five presidents and how the national debt grew during their first terms.
Given what you know about President Trump, do you think he will aspire to come in last?
It wasn’t a secret during his campaign and it is not now: [Pence Admits The Obvious—Trump’s Tax Cuts Could Increase The Deficit]. I voted for President Trump because I didn’t want Hillary, not because I thought he would shrink the government. What we know after his first 100 days: Trump has no plans to shrink the government. His “skinny budget” kept spending the same and simply rearranged the money flows. The ease in which the debt ceiling discussion was kicked to October and the speed in which a $1.1 trillion spending package found agreement, confirms nothing has changed. The swamp-dwellers are in charge. [For my earlier discussion of “the way things are is the way things are,” read: Obamacare Lite Autopsy.]
So you don’t think I’m just making this stuff up, former Reagan budget director, David Stockman, recently said: “The president is ‘essentially a 70-year-old kid in a candy store who wants one of everything: More for defense, veterans, boarder walls, law enforcement, infrastructure and ‘phenomenal’ tax cuts, too—without the inconvenience of paying for any of it.’”
We’ve been snookered. It doesn’t matter whether the blue team or the red team is in charge; they both aim for a bigger government.
So where’s the hope? Isn’t there a happy ending?
I always thought “Make America Great Again,” created a false hope. As the Titanic was listing, passengers needed to face the cold, hard reality. A pep-talk by the captain had little value.
That’s our problem. Our government, media and financial institutions are lying to us. They don’t want us to know the truth. At the end of the last fiscal year, 82% of all government revenue went to mandatory spending and interest on the debt. The Trump administration is focusing on the 18% of revenue and additional borrowing/money printing. They pretend that can make a difference.
As a businessman, Trump would have already declared bankruptcy. He is now, just trying to buy time. As I wrote last week, I think he knows he has inherited bubbles and he has a plan for how to pop them without being blamed [When The Bubbles Pop].
The good news is, in spite of the consensus, hard assets will be a better protector of your wealth than paper assets. We are heading into a period of significant price inflation, fueled by larger sums of money printing. The long-term plan of the Federal Reserve is to lower interest rates. The next time that happens, their control will likely break and the markets will demand higher rates. It’s over when that happens. For the government, higher rates will sink the ship of state. That’s when debt matters. Russia and China, in particular, are preparing for these events. The IMF is preparing for the next monetary change. They call it, “the reset.”
In our last chart, the red line is going much, much higher. We have an opportunity to purchase precious metal investments before the gold line returns to its long-term pattern. That’s the good news.
“Dollar” Bill is a real guy, with real knowledge on our nation’s financial calamity, and real solutions for what must be done to dig ourselves out of the hole we are in. Due to his career, Bill must remain “disguised” to protect his position. “Bill” loves America, sees the impending cliff we are all headed towards, and hopes that by sharing his inside knowledge of the failed monetary policy in our nation, that a fiscal “nuclear” event can be minimized.