This post is a thought experiment simply looking at what, if anything, would signal that has achieved Checkmate with respect to the status quo attempts to defeat, eliminate, delay, and otherwise obstruct it. In other words, what might or could signal that the HODLers have won. This is not investment advice nor is it any type of declaration or proclamation that will or will not rise or fall to any particular price within any particular amount of time.
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The below chart courtesy of Bloomberg depicts the annualized cost in $ to simply service and pay interest on the debt. As you can see this trend has been rising in a sustained manner, though this was generally aligned to the total amount of debt increasing. This makes sense. The more debt you take on the more in total interest you pay. However, the parabolic vertical move in the last two years shows what happens when the Fed raises rates in the most aggressive manner in history
Just facts and math folks. Higher rates could literally eat up the entire federal budget if left unabated.
The below chart courtesy of ZeroHedge shows that the costs to insure against a U.S. default on its debt remains at or near all time highs. This is supposedly the most advanced and sophisticated nation on Earth, but the market says America is now more than ever more likely to default?
Again - not fear mongering and doom and gloom. Just
The below chart shows the projected tax receipts for 2023, blue line not completed yet, compared to the same data the year prior. Sure, we can debate the exact figures until the cows come home. Bottom line: Biden destroyed the economy and tax receipts are down as a result. People have earned less and Cap Gains taxes have plummeted.
The government is bringing in much less "revenue" via taxation (and yes, politicians will as usual blame YOU for this).
The below chart is courtesy of NBF Economics which simply spits out the governments own data on Social Security. Social Security is headed towards insolvency rapidly. How will this be resolved?
The below chart depicts how many years Americans experienced financial strain between 2018 and 2022. Almost half the nation is under chronic duress and strain financially. In other words - things like loss of job or income or rampant inflation are devastating for half of America.
Summary:
cost to service the debt skyrockets with increases in rates to the point where it goes parabolic if rates stay the same or go higher
- The market is telling you via 5yr CDS that no other time in history has been more perilous than now in terms of America's fiscal situation, and America is supposedly "the most advanced" and "strongest"
- Due to a variety of factors since January of 2021, the U.S. Treasury is bringing in a lot less revenue. Less money to cover ALL the expenses to include interest on the debt.
- Social Security is heading towards complete insolvency. Tens of millions of Americans have paid into this system for years and even decades, and they are going to get a rug pull on this?
Half of America is "paycheck to paycheck" and hanging on by a thread. Job/income loss and inflation are devastating.
So, what would constitute checkmate
Here's a stab at that:
- The markets - NOT the governments - finally, fully, and completely realize we face two choices based on math and logicepic deflationary collapse or inflating away the debt via currency debasement
- The markets, NOT the governments, begin to discount and price the reality that the ONLY way to avoid a deflationary collapse is to use the currency as a pressure release valve to inflate away the debt and try and make things like nominal debt/GDP ratios "look better".
Also called . Chess. (source: dictoinary.com)
- an act or instance of maneuvering the opponent's king into a check from which it cannot escape, thus bringing the game to a victorious conclusion.
Once the market emphatically concludes the only way out is to inflate away the debt via QE or some other cute new acronym they create, then we would argue that is a "check from which it cannot escape".
Is that Checkmate?
You decide. There is a gentle and comfortable lifeboat chugging along willing to take on board anyone willing to join.
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