I got word on the weekend that the U.S. national debt has just surpassed . For a few months, the markets were on edge because the debt limit had been reached and Treasury Secretary Janet Yellen repeatedly reminded Congress to raise the debt ceiling or the treasury would run out of cash by the first week of June.
Just as the deadline arrived, Congress and the Senate finally approved a bill brokered between House Speaker Kevin McCarthy and President Joe Biden in which $4.5T would be borrowed into existence to cover costs to run the government for the next 2 years. What a lot of people don't know about this agreement, which Biden signed into law on June 5 is that the debt ceiling limit was removed altogether!
Now, I've been tracking America's national debt since it was 'only' $800B around the year 1981, when I was 15 years old. My history teacher at the time lamented in class how worried he was about the enormous debt the U.S.A. had incurred. Over the next four decades, I watched in amazement as the national debt continued to rise. My old history teacher is long gone from this world now but I'm sure he'd roll in his grave if I could tell him the national debt now stands just above $32T.
Thing is, the central banking system that runs the financial system we live in is a debt based system. As an example, if you borrow $1,000 at 10% interest for one year, you'll owe back $1,100 at the end of the loan term. So where will that extra $100 come from. The answer is, it must be borrowed into existence because it doesn't exist yet. This is how the ever increasing debt begins to grow exponentially. Add another $4.5T in newly created debt and the national debt is guaranteed to explode to + $36T in the very near term.
FED paused their rate hike program last week, rates are now at +5%. What's 5% of $36T, you ask? That adds up to $1.8T in interest payments alone. This guarantees that at least $1.8T will need to be borrowed into existence just to pay this interest.
Can you see where this is going? With the debt ceiling removed and with a Presidential election coming up next year, it's a given that Biden will go on a spending spree as Presidents often do when they're running for re-election. As a result, I can see the national debt exploding to $40T by January, 2024. Even at present rates, the interest payments would hit $2T but If the FED continues to raise rates, that number will be even higher.
There's no going back now. These numbers are going higher and if you have any knowledge of Calculus, then you probably agree the national debt will grow exponentially higher. In other words, the more debt is created which is inevitable, the faster it will grow. This is already having huge implications right across the economy. While Russia is claimed to be a national threat, barely a word is being discussed about the biggest threat to America's safety and that is its national debt.
It can never be repaid. I can't say what this will eventually lead to but I have a good idea. Just look at more recent examples like Zimbabwe or Sri Lanka to get a picture of what might be in our future. An even better example is 1920's Germany. An ounce of gold went for 150 marks in early 1920. By November, 1923 that same ounce fetched 57 trillion marks. At that point, Germany was once again in total ruins. We all know what followed.
Over the next two or three years, we may also experience a similar and equally severe hyper-inflation if the governments around the world keep borrowing money into existence (with the help of central banks). You know they will. Actually, they have no choice. This is the system we live in. It's definitely not in our favor.
This is why I encourage everyone to invest in silver, gold and Bitcoin as financial insurance against a possible hyper-inflationary event and if possible, to grow your own foods and to work on being more self-reliant. Don't expect government to come and save you. That's where family, friends and neighbors come in. Be ready to help those you love if capable and within reason.
It's going to be tough. For many, it already is. Compassion brings out the very best in people. Let it bring out the best in you!
Peace and love to everyone!
I'm now also on Substack where I will soon begin new podcasts as well as post extra material.
Previous Posts:
San Francisco - Echoes of old Detroit
Fed finally pauses after most aggressive rate hike in its history.
Time for a winter to spring gardening update.
M2 money contraction + rate hike double lag effect
Silver's massive 237 million ounce deficit
Never before seen divergence between silver and gold.
Growing food through winter!
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