Once it’s obvious that the ship is sinking, it’s too late – the lifeboats will already be full.

Posted by freedomforall 2 months, 3 weeks ago to Economics
0 comments | Share | Flag

"As I have noted in the past, the U.S. economy rests on a foundation of intrinsically worthless currency – and so much debt that the slightest rise in interest rates causes huge ripple effects.

The 20% interest rate level of the early 1980s? Yes, it was worrisome, and led to not one but two grueling recessions. After 200 years of existence, the U.S. ended the decade of the 80s with just under $3 trillion in debt.

Today? Well, for comparison purposes, the Biden administration’s 2021 budget added $2.77 trillion to the national debt. In ONE YEAR! For comparison purposes, from 1776-1989, the federal government accumulated about $2.77 trillion in debt.

It’s impossible to overstate this point: The Biden regime saddled the nation with over 200 years’ worth of debt in just one year.

With a debt over $33 trillion, barely-above-historical-average 5.25% interest rates are catastrophic. Because of “compounding interest,” what Einstein called “the most powerful force in the Universe.” He called it one of the greatest “miracles” known to mankind – if you’re a creditor. If you’re a debtor, though? That miracle becomes a disaster…

Today, the U.S. government regularly borrows money just to make interest payments. The Treasury department also writes new IOUs to fund old IOUs that come due. Finally, the government borrows still more to fund all spending which exceeds tax collection (this is “deficit spending,” which increases the national debt – sometimes the two are conflated).

At higher interest-rate levels, borrowing enters a destructive spiral. There’s interest payments on debt, which was itself borrowed to make interest payments on debt. To put it in simple terms, it’s a bit like a broke person taking on a stack of new credit cards to make the interest payments on a stack of old credit cards. It’s financial suicide.

Eventually the avalanche of debt will stall inflation but it will also wreak havoc across the economy and trigger a deflationary crisis."
SOURCE URL: https://www.zerohedge.com/markets/financial-disaster-no-one-talking-about

Add Comment



  • Comment hidden. Undo