Monday, December 11, 2023

The future of our economy, if we don't change course


Brandon Smith offers his forecast.

Currently, the US national debt is $33.8 trillion and has a 120% debt-to-GDP ratio. In a single month (October) the US added over $600 billion to the debt, and at the current pace the total official debt will hit over $41 trillion in one year. The speed of this accumulation is frightening. To put this in perspective, the Obama Administration and the Federal Reserve added around $9 trillion to the debt in 8 years during the corporate bailouts. Under Joe Biden, this is set to happen in a little over 1 year.

. . .

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 pop multiple asset bubbles cross numerous market sectors and trigger a deflationary crisis. We are already seeing this trend with a crash in manufacturing as well as frozen wages. We are seeing it in the freight industry, with layoffs and bankruptcies piling up in a shocking downturn indicating impending recession. Not to mention US home sales have plunged to a 13 year low as prices continue to rise.

These are all red flags of an impending deflation event that WILL lead to large scale job losses, likely within the next year. It would seem the magic of covid stimulus measures is finally fading away and we are beginning to see the real economy underneath.

. . .

Will the Fed keep rates steady, risking deflationary implosion and debt default, or, will they cut rates, return to stimulus to pay the debt and risk double digit inflation?

These are the two choices in front of us as debt overwhelms the system.

There's more at the link.

It's hard to argue with Mr. Smith's conclusion.  In fact, the headline to this blog post is probably over-optimistic, in the sense that we may no longer be able to change course, even if we want to.  The "debt overhang" is already there, and can't be wished away.  It's too late to do anything to stop it - only to endure its consequences.

To make matters worse, the Biden administration is spending money it doesn't have as if there's no tomorrow.  The money it wants to send to Ukraine?  It will all have to be borrowed, because our cupboard is bare.  And what about the vast sums wasted on illegal aliens crossing our border?

Immigrants who illegally cross the border into Arizona are being handed $5,000 in good-as-cash gift cards, along with cell phones and costly plane tickets, all of which are being paid for by the American taxpayer, according to Arizona Sheriff Mark Lamb.

. . .

“I was absolutely in shock when these agents came forward,” said Mr. Lamb. “I had known we handed out free cell phones and plane tickets, but to give out $5,000 Visa gift cards to people who break our laws and come into our country illegally when the average American is struggling to pay their bills is just tough to swallow.”

Again, more at the link.

That's your and my tax dollars being handed out, dear readers.  The administration is borrowing the money to dispense like candy, but it's our taxes that will have to pay off that debt.  If that makes your wallet feel happy . . . it doesn't do anything for mine except make it hurt.

David Stockman warns of "the destruction of the American middle class".  Bold emphasis in original.

Even though the CPI tends to undermeasure the cost of living on Main Street owing to its flaky hedonics’ adjustments for “quality” and other statistical razzmatazz, this imperfect proxy for the cost-of-living is still up by 82 percent since the turn of the century.

Accordingly, during the last 22 years the median real annual wage, as tracked by Social Security payroll tax records, has risen by only 14.5 percent or just $235 per annum.

. . .

The average worker in the bottom half of the wage distribution generated earnings that do not even remotely support a middle-class living standard. In fact, this figure amounts to only 65 percent of the Federal poverty line for a household of 4 persons ($27,750) and is barely above the $14,580 poverty level for a single person household.

In other words, the overwhelming bulk of the 84.5 million workers in the bottom half of the wage distribution pulled in paychecks over the course of 2022 which were below or just above the Federal poverty line!

That is to say, the U.S. economy is badly broken, yet you do not hear a peep from either wing of the Uniparty.

. . .

In short, a huge share of the workforce is no longer even remotely middle-income ... So the question recurs. Why isn’t the U.S. economy generating middle-income jobs at the scale needed to provide better opportunities to the 84.5 million workers below the median wage level?

The short answer, of course, is that the U.S. economy desperately needs far less speculation on Wall Street and far more productive investment on Main Street—when, in fact, the opposite has been happening during the past two decades.

More at the link.

As a result of this economic malaise, among other factors, Charles Hugh Smith wonders whether America could endure a French-style revolution.  Bold emphasis in original.

In the past, I reckoned the odds of America experiencing a revolution akin to France 1789 were low due to the different political, economic and cultural conditions present then and now, but recently I've considered the possibility that America's extremes of wealth, income and power inequality are a powder keg awaiting ignition ... extremes of inequality undermine ... stability, as the wealthiest elites now bring such a preponderance of wealth to bear that each of the three branches of the state are now beholden to the interests of the few, leaving little recourse to the many.

. . .

Another common factor driving the masses to revolt is when the essentials of life are no longer affordable or available in sufficient quantity. Historian David Hackett Fischer has documented the perilous impact of inflation, i.e. the collapse of the purchasing power of wages ... Another factor is the promises made by the state generations ago can no longer be met without creating new money on a scale that guarantees destabilizing inflation.

More at the link.

Friends, putting all that together, we're facing a bleak future.  Many of us who've experienced something similar, and/or who are economically literate, have warned of this for many years, but even so, there are plenty of people today living in an economic cloud cuckoo land.  They refuse to believe that things can fall off a cliff with little or no warning.  I fear they're about to learn that lesson the hard way.

The old idiom reminds us to "make hay while the sun shines".  I can only recommend that we do just that, while we still have the resources to do so.  Stock up on reserves of food and essential goods, so that in the hard times that lie ahead, you have something to fall back on if and when necessary.  You may get awful tired of eating oatmeal, canned soup and ramen noodles, but they're a darned sight better than having nothing to eat at all.



Andrew said...

US debt clock

Joe said...

Is there a list of the people who can be snuffed to eliminate this problem?

Anonymous said...

The ancillary problem is exactly too many people in too much talk but not enough action. I fail to see how this may be resolved by a change in temperment. My perspective is to act aggressively, as one would in battling a cancer.

Example; the Sheriff quoted as it's tough to swallow. This while first hand witnessing overt criminal acts.
(My rebuttal to the argument that his hands are tied; No, as Sheriff he holds vast powers. Our problem is that those in power fail to exercise thise powers.)

It looks like C. Hugh Smith is come around to what I had been saying for years. Let's get this a-poppin now before it gets worse. It will get worse if not for hostile action now.


Anonymous said...

Anyone with a printer has a printing press. Or use the printer at the public library.

A good father instructs his children. Likewise, act to instruct your neighbor. I mean your whole community and then some. No, not your 'tribe' (gag!) but larger.

They who live in the cloud cuckoo land (a fine descriptor) are of two parts. One part is they want to be. The other is they who don't have the understanding. Both are ignorant, the former willfully so. Waste not your time on them.

You see where I am going on this? Become a Publius. Act to inform your fellows. You may do so under the veil of anonymity. Because when the hostilities come increased, absent knowledge, there may exist the condition of good guy fighting, robbing, stealing, obstructing a good guy.

(By hostilities I mean any crime from petty theft upward in severity or magnitude. Because crime is an act of hostility.)

Mind your own business said...

Solving this requires immense fiscal discipline from our government. At least the Legislative and Executive branches.

Face it. Which means we won't solve it but will let this catastrophe just proceed along to its natural conclusion. Prepare accordingly. This is not a drill.

Xoph said...

We always saved, so 2 years ago fled the big city and now we're quite rural. Work part time in a big box store - the people know. You don't need a big education to know how badly the gov't is lying, how bad our monetary policy is, how bad the immigration situation is (Maybe 50% of my conversations are with native english speakers).

Whoever is controlling the meat puppet wants this. We are accelerating, not trying to put on the breaks. History very clearly shows the consequences of our monetary policy. Our country was founded by white Christian Nationalists, whose profile now fits our terror watchlist. What profile fits the rural population that raises the food?

Will we have a bloodletting like the French Revolution? How many innocents died when spiteful people made false accusations?

To despair is a sin. I think at least 70% of registered voters (regardless of race or living location) know what is going on. This is my rough, conservative estimate. I knew many city people who feel the same way. In other words, if we could throw the rascals out, we could start fixing things. But, how do you overcome the Uniparty who weaponizes the gov't against people who love this country? They won't let go until a violent revolution forces them out (history again). Spread hope, we are the majority. When the wheels come off do what you can to create stability. 80% of cows grow up on farms with <20 animals. They're aggregated at the sale barns. Grass feed beef off the pasture has more taste - Get to know a local farmer and/or meat processor. Food security need not be hard (Electricity is the key weak point for food storage). Plant potatoes in your back yard along with beans. 50% of green space in the US is grass that is mowed, not grazed. Sheep and goats produce more meat per pound of grass than cows. Your HOA not allow this? Make a deal with a hobby farmer to raise your animals until you go get them. Add chickens for insect control. Kids will learn a lot taking care of the animals and never look at their food the same way again.

If you're in range of NE Alabama I raise pasture fed meat, ping me in the comments.

Anonymous said...

At best we will have what happened with the Soviets when they turned back into Russia. Pretty sad when that is the best outcome with total repudiation of government debt and the economics of that happening.
I don't believe that an earlier kick off would improve anything, we are not going to reenact 1776, that was a one off deal, not duplicated anywhere or anywhen else.

Ozborn said...

Asking for a hit list = glowing like the sun.

William Bianco said...

Regarding the 5k payments to border-crossers - no, just no. The story has been circulating for years with no evidence.

The Sheriff in question is also running for the Senate in Arizona.

Anonymous said...

Yes! A thousand times, Yes. But embraced in comfort as they are, they will not change. Economic responsibility, even accountability, in today's climate, represents change. Ergo, they will not become fiscally conservative.

Therefore, applied force is the answer. It is the same answer since the Founding. It is to The People to put that force to their REPRESENTATIVES.
(All caps because they are the agents, The People are the principals.)

Sad to report, much of what we have today is due to the lackadaisical part of The People. I dare say that even the wickedness shown by certain people in government (of all levels) would not exist but for the nonchalance of The People.

Yes, eeking an existence under oppression has been difficult.
(To foment difficulty has been a tactic. The response, 'Let George do it.' was conveinient but an error. Hinsight is 20/20.

Now, here we are. Who will join me in pledging their lives, their sacred honor, their prosperity to battling these dark forces?
God has, and does now, bless America.

Anonymous said...

Anon @ 11:54
Would you care to elborate?
As you imply, history is a guide.
But do you mean to do nothing?
Do you mean for the courts to decide?

I mean not to put words into your mouth. Please elaborate.

lynn said...

I had heard about the feddies giving money to illegal aliens but I did not believe it. How is this justified ? Did Congress authorize this money to be given to law breakers ?

Anonymous said...

Oh right, the bastion of truth known as MM. In respect for our esteemed host, I will refrain from further commentary on that subject

BTW: Do you intend that running for election to a different office is to be perceived as a slight,, i.e., a warning advisory?

A Texan said...

Don't forget the parasite known as Israel. Both sides can't give them enough money and refuse without being called an anti-Semite by AIPAC or the subversive America hating ADL.

Anonymous said...

Seed catalogues are now coming out. Look for seeds that are non hybrid, you can keep the seed year by year. There is no shortage of information available. Whatever you do, do something.

McChuck said...

The national debt can be repudiated. The vast majority of it is debt to the Federal Reserve, which created the debt money out of nothing but keystrokes on a computer.

From dust it came, to dust it may return.