While mainstream pundits and talking heads cluck about great jobs number and amazing economic growth, by and large, they completely ignore the fact that the entire economy is built on giant piles of debt.
In our Friday Gold Wrap podcast last week, Mike Maharrey talked about the fact that the economy is drowning in debt, focusing on ever-increasing consumer debt and government debt. He didn’t even get into corporate debt.
So, just how much debt is really out there? The following bullet points will give you a good birdseye view of the debt stretching from horizon to horizon.
The federal government is borrowing money at levels one would expect to see during a major economic crisis. According to the Congressional Budget Office, the federal deficit for the fiscal year 2018 will come in at around $804 billion. That is expected to balloon to around $985 billion in fiscal 2019.
Does that seem pretty bad to you? Well, it’s even worse than you think.
If you look at the increase in the federal debt, you’ll find that it is bigger than the deficit. How can this be? The government simply excludes some of the money it borrows in the deficit.
The economy is booming – or so we’re told. But the federal government is borrowing money like we’re in the midst of a deep recession.
Long-term US debt sales have risen to a level not seen since the height of the Great Recession. Meanwhile, the Treasury Department announced the creation of a new benchmark short-term 2-month Treasury bill.
All of this is in an effort to cover a rapidly upward-spiraling national debt even as some of the big players in the bond market sit on the sidelines.
At the current trajectory, the cost of paying the annual interest on the US debt will equal the annual cost of Social Security within 30 years, according to a recent report released by the Congressional Budget Office.
By 2048, as interest rates rise from their currently low levels and as debt accumulates, the federal government’s net interest costs are projected to more than double as a percentage of GDP and to reach record levels. Those costs would equal spending for Social Security, currently the largest federal program, by 2048.”
Jim Rickards called them “A-list of top-tier economists.” Michael Boskin, John Cochrane, John Cogan, George Schultz and John Taylor are all senior fellows at the prestigious Hoover Institute. And they all agree on one thing.
The US is going broke.
One of the favorite Republican talking points is that tax cuts will “pay for themselves” by spurring economic growth. This seems plausible. But GOP talking heads underestimate just how much growth would be necessary to pay for the massive tax cuts and spending increases recently passed by Congress. In fact, the Congressional Budget Office released its analysis Monday and said that the tax cut plan will “balloon” the deficit over the next several years.
Spending America into oblivion has become business as usual on Capitol Hill.
On Friday, Pres. Donald Trump signed a $1.3 trillion dollar spending bill. The legislation funds the federal government through the remainder of the 2018 budget year, which ends Sept. 30.
The bill directs $700 billion to the military and $591 billion to various domestic agencies. According to the Washington Post, military spending will increase $66 billion over the 2017 level, and the nondefense spending comes in at $52 billion more than last year.
The mainstream investment world is starting to worry about the federal debt.
Goldman Sachs sees a tidal wave of red ink — and it may drag the US economy into its undertow.”
Goldman recently released a note to clients saying virtually the same thing Peter Schiff has been saying for months. The US economy won’t likely get the promised economic growth out of GOP tax cuts – at least not over the long-haul.