Should you be Panicked About the Current Federal Deficit and Debt

[This article follows much of what most Americans think is true about Deficits, Debt, and Interest Rates – I don’t. Please be kind in your comments as you explain what you think the author’s misconceptions are.  –Bob]

 

The federal debt has touched an historical figure in 2020 after the Covid-19 outbreak. It is way more than what the country has tackled since the end of World War II. With the current GDP, the 17.9% federal deficit is also double of what the country had during the great recession in 2009.

 

Why is there a federal budget deficit?

 

Even before the fatal Covid-19, the federal budget deficit was large due to recession and the increase in the government’s spending. After Covid-19, the government launched stimulus packages to ease the financial pain of individuals, which meant more expenses. Congress had to spend more on the unemployment benefits, Medicaid, food stamps, etc. On the other hand, the reduced income of the working people, suspension of federal student loan payments, recession, and less tax revenue has led to overall lower government revenue.

The federal budget deficit is the difference between government spending and revenue. In the fiscal year 2019, the federal government’s overall revenue was $3.5 trillion on September 30, 2019. But, the government spent $4,4 trillion, which meant that the total deficit was $984 billion.

 

If these figures have already made you worried, then hold your heart with your hand for a second. There is a lot more to come. According to the Congressional Budget Office declaration in April 2020, the federal deficit for the fiscial year 2020 will be around $3.7 trillion or 17.9% of projected GDP. If Congress continues to launch more relief plans for the people, then only God knows how much will be the deficit.

 

The expected federal deficit in 2020 is very large. There is no doubt about it. In the last 50 years, the average deficit has been only 3% of GDP. Even in 2009, the year of the great recession, the federal deficit was 9.8% of GDP. But in 2020, the federal deficit is 17.9% of GDP, a historical figure in itself. The federal deficit was already high before Covid-19 due to the 2017 tax cut. But, the Covid-19 economic impact has stretched the federal deficit to an astronomical figure.

 

How about the federal debt?

 

The federal debt is all about how much the government owes to cover the deficit of the previous years. When the government continues to borrow money to cover its budget deficits, it’s debt burden also increases simultaneously. The federal government already owed $16.8 trillion to the foreign and domestic investors on September 30, 2019, including the US Treasury securities too. In June 2020, the same government owed around $20,3 trillion, which is huge.

 

Between 2007-2009, the federal debt was approximately 35% of GDP. Before the pandemic, the federal debt touched 80% of GDP. And, going by the way the government is borrowing money, it is expected that the federal debt will become 100% of GDP by September 30, 2020. Unless a massive change in the tax or spending policy is introduced, the federal debt is expected to grow and touch a gigantic figure.

 

Should you be worried about federal debt and deficit?

 

Honestly speaking, the government can hardly be blamed for the fiasco. The government had to introduce a liberal spending policy to reduce debt problems and consumer bankruptcy in the country. Job cuts, pay cuts, and hour cuts have pushed people into severe financial problems. People don’t even have money to pay off credit card debts or student loans. As such, the government had to bail out people in that sector too. Hence, it had to borrow money like never before.

 

Should you be worried about the current federal budget deficit and debt? As of now, there is no need to worry about it. The federal government is borrowing money at a super low-interest rate from global financial markets. There is not much competition from the private sectors on the borrowing front. It is not just the US, all countries are borrowing heavily to deal with COVID recession. The global interest rates are rock-bottom low. So, governments are still able to save money.

 

How much debt can the government handle? How much is too much for the economy? There is no clear answer to these questions. Top economists are also clueless about it. However, if the global interest rates remain this low, then the government can tackle more debts than you can imagine. Yes. The government is indeed borrowing heavily. The debt amount is gigantic. But this increase in the debt amount is mainly due to the abnormal economic situation created by the Covid-19. It is a temporary phase, not a long-run trajectory.

 

There was speculation that the enormous size of the debt amount would cripple the government’s flexibility if it faced a recession like that of 2009. Fortunately, the government could borrow money promptly during the pandemic. So, even if politicians are skeptical since a huge amount has been borrowed already, the government may continue to take out loans, especially to take advantage of the record low-interest rates. In June 2020, the U.S treasury borrowed money for ten years at an interest rate between 0.625% and 1%. From October 2019 to June 2020, the government’s overall outflow was 10.5% less than in the same period in the last year, even though the government has borrowed more now.

 

Conclusion

 

If the current economic policies are changed, then the federal debt and deficit are expected to increase as more people will qualify for Medicare and Social Security. It is projected that by 2030, the federal debt will become 118%. The current debt load is manageable. But it is equally true that healthcare costs are increasing at a faster rate than the national economy. The interest rates will also become normal in the future. So, the government will have to think about the steps to reduce federal debt and deficit in the future.

Author bio: Stacy B. Miller is a writer, blogger, and a content marketing enthusiast. Her blog vents out her opinions on debt, money and financial issues. Her articles have been published in various top-notch websites and she plans to write many more for her readers. You can connect with her on Facebook and Twitter.

 

The Express Train To Insolvency

By GE Christenson – Re-Blogged From Gold Eagle

·     Gold reached $1,800, close to its all-time high of $1,923.

·     Silver reached $19, a long way from its high of $50.

·     The NASDAQ hit another new high.

·     Tesla closed on July 10 at $1,544, a new high. Tesla looked outrageously high at $1,200.

Now  the bubble has blown even larger.

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Think Deficits Are Bad Now? You Ain’t Seen Nothin’ Yet

The U.S. government was on track for a $1 trillion deficit this fiscal year, even before coronavirus. That’s the kind of budget deficits one would expect to see during a major economic downturn. The federal government has only run deficits over $1 trillion in four fiscal years, all during the Great Recession. The U.S. was on that path before the recent coronavirus economic upheaval even while Trump called “the greatest economy in the history of America.”

And now it looks like the U.S. is on the cusp of a legitimate economic crisis.

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Total US Public Debt Surged Nearly $3 Trillion…While The Government Is Paying Less To Service Its Debt

By SRSrocco – Re-Blogged From Silver Phoenix

If Americans thought the U.S. Government would be in serious trouble as its ability to service its ballooning debt would become unmanageable, guess again.  After the U.S. Government added nearly $3 trillion more debt in just the past eight months (fiscal year), the interest paid on the public debt actually declined versus last year.

According to TreasuryDirect.gov, the U.S. public debt increased from $22.8 trillion to $25.7 trillion during fiscal 2020 (October to May).  Thus, total U.S. federal debt has increased by nearly $3 trillion in eight months compared to $1.2 trillion last year… for the entire year!!  So, with $3 trillion more debt on the U.S. Government’s balance sheet, you would think the interest expense would have also increased.

NOPE… the U.S. Government paid $337 billion of interest expense so far this year (Oct-May) compared to $354 billion during the same period last year:

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Why Nobody Talks About Ballooning Federal Deficits

By Clint Siegner – Re-Blogged From Money Metals Exchange

The presidential race will mesmerize Americans over the next 11 months. The country hasn’t been this polarized since the Civil War.

Voters on the left desperately want a story which undermines support for President Trump. They are also searching for a candidate who can actually win.

Many Republicans are outraged about the Deep State and corporate media campaign obsession with unseating a duly elected president – and they worry an avowed socialist could win the Democratic primary and, just possibly, the general election.

Plenty about the year ahead is unpredictable. Massive federal budget deficits and unrestrained borrowing, however, are a certainty.

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Federal Debt Ceiling Reached As Federal Spending Rages

By Clint Siegner – Re-Blogged From Gold Eagle

The federal government will soon run up against its self-imposed borrowing cap once again.

Current estimates are for the government to max out its credit limit at a little over $22 trillion in early September. Congress goes on recess in August, so there is some pressure to address the cap right now.

Treasury Secretary Steve Mnuchin has been fulfilling what seems to be the most sacred responsibility of his position: borrowing money. It’s one that each of his predecessors has also undertaken, without fail and without regard to party affiliation, in recent decades.

He is solemnly arguing why it would be wholly irresponsible for Congress not to approve another massive increase in what the Treasury can borrow.

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When Overvalued And Dangerous Markets Meet Stagflation

By Michael Pento – Re-Blogged From PentoPort

To put into perspective how overvalued and dangerous the US market has become; I often cite the figure of total market cap to GDP—currently 145% of the economy. How high is 145% of GDP? It is a full 30% higher than it was before the start of the Great Recession.

The twin sister to this metric is the Household Net Worth to GDP Ratio. Household net worth as a percent of GDP is calculated by dividing the current bubbles in home prices and equities by the underlying economy, which has been artificially inflated by interest rates that have been pushed into the sub-basement of history. This metric is now an incredible 535% of GDP, which is a record high and 19% higher than the NASDAQ bubble of 2000. To put that figure in perspective, the good folks at Daily Reckoning have calculated that the historical average is 384%.

These valuation measurements are much more accurate than Wall Street’s favorite PE ratio valuation barometer because they cannot be easily manipulated by corporate share buybacks that have been facilitated by record-low borrowing costs. And, as hinted at already, the GDP denominator of today is much more tenuous because it has become more than ever predicated on the record amount of fiscal and monetary stimulus from the government.

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How US Government Debt May Impact Social Security

By Peter Reagan -Re-Blogged From Newsmax

Fiscal year 2018 wasn’t a good one for U.S. government net-worth. While that may hardly be surprising, it’s possible we’re reaching a “tipping point.”

From an official report released by the U.S. Treasury, Sovereign Man pulled out a few key highlights:

  • In fiscal year 2018, the government’s total net loss was $1.16 TRILLION.
  • … they spent over $4.5 trillion.
  • … nearly HALF went to Social Security and Medicare.
  • … spent a record $523 billion just on interest payments on the national debt!

 

How US Government Debt May Impact Social Security
(Pixelrobot/Dreamstime)

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Federal Borrowing Crosses The Rubicon

By Clint Siegner – Re-Blogged From Gold Eagle

A year ago, Republicans in control of Congress suspended the cap on federal borrowing. The limit was automatically re-imposed on March 1st. Politicians now have a few months to hammer out legislation to raise the cap as the Treasury employs “extraordinary measures” to fend off default.

The federal deficit is mushrooming once again. The 2017 tax cuts have taken a bite out of receipts at the IRS and economic growth has not met expectations.

This year’s borrowing to fill the gap between government tax revenue and expenditures may reach a trillion dollars for the first time since 2012.

If Washington politicians follow the usual script, we can expect Republicans to posture as fiscal conservatives and then relent either just before or just after a federal shutdown.

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Stacking The Next QE On Top Of A $4 Trillion Fed Floor

By Daniel Amerman – Re-Blogged From Gold Eagle

The Federal Reserve is currently communicating to the markets that it will likely pivot, and pause two strategies. The first pivot is to stop increasing interest rates. The second pivot is to stop unwinding the Fed balance sheet.

While the interest rate pause is getting the most attention – the balance sheet pause could be the most important one for investors over the coming years.

As explored herein, the impact of pausing the unwinding the balance sheet is to create a new floor at about $4 trillion in Federal Reserve assets. And if the business cycle has not been repealed and there is another recession – the Fed fully intends to go back to quantitative easing, potentially creating more trillions of dollars to be used for market interventions, and to stack another round of balance sheet expansion right on top of the previous round.

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MAGA And Government Myths

By Gary Christenson – Re-Blogged From Silver Phoenix

We know the acronym MAGA – Make America Great Again. A different description of MAGA is MYTHS ASSOCIATED with GOVERNMENT ACTIONS.

WHAT MYTHS?

THE MYTH OF GOVERNMENT SHUTDOWN. Some parts of the U.S. government close. The employees are not paid and hardship blankets the land. Well, NO! The government employees are paid retroactively and most business continues as usual. It is good political theater. The D.C. circus never stops.

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Federal Reserve’s Balance-Sheet Unwind is Unwinding Recovery

By David Haggith – Re-Blogged From Great Recession Blog

We are in the end time of an unprecedented era of financial expansion — the greatest expansion of the world’s money supply ever attempted, expansion of the Federal Reserve’s vast and unchecked powers far beyond what the Fed could do before the financial crisis, and super-sizing expansion of banks that were already way too big to fail.

I am calling this time in which we are now unwinding this monetary expansion the Great Recovery Rewind because I believe this attempt by the Federal Reserve and other central banks of the world to move us away from crisis banking is taking us right back into economic crisis. That is why this was the top peril listed in my Premier Post, “2019 Economic Headwinds Look Like Storm of the Century.” It is more potent in possible perils than all the trade tariffs in the world.

US Government Debt Bomb Much Higher Than Americans Realize

By SRSrocco – Re-Blogged From Silver Phoenix

The U.S. Federal debt bomb continues to increase, even with the government shut down.  In just one day, the U.S. public debt increased $50 billion on Jan 15th.  While the total outstanding Federal debt has now reached nearly $22 trillion, it doesn’t include all U.S. government debt.

That’s correct… there’s a lot more debt than Americans realize sitting on the balance sheet of the U.S. Government.  For example, there are other obligations such as U.S Government Agency Debt that isn’t well-known.  According to the USGovernmentSpending.com website, U.S. Agency debt is the amount of outstanding debt issued by federal agencies (such as FHLB and GNMA) and government-sponsored enterprises (such as Fannie Mae and Freddie Mac).  The amount of U.S. Agency debt

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National Debt Is An ‘Economic Threat’ To The US

By Mac Slavo – Re-Blogged From Freedom Outpost

In an incredibly obvious statement, National Security Advisor John Bolton has declared the high level of national debt an “economic threat” to the United States. Unless you have been living under a rock for the past ten years, you know that statement is not only true but obvious.

Bolton claimed that the national debt is a big problem and tackling it requires significant cuts to the government’s discretionary spending, while most other economic experts say entitlement spending is the biggest concern. According to Bloomberg, Bolton was quoted as saying: “It is a fact that when your national debt gets to the level ours is, that it constitutes an economic threat to the society. And that kind of threat ultimately has a national security consequence for it.”

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Does Gold Speak Italian?

By Arkadiusz Sieron – Re-Blogged From Gold Eagle

Is Italy the new Greece? Read today’s article and find out what does the newest Italian turmoil imply for the gold market.

The recent days have been quite tumultuous in Italy. The turmoil started last week when the new government submitted its spending plans to the EU. The ruling coalition set Italy’s budget deficit at 2.4 percent of its GDP. The number is much higher than the current deficit which is set to be 1.5 percent of the GDP. The proposed difference between spending and revenue is also higher than 1.6 percent proposed by the country’s finance minister Giovanni Tria. So the number was above the expectations. Actually, it came as a shock, especially that the International Monetary Fund has projected it to fall to 0.9 per cent in 2019. Well, nobody expected the Italian inquisition.

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Bankruptcy Soars As The Country Grapples With An Unprecedented Debt Problem

By Michael Snyder – Re-Blogged From Freedom Outpost

America, you officially have a debt problem, and I am not just talking about the national debt.  Consumer bankruptcies are surging, corporate debt has doubled since the last financial crisis, state and local government debt loads have never been higher, and the federal government has been adding more than a trillion dollars a year to the federal debt ever since Barack Obama entered the White House.  We have been on the greatest debt binge in human history, and it has enabled us to enjoy our ridiculously high standard of living for far longer than we deserved.  Many of us have been sounding the alarm about our debt problem for a very long time, but now even the mainstream news is freaking out about it.  I have a feeling that they just want something else to hammer President Trump over the head with, but they are actually speaking the truth when they say that we are facing an unprecedented debt crisis.

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US Government To Fork Out A Half Trillion To Service Its Debt In 2018

By SRSrocco – Re-Blogged From Gold Eagle

The US Government is going to surpass another significant milestone this year.  According to the recently released data from the TreasuryDirect.gov, the government will fork out a stunning half trillion dollars just to service its debt in 2018.  Unfortunately, as U.S. interest rates rise, along with ever-expanding public debt, the cost to service the debt will continue to increase.

In just the first nine months of the year, the US interest expense has increased by an additional $40 billion.  Last year, the U.S. Government paid only $375 billion to service its debt from October to June, but this year it has jumped to $415 billion:

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Spending Our Way to a Fiscal Crisis

By Ron Paul – Re-Blogged From Freedom Outpost

According to financial writer Simon Black, the federal government is spending approximately 52,000 dollars per second. This, not last year’s tax cuts, is the reason why the national debt has reached a record 21 trillion dollars, which is more than America’s gross domestic product (GDP).

Another ominous sign is that this year both Social Security and Medicare will have to draw down on their reserve funds to be able to pay benefits. The Social Security and Medicare trust funds will both soon be bankrupt, putting additional strains on the federal budget and American taxpayers.

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Speculation On Hyperinflation

By Gary Christenso – Re-Blogged From http://www.Gold-Eagle.com

Hyperinflation Myths:

  1. Hyperinflation occurs in banana-republics and not modern western countries.
  2. Hyperinflation cannot occur in the United States because the U.S. issues dollars – the reserve currency.

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Which Has The Bigger Economy: Texas Or Russia?

By Frank Holmes – Re-Blogged From http://www.Silver-Phoenix500.com

You’ve no doubt heard that everything’s bigger in Texas. That’s more than just a trite expression, and I’m not just saying that because Texas is home to U.S. Global Investors.

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Potential ‘Market Panic’

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

JPMorgan Chase CEO Jamie Dimon sees ‘chance of market panic’
– In annual letter to shareholders Dimon warns of increased inflation and interest rates
– Concerned QE unwinding could cause chaos as ‘markets will get more volatile’
– Hard to look at the last 20 years in America “and not think that it has been getting increasingly worse.”
– Positive about US economy over next year, but ignores record levels of world and government debt
– Believes major buyers of US debt (e.g. China) could reduce their purchases of US government debt
– Investors can protect portfolios with gold and silver bullion
– U.S. debt and dollar crisis coming which will propel gold higher (see chart)

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Sacrificing Future Spending

By Gary Christenson – Re-Blogged From http://www.Gold-Eagle.com

Financial sacrifices are so obvious and commonplace they are seldom acknowledged.

Borrowing money on a credit card, mortgage or car loan to purchase something is typical. You have sacrificed future spending for use in the present.

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Are Intragovernmental Holdings Real Debt?

By Scott Anderson – Re-Blogged From Seeking Alpha

[This article orignally was written over 5 years ago. I’ve update the numbers to today. -Bob]

As everyone who is paying attention knows, the amount of US debt outstanding is fast approaching $20.5Trillion. But whom do we owe it to? Most of the debt, about $14.8T of it, represents debt held by the public. This portion of the debt is easy to comprehend. It could be bonds held by investors, savings bonds given to children, bonds purchased by the Chinese government, or even bonds purchased by our good buddies at the Federal Reserve. The remaining balance of $5.7T, known as “Intragovernmental Holdings,” is what I would like to discuss today.

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US Public Debt Surges By $175 Billion In One Day

By SRSrocco – Re-Blogged From http://www.Silver-Phoenix500.com

After the U.S. Government passed the new budget and debt increase, with the President’s signature and blessing, happy days are here again.  Or are they?  As long as the U.S. Government can add debt, then the Global Financial and Economic Ponzi Scheme can continue a bit longer.  However, the days of adding one Dollar of debt to increase the GDP by two-three Dollars are gone forever.  Now, we are adding three-four Dollars of debt to create an additional Dollar in GDP.  This monetary hocus-pocus isn’t sustainable.

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David Stockman: Soaring Federal Deficits

By Rob Williams – Re-Blogged From Newsmax

David Stockman, the former budget director for President Ronald Reagan, said the spending plan now being hammered out in Congress will add trillions of federal debt and smother the U.S. economy.

Congress on Wednesday night released the text of the 652-page budget deal that will raise strict spending caps on domestic and military spending in this fiscal year and the next one by about $300 billion. It includes almost $90 billion in disaster relief in response to last year’s hurricanes and wildfires, and would lift the federal debt limit until March 2019, the New York Times reported.

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Trump’s Tax Cuts: The Good, The Bad, and the Inflationary

By Stefan Gleason – Re-Blogged From Money Metals Exchange

At last, tax reform is happening! Last week, President Donald Trump celebrated the passage of the most important legislation so far of his presidency.

The final bill falls far short of the “file on a postcard” promise of Trump’s campaign. It even falls short of the bill trotted out by Congressional Republicans just a few weeks ago. It is, nevertheless, the most significant tax overhaul in more than a decade.

Corporations and most individual taxpayers will see lower overall rates. That’s the good news.

Unfortunately, there is also some not so good news investors need to be aware of.

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Soaring Deficits Force Treasury Into Foolish Gamble

By Michael Pento – Re-Blogged From http://www.Silver-Phoenix500.com

The Treasury opened the fiscal year 2018 with an October budget deficit of $63.2 billion. That is 37.9% larger than the $45.8 billion deficit in October of last year. The primary reason behind this surge in year-over-year deficits was a 21.6% increase in net interest expenses. The annual red-ink problem looks even greater when recognizing that the national debt is already over 105% of Gross Domestic Product (GDP), at nearly $21 trillion, and with an additional $10 trillion projected to be added in the next ten years.

According to the Congressional Budget Office (CBO), the budget deficit grew to 3.5% of GDP for fiscal 2017. But due to the growth in spending for Social Security, Medicare, and net interest payments, the deficit explodes to 5% of GDP ($1.4 trillion) by 2027.

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Yawning Debt Trap Proves the Great Recession is Still On

By David Haggith – Re-Blogged From Great Recession Blog

While David Stockman stated early this year with resolute certainty that the debt ceiling debate would blow congress up and send the nation reeling over the financial precipice, I avoided jumping on the debt-ceiling bandwagon. While I was convinced major rifts in the economy would start to show up in the summer, I was not convinced they would have anything to do with the debt ceiling debate. If there is anything you can be certain of this in endless recovery-mode economy, it is that the US will just keep pushing its bags of bonds up a hill until it can finally push no more. So, I figured another punt down the road was more likely.

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Impact Of The National Debt On Our Retirements

By Daniel Amerman – Re-Blogged From http://www.Silver-Phoenix500.com

In this analysis we will take a look at something deeply personal – which is how the $20 trillion United States national debt may change the day-to-day quality of life for savers and retirees in the decades ahead. That is likely a somewhat unusual perspective for many savers and investors.

On the one hand, we have what are often thought of as abstract economic concepts – such as how large will the national debt be in 10 or 20 years? How will Federal Reserve actions to increase interest rates change future government deficits and debts?

On the other hand, we have something that is typically presented as being entirely different, which is individual financial planning. What are the savings and investment choices that we need to make today that will help determine what our standard of living may be in retirement 10, 20 or 30 years from now?

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An Accountant’s View of the Economy

By Peter Diekmeyer – Re-Blogged From http://www.Gold-Eagle.com

Twenty years ago Doug Noland was so worried about imbalances surrounding the dot.com boom that he began to title his weekly reports “The Credit Bubble Bulletin. Years later, he warned the world about the impending 2008 crisis.

However a coming implosion, he says, could be the biggest yet.

“We are in a global finance bubble, which I call the grand-daddy of all bubbles,” said Noland. “Economists can’t see it. They can’t model money and credit. However, to those outside the system, the facts are increasingly clear.”

Noland points to inflating real estate, bond and equity prices as key causes for concern. According to the Federal Reserve’s September Z.1 Flow of Funds report, the value of US equities jumped $1.5 trillion during the second quarter to $42.2 trillion, a record 219% of GDP.

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New Thinking And Different Actions

By Gary Christenson – Re-Blogged From http://www.Silver-Phoenix500.com

Hypothetical 65 year old American Male:

Height: 5’10”

Weight: 285 pounds – 120 # overweight

Health: Marginal, with chronic pain and increasingly difficult daily existence

Ask our hypothetical male if he wants to lose 100 # of unnecessary fat, improve his physical health, live 10 years longer, increase stamina, reduce chronic pain, and drive a golf ball 50 yards longer off the tee.

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Higher Interest Rates May Force Higher Inflation Rates

By Daniel Amerman – Re-Blogged From http://www.Gold-Eagle.com

1) Financial analysis of the three way relationship between interest rates, inflation and the U.S. national debt.

2) Higher interest rates causing higher interest payments on the $20 trillion national debt would ordinarily cause soaring deficits over time.

3) Detailed analysis of the “loophole”, which is that if inflation even moderately increases – then interest rates can rise without exploding the real debt.

4) This simultaneous increase in interest rates and inflation would have a major impact on all markets, as well as long term retirement planning.

5) The logical response to rising interest rates may be to sharpen one’s focus on how to better deal with higher rates of inflation over the long term.

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Trump Suggests Eliminating the Debt Ceiling – Dollar Falls

By Clint Siegner – Re-Blogged From Money Metals Exchange

Those who paid any attention to the financial press last week saw the following narrative; President Donald Trump betrayed Republicans by cutting a deal with Democrats Nancy Pelosi and Charles Schumer. They agreed to punt on the borrowing cap until December and spend $15 billion for hurricane relief.

Americans are supposed to conclude that Trump is flip-flopping, and that Republicans aren’t responsible. Dig just a little, and you’ll find only one of those things is true.

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Sleeper Issues Poised To Rattle Markets

By Clint Siegner – Re-Blogged From http://www.Silver-Phoenix500.com

Investors have been well-trained in complacency. They have spent the past few years watching markets shrug off momentous geopolitical events – each more quickly than the last. Brexit’s impact faded within days. Trump’s election faded within hours.

Stocks traded at all-time highs this summer and volatility made all-time lows. That is the set-up as we head into the fall…

Almost nobody seems nervous. In this age of central planning and highly artificial markets, it is hard to tell when this period of strange market serenity will end. But vigilant investors should have a few ideas. The next few months are going to challenge the status quo.

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Government Debt Isn’t Actually Debt (??)

By John Rubino – Re-Blogged From Dollar Collapse

The failure of fiat currency and fractional reserve banking to produce a government-managed utopia is generating very few mea culpas, but lots of rationalizations.

Strangest of all these rationalizations might be the notion that government debt is not really a liability, but an asset. Where personal and business loans are bad if taken to excess, government borrowing is not just good on any scale, but necessary to a healthy economy. Here’s an excerpt from a particularly assertive version of this argument:

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Raising The Debt Ceiling Means Jacking Up Future Inflation

By Stefan Gleason – Re-Blogged From http://www.Gold-Eagle.com

The dramatic failure of the US Senate’s last-ditch Obamacare repeal effort leaves Republicans so far without a major legislative win since Donald Trump took office. No healthcare reform. No tax reform. No monetary reform. No budgetary reform.

The more things change in Washington…the more they stay the same.

Despite an unconventional outsider in the White House, it’s business as usual for entrenched incumbents of both parties. The next major order of business for the bipartisan establishment is to raise the debt ceiling above $20 trillion.

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Federal Employees & Budget Deficits

   By Bob Shapiro

The US Federal Government employs a lot of people – a LOT of people.

In total, Uncle Sam has over 4 million people on the payroll, plus a whole lot more working as contractors. The military has about 40% of those employees, while federal civilian bureaucracies employ an army and a half (60%).

Now, I’m not a military guy, but I expect – especially if peace broke out – that we could make do with fewer soldiers and fewer generals. I know that there are a lot of people around the world who would like to see us dead, so I’ll defer to the military brain trust (for now) on just how many people they need.

The civilian federal workforce is a whole different matter. Over 1% of Americans – men, women, and children – work directly for the federal government. When you consider that only half of Americans currently are working (and looking only at civilians), around 1 person in 100 is a federal bureaucrat of varying level.

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America Needs a Debt Cut Before a Tax Cut

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

President Donald Trump has finally unveiled his broad blueprint for tax reform. Well, at least let’s call it a sketchy outline of one. It would take the top income tax rate for small businesses from 35% to 15%. Theoretically, a business that makes $500k in taxable income, which had been paying roughly $175k in Federal taxes, would then pay closer to $75k. This means our business in this example, which saved 100k in Federal taxes, would have to grow its taxable income to $1,166.666, or by 133% to provide the government with revenue neutrality.

Even though Trump’s proposed tax plan offers more questions than answers, what is clear is that the administration is no longer working off the pretense that tax reform will seek revenue neutrality. Instead, it looks like Trump and the Republicans are leaning towards pretending that dynamic scoring of tax cuts will suffice for a revenue neutral plan.

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New Risk for Investors: Fed Considers Jacking Up Inflation Target

By Stefan Gleason – Re-Blogged From Money Metals Exchange

Investors are under-estimating inflation risk. As a consequence, they are under-pricing inflation protecting assets including precious metals.

The Federal Reserve has given itself the objective of engineering an inflation rate of around 2%. However, there are many ways in which real-world inflation can potentially outpace the Fed’s 2% target.

Firstly, the Fed’s preferred inflation gauges are flawed. The so-called “core” rate of consumer price inflation strips out food and energy costs. The core Personal Consumption Expenditures (PCE) index has also been criticized for underweighting housing and medical costs.

The PCE number for March, which came out on May 1st, shows the Fed’s favored inflation gauge running at 1.6% year over year. That’s down slightly from the previous month’s reading of 1.8% (2.1% for the headline unadjusted PCE).

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Economy Contracting But Expect Higher Stock Prices

By Chris Vermeulen – Re-Blogged From http://www.Gold-Eagle.com

The United States is the world’s largest and most diversified economy! It is currently suffering through a protracted period of slow growth which has held down job creation and labor market participation.  The Pew Research Center reported, in late 2015, that a mere 19% of Americans trust the government either always or most of the time.

The FED must print more money in order to keep the party going forward.

The bottom line is that this current bull market has been driven mostly by corporations which are buying back their shares, over the years. Individual investors have increasingly been moving out of equity mutual funds and into equity ETF’s.

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Dow Euphoria

By GE Christenson – Re-Blogged From The Deviant Investor

Following President Trump’s speech the Dow Jones Industrial Average (Dow) easily broke 21,000, and closed at another all-time high – 21,115.

The Dow closed up for the 12th consecutive day on Monday February 27, another three decade record.

Excel calculated the Dow’s daily Relative Strength Index (RSI – 14 period), a technical timing oscillator. It reached 97.75 (maximum = 100.00) on March 1, an exceptionally “over-bought” reading that has occurred nine times since 1950.

The weekly RSI also reached a very high “over-bought” reading as of March 3, the end of last week.

Margin debt recently registered an all-time high on the NY exchange. Price to earnings ratios have risen into “nosebleed” territory, and the last 1% correction in the S&P was in November – a long time ago. Many other market extremes and highs in confidence indexes are evident.

YES, THE EUPHORIA IS PALPABLE!

The Dow reached new highs the normal way – levitated through the creation of massive unpayable debt and the expectation of huge profits (for traders). Daily sentiment has reached a peak and indicates we are at or near a top.

Official national debt is nearly $20 trillion. Regardless, President Trump promised something for everyone:

  • More military spending, which will create larger deficits and more debt;
  • Middle-class tax relief; (Larger deficits and more debt…)
  • $1 trillion infrastructure spending; (More debt…)
  • Education bill for more school choice etc.; (More debt…)
  • The Wall; (More debt…)
  • And more promises that require massively more debt.

The Dow likes more debt, until reality strikes.

Previous Peaks in the Dow: (National debt in $ billions.)

Date                      Dow          Official National Debt          Ratio Dow to Debt

Jan. 1973              1,067                   450                                      2.37

Aug. 1987             2,746                 2,330                                     1.18

Jan. 2000            11,750                 5,776                                     2.03

Oct. 2007            14,198                 9,055                                     1.57

Mar. 2017            21,115               19,960                                     1.06

To keep the Dow rising, create debt and don’t worry, be happy…

But it takes more debt to buy each Dow point than it did several decades ago. How much debt will be needed to levitate the Dow to 30,000? Will it require $40 trillion in debt? And what are the consequences of massively more debt? Stagflation is on the horizon.

Consequences of the spending problem according to Ron Paul:

“That leaves only one solution: printing money out of thin air.” [But] “printing money out of thin air destroys the currency, hastening a US economic collapse and placing a very cruel tax on the working and middle classes as well.”

His solution for US government policy:

“… end the US military empire overseas, cut taxes and regulations at home, end the welfare magnet for illegal immigration, and end the drug war. And then get out of the way.”

These ideas will encounter fierce resistance, so much that his plan is clearly “dead on arrival.”

CREATE MORE DEBT!

More debt is guaranteed by a century of fiat currency devaluations, a borrow-and-spend congress, the executive branch, central banks that love debt, and an economy that runs on debt and credit. Expect continued dollar devaluation and more Dow highs after a nasty correction/crash.

While the Dow corrects and the U. S. economy struggles in a fiat currency induced coma, gold and silver prices will rise.

CONCLUSIONS

  • The Dow has reached another all-time high powered by borrow and spend euphoria. A bubble in search of a pin… Read Speculative Blow-offs.
  • By many measures including daily sentiment, P/E ratios, technical indicators, and consecutive daily highs, the Dow is peaking and due to correct. Perhaps the correction/crash will occur soon, or near the next Fed meeting, or after the March 15 budget ceiling deadline, or whenever the HFT machines decide to crash the market.
  • Expect massively more “money printing” and debt creation.
  • Ever-increasing spending and more debt and currency in circulation will push the price of gold to new highs. Fear and panic will eventually force withdrawal of “funny money” from the stock markets and bond markets. Some of that fearful money will purchase gold and silver for safety, preservation of capital, and protection against further devaluation of fiat currencies.
  • The stock and bond markets will correct but the debts will remain.
  • Gold and silver will surge higher, probably through the balance of this decade.

CONTINUE READING –>

How We Got Here In One Sentence

By John Rubino – Re-Blogged From Dollar Collapse

In every annual budget debate since the 1980s, one side figures out that the way to get what it wants – which is higher spending – is to frame the request in a particular, ingenious way: We have to borrow and spend way more now if we want to borrow and spend way less later. History has of course proven this argument to be idiotic, but because it moves the pain of living within our means into the indefinite future, it always manages to attract enough votes to win the day.

The following article, published today by a major news outlet, spells it out in one sentence, in the title no less:

Why federal debt may have to explode before it shrinks

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2017’s Real Milestone (Or Why Interest Rates Can Never Go Back To Normal)

By John Rubino – Re-Blogged From Dollar Collapse

Forget about NAFTA or OPEC or TPP or crowd size or hand size or any other acronym or stat or concept that obsesses the financial press these days. Only two numbers actually matter.

The first is $20 trillion, which is the level the US federal debt will exceed sometime around June of this year. Here’s the current total as measured by the US Debt Clock:

To put $20 trillion into perspective, it’s about $160,000 per US taxpayer, and exists in addition to the mortgage, credit card, auto, and student debt that our hypothetical taxpayer probably carries. It is in short, way too much for the average wage slave to manage without some kind of existential crisis.

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Will Trump Bring Inflation To America’s Shores?

By Stefan Gleason – Re-Blogged From http://www.Gold-Eagle.com

Something is brewing in the economy. Since the election of Donald Trump, interest rates have spiked, copper prices have surged, and various sectors of the stock market have swung “bigly” on speculation of what “Trumponomics” will bring.

Scores of triumphant Republican commentators are already painting a bullish picture of the Trump economy. The GOP – which will control the White House, Congress, and most state governments – has a rare opportunity to implement a pro-growth agenda.

Republicans squandered their last great window of opportunity. George W. Bush and his Congressional allies grew government spending at a faster clip than the economy and saddled the country with trillions of dollars in new debt.

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Another Election Year, Another Bunch Of Fake Growth Numbers

By John Rubino – Re-Blogged From http://www.Gold-Eagle.com

Some pretty good economic reports have energized various parts of the financial markets lately. Consumer spending is up, GDP is exceeding expectations and even factory orders, that perennial downer, popped this morning.

In response the dollar is soaring and interest rates are at breaking out of their multi-decade down-channel. The economy is clearly recovering, implying a return to normality. Right?

Nah, it’s just the usual election year illusion. When the presidency is at stake the party in power always pumps up spending in an attempt to put people back to work and create the impression of a well-run country whose leaders deserve more time in the spotlight. After the election, spending returns to trend and the resulting bad news gets buried in “political honeymoon” media coverage.

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Silver, Debt, and Deficits – From an Election Year Perspective

By Gary Christenson – Re-Blogged From The Deviant Investor

It is an election year. We should anticipate 8 years of upcoming trauma, following nearly 8 years of “hope and change,” after 8 years of “no nation building,” after 8 years of “I did not have sexual relations with that woman.”

Examine the official US national debt in 8 fiscal year increments (10/1/84 – 9/30/92 etc.) using linear and log scales.

You can see that official national debt has been rising exponentially. At the current rate of increase it should approach $40 trillion in 8 years. Given the likelihood of more wars, recessions, more social spending, and accelerating Medicare and Social Security expenses the total debt might be considerably higher than $40 trillion in 8 years, regardless of who is elected.

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2016 Budget Deficit Almost Final Around $600 Billion

cropped-bob-shapiro.jpg   By Bob Shapiro

The US Budget Deficit for Fiscal 2016 is about to close, and various estimates bracket a $600 Billion Deficit. I’ve seen numerous analyses which forecast this to rise to over $1 Trillion over the next few years, largely due to the growth of Social Security, Medicare, & other Health outlays, which currently make up about 2/3 of total federal government outlays.

Here is a wealth of numbers from the Office of the President. (I copied below only a tiny amount because the many graphs didn’t copy well.)

2016 United States Budget Estimate

GDP: $16.5T

Total Receipts: $3.34T

Total Outlays: $3.95T

Total Surplus or Deficit as Percentage of GDP: -3.3%

* Note: To the extent feasible, the data have been adjusted using chained 2009 GDP to provide consistency with the 2015 Budget and to provide comparability over time.

CONTINUE READING –>

King of Debt vs. Queen of Deficits

By Michael Pento – Re-Blogged From Pento Portfolio Strategies

The Congressional Budget Office (CBO) estimates the total deficit for fiscal 2016 will be $590 billion. This is $152 billion (34%) greater than the shortfall posted in fiscal year 2015. And by 2026 the deficit would be considerably larger as a share of the nation’s output (GDP) than its average over the past 50 years.

In addition to this, debt held by the public would rise significantly from its already high level, reaching 86% of GDP by 2026.

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Three Big Stories NOT Being Covered Part 3

By Andy Sutton & Graham Mehl – Re-Blogged From http://www.Gold-Eagle.com

The third and final (for now) portion of this series might be a tad anticlimactic. If so, we apologize. Most people know America is in debt beyond comprehension. A small subset of people understand that the numbers published by the government are missing a whole bunch of important items and use accounting methods that would land most business people in prison. An even smaller subset understands the idea of generational accounting.

What we are going to discuss this time around is not the long-term situation, but rather the medium to short-term situation because some really bad things are going to take place within the next 5-7 years absent major, MAJOR policy changes. At that point, the policy changes will have to be drastic since our government fiddled while Rome burned for the last 3 decades.

If you take nothing else away from this article, understand that our ‘leaders’ – of all political affiliations and stripes – KNEW this was going to be the result if they did nothing, yet that’s precisely what they did. The blame game this time around ought to be one for the ages, however a well-informed populace can short-circuit the traditional mudslinging by inserting the following statement: “You all knew. You knew and you did nothing. You are guilty of dereliction of duty. You failed your constituents and your country. ALL of you.”

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