Every single hour, of every single day, the U.S. government spends about $200 million that it doesn’t have.
Yes, that’s every hour of every single day… 24 hours a day, seven days a week, including Sundays, Christmas, Thanksgiving, Easter, and every other holiday.
For a point of reference, consider that in just two months, the government borrows more money than the combined annual profits of the 100 biggest publicly traded companies in America.
That’s absolutely incredible, isn’t it?
Again, every hour of every single day, we are spending $200 million we don’t have.
Does that sound sustainable to you?
Take a look at just one simple chart…
This will tell you all you need to know about the likelihood of massive changes in the very near future. This will tell you whether or not things are really “normal” in America today.
This chart shows that what has taken place is something straight out of Weimar Germany… or the last 20 years in Zimbabwe. This kind of gross, out-of-control experiment with our money has never happened before. No one can predict the exact outcome. No one. It sure isn’t “normal,” and it’s sure to be a disaster.
But even these incredible figures don’t tell the real story. Or even half of it.
Various other government agencies and private companies taken over by the government also have obligations of nearly another $5 trillion. We’ve already booked complete losses on $140 billion worth of these obligations. Yet they remain completely off the federal balance sheet.
When you add these other, genuine, federal obligations that exist right now, today, you come up with a total debt figure that’s much more than $20 trillion. Far more than half of these debts were assumed under President Obama.
We don’t know what the full burden of these new and existing debts will be in total, over time.
That’s because the Federal Reserves power to manipulate interest rates is unlimited—at least for now that’s the case.
We don’t know how much of Fannie’s and Freddie’s bad debts will eventually be covered by the U.S. Treasury. (We do know they have an unlimited line of credit… so it’s a safe bet that we haven’t seen the last of these charges.) Finally, we have no idea what the eventual costs of the Federal Reserve’s ongoing expansion of the monetary base will be over the long term.
There is one thing that’s certain, however: these debts will not be free. They will carry a burden.
Today, we have more government debt than any country in the history of the world. We have more debt than every country in the European Union… combined.
And here is the part that really matters… the costs of maintaining our debts are about to skyrocket.
Right now the Federal Reserve is manipulating interest rates down to almost zero. As a result, the interest rate at which our government can borrow money is at a record low level. In fact, the Federal Reserve has lowered its benchmark interest rate ten times since August 2007, from 5.25% to a zone between zero and 0.25%. Obviously, the current rate won’t last forever.
But what will happen if the average real interest rate ends up being just 4% annually, and we pay it off over 30 years like a mortgage?
Incredibly, we’ll spend $34.3 trillion to simply repay what we owe right now. If the rate ends up being 6%, we’ll spend $43.1 trillion.
Now, of course, our politicians believe that through policy and currency manipulation, they can simply avoid paying any of these costs. They can order the Federal Reserve to prevent interest rates from ever rising to a level that would cost the American people anything. They believe they can manage the economy, so the debts of Fannie and Freddie won’t go bad. They believe (without any proof whatsoever) that they can stimulate the economy by even more deficit spending, so that it grows faster, allowing tax revenues to produce a surplus. Repaying these debts, they say, will be easy and painless.
But you know better, my friend. You must know better. The wages of sin must be paid. And they will be paid.
|“There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items – but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling – while doing no economic harm at all.”|
Very few people, even our most influential economists, seem to remember that the utility of money and credit are based upon their soundness.
Money allows people to exchange goods and services widely, greatly increasing the specialization of labor and facilitating the economic magic of competitive advantage. Money also plays the critical function of facilitating communications between and among many disparate actors. Price changes guide producers and consumers.
But… when the money can’t be trusted… this entire system breaks down. The price signals can’t be relied upon. And it becomes harder and harder for people to exchange labor and capital.
Likewise, credit enables an economy to grow by facilitating the growth of savings and capital investment through real interest rates. But very few people are willing to delay consumption and trust their savings in an economy that refuses to pay savers any return above inflation for their savings.
And that’s exactly where we are today.
We are trapped. There is no way out.
And nobody in Washington – not Republicans, not Democrats, and not even Tea Partiers – want you to realize how precarious our government’s finances really are. They can’t afford for you to understand this dilemma… or what it means.
Because here’s the thing…
And this is the big secret the government hopes you never understand…
According to even the most conservative calculations (again, using numbers provided by the Congressional Budget Office) a debt default by the U.S. government would be inevitable – were it not for one simple anomaly…the one thing that has saved the United States so far: Our country’s unique ability to simply print more money.
You see, the U.S. government has one very important weapon to use in this crisis so far: We are the only debtor in the world that can legally print U.S. dollars. And the U.S. dollar is what’s known as “the world’s reserve currency.”
The dollar forms the basis of the world’s financial system. It is what banks around the world hold in reserve against their loans.
Again, that’s a secret most politicians don’t understand:
As things stand now, the U.S. government can’t go broke in any ordinary sense of the word because it can simply print dollars to pay for its bad debts. (It’s been doing so since March of 2009.)
That might sound pretty good at first. Since we can always just print more money, what is there to worry about…?
Even as late as the 1970s, America was the world’s largest creditor. But by the mid-1980s we’d become a debtor to the world. And since the late 1990s we’ve been the world’s LARGEST debtor.
Today, our government owes more money to more people than anyone else in the world.
With all of these bad debts piling up, we’ve had to begin repaying our debts by printing trillions of new dollars.
With QE3, the latest round of “quantitative easing,” the Fed is printing $65 billion a month. That’s nearly a trillion dollars a year.
And now, finally, the impact of this is being felt in a big way.
As our creditors figure out what’s happening, we are beginning to have very, very big problems.
Our creditors (which include foreign countries and other investors here and abroad) can either completely stop accepting dollars in repayment… or greatly discount the value of these new dollars. This is already happening.
In fact, Zha Xiaogang, a researcher at the Shanghai Institutes for International Studies, recently said:
|The shortcomings of the current international monetary system pose a big threat to China’s economy.”|
That’s why China is now actively taking steps to phase out the U.S. dollar because of its frustration with the U.S. government’s mismanagement of our currency. And how does our government respond? We have the audacity to label China a “currency manipulator!”
And maybe you think it could never happen… but the truth is, this is exactly what happens when countries get too far in debt or when they consume too much or produce too little.
In fact, the same thing happened to Great Britain in the 1970s.
It continued to play this role until after World War II, when America was forced to prop up Britain’s economy with foreign aid –remember the famous Marshall Plan, when we gave billions to help European countries rebuild?
Unfortunately though, Britain pursued a socialist national agenda. The government took over all of the major industries. Like Barack Obama, Britain’s leaders wanted to “spread the wealth around.” Pretty soon the country was flat broke.
The final straw for Britain came in 1967, when things got so bad the Labour Party (the socialists) decided to “devalue” the British currency by 14%, overnight. They believed this would make it easier for people to afford their debts.
In reality, what it did was make anyone holding British sterling 14% poorer, overnight, and it made everything in Britain, much, much more expensive in the coming years.
And for the country as a whole, it ushered in one of the worst decades in modern British history.
Most Americans don’t know about Britain’s “Winter of Discontent” in the late 1970s, when the government put a freeze on wages. There were continuous strikes in nearly every sector… grave diggers, trash collectors… even hospital workers. Things got so bad at one point that many hospitals were reduced to accepting only emergency patients. And mothers giving birth had to bring their own linens.
In 1975, inflation in Britain skyrocketed 26.9%… in a single year!
The government also imposed what was known as the “Three Day Week” in 1974. In short, businesses were limited to using electricity for only three specified consecutive days’ each week and they were prohibited from working longer hours on those days.
Television companies were required to cease broadcasting at 10:30pm… to save electricity.
Just how bad were things, exactly?
Imagine… Britain was a global superpower for 150 years. But when they started intentionally devaluing their currency, things went straight downhill.
It’s now obviously clear that the same thing that happened to Britain’s sterling when it was the world’s reserve currency, is now happening to the U.S. dollar. In fact, the exchange value of the U.S. dollar has fallen nearly 20% since mid-2003, according to data from the Federal Reserve itself.
As the U.S. dollar continues to lose its position as the world’s currency, gas, oil, and other commodities will continue to skyrocket. Almost EVERYTHING we consume will get dramatically more expensive. All the clothing, furniture, and household goods we import from China. All the food we get from Central and South America… all the electronics, televisions, computers, and cars we get from Asia and Europe.
Around the world, as we print, prices soar… citizens protest… governments get overthrown. And it’s only going to get worse…
Because here’s the important fact you simply must understand about the United States right now:
Our government can NOT stop printing money because there is no possible way for us to actually afford our existing debts. No one wants you to know this. No one.
That’s why, despite the obvious inflation going on all around the world, the Fed continues to say there’s no inflation at all.