The Bill for the Borrowed Prosperity is Finally Here
For every $1 of new debt, the U.S. has only seen a return of $0.32 of growth in the economy.
To put it bluntly, the U.S. has already shot its wad when it comes to financed prosperity.
For the past 40 years, we’ve been on a debt binge, to the point where today, if the Federal Government stopped borrowing, they couldn’t even pay a single salary.
All the money would go to Social Security, Medicare, other entitlements, and the interest on our debt.
Not a single penny is left over for any other government service, including our bloated military budget.
Increased deficit spending is going to wreak havoc on the economy.
It’s sucking up capital from the real economy and acting as a massive drag and hangover, especially as interest rates rise.
The national debt at the end of 2008 was $11 trillion. Today, it’s approaching $21 trillion.
Public debt was $7.27 trillion. It’s almost doubled, to $14 trillion.
All those purchased homes, cars, and much of the consumption has been debt-fueled. Of course, as consumers become maxed out, their unsustainable spending comes to a wall, along with the fake, borrowed prosperity.
This was able to balloon due to artificially-low interest rates. Government debt is the perfect example: at $11 trillion, the annual cost for interest was $185 billion. In 2017, with $20 trillion, interest payments had barely climbed to $223 billion.
Not if, but when the U.S. Treasury hits 5% in the next year or two, keeping in mind that we are about to have a trillion-dollar annual deficit this year, the Congressional Budget Office (CBO) is projecting that $700 billion will be for interest payments alone!
That’s about what our entire military spending is and nearly half of what was collected in income tax for 2017.
Consider that the CBO is always wrong. ALL of their assumptions assume we won’t have a recession for the next 10 years.
For those sold on a coming boom… Where does the capital come from for this boom? From tapped-out consumers? A government that is now borrowing a trillion dollars per year?
All of this is deflationary, which is a death nail for the Ponzi scheme we live in today.
Politicians will always choose inflation over deflation, and in order to overcome what’s coming, they’ll need some serious helicopter money.
Helicopter money is a reference to former FED Chairman Ben Bernanke, who said a deflationary depression would never happen again because central planners could drop pallets of cash from helicopters if they had to.
It’s a visual aid for what the sociopaths are prepared to do in order to keep the financial system propped up.
I think that in this environment, you need to completely avoid conventional financial planning.
Avoid the bond market, risky stocks, and debt.
It’s fun to speculate, but always keep it to a minimum.
For stocks, if you’re buying dividend-paying blue chips, make sure you are 100% confident that they will be around in 50 years from now.
This means companies like Disney, Berkshire Hathaway, and Johnson & Johnson.
Right now, you want to have real diversification in assets (meaning not 100% in the stock market), and make sure you have your monthly obligations down to a minimum.
Legal Notice: This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.