The U.S. debt spiral
June 2023. People in America are feeling a familiar, almost nostalgic vibe. The same old headlines are back on WSJ and Bloomberg: Congress is at it again, sparring over the debt ceiling.
Strip away all the buzzwords, flashy headlines, and news-speak, and it boils down to a pretty straightforward choice that even a slightly buzzed trailer park guy in West Virginia would get:
Either we raise the debt ceiling and kick the mess down the road, or we don’t – and the mess hits us right here, right now.
The current policy vibe in the U.S.? One word: Bidenism. And Bidenism can be summed up as: delay the fallout for as long as possible. Not now. Also, my son died in Iraq…or maybe I remembered that because we’re slipping in the primaries.
The debate was just posturing from the get-go, a filler for the front pages, a chance to show off the strength of democracy and bipartisanship – and then to make the one obvious call: raise the ceiling.
Everyone knew the deal, everyone got it. But one question lingered: how high are we raising this thing? Current cap was $31.5 trillion, which already looked like a joke. But the talk was about adding another $3-5 trillion on top.
And this is where Bidenism takes center stage. Why set any cap at all when, as every good American knows, sky’s the limit?
So, President Joe Biden signed off on a deal to ditch the debt ceiling entirely for two years and drop spending limits after 2025, letting the government burn through as much green paper as it wants, no questions asked.
- Student aid? No sweat, hermano. Clear all their debt.
- Flex in Eastern Europe? Easy.
- Hookups for Nancy Pelosi’s hubby? Already in the books for the next four quarters.
Debt ceiling issue on hold till 2025 — so, in the meantime, let’s go all out.
In Treasury reports, the ‘statutory debt limit’ is now set to ZERO. Guess there just wasn’t enough room for the word ‘INFINITY.’
Right now, the national debt’s climbing faster than the average ‘profitable’ trader’s last round in bed. Scrapping even the tiniest hint of fiscal limits let Treasury sink even deeper into that debt black hole.
With things going this way, we’ve racked up an extra $1.5 trillion in just a couple of months.
What’s got this number skyrocketing so high you’d only really see it on some sketchy website? Bonds, notes, all sorts of debt instruments are flooding the market. This whole situation just proves one more time that the U.S. economy’s in a debt spiral.
A debt spiral kicks in when a person, business, or country has to keep borrowing just to pay off what they already owe.
Let’s break it down with my table to visualize this whole thing:
This is the mess the U.S. is stepping into for sure. With the federal debt hitting $33 trillion, if rates stay at around 5%, the U.S. is gonna end up shelling out $1.6 trillion a year just on interest to keep that debt afloat. And that doesn’t even include paying off the principal.
The mess the U.S. government is dealing with isn’t even in the same league as Jacques Fresco's puzzles. The Venus Project is a joke compared to what the Fed, Congress, and the kids messing around with Joe Biden have to figure out.
If they hike rates to tackle inflation, they’re just speeding up the debt spiral. But if they lower rates and go for some quantitative easing, that’s gonna spark inflation, which means the Treasury will have to cough up even more as costs for labor, infrastructure, healthcare, and military gear go up.
That’ll bump up the total debt the Treasury has to deal with. Just take a look at the chart above.
The only way out of this mess is serious budget cuts. That means slashing military spending, infrastructure projects, and social programs while raising taxes and closing loopholes, especially for corporations raking in cash from the current one-sided tax code.
It’s politically dicey. That’s why Triple J (Joe, Jerome, and Janet) are gonna keep leading the U.S. straight into a giant mess. The Fed has trapped the Treasury in a black hole of its own making. Burdened by the weight of debt, the government is heading for a recession. And determined to dodge a deflationary collapse, Yellen and Powell are gonna work together to crank out more cash.
At this rate, by 2027, the U.S. national debt is gonna top $43 trillion. Not too shabby compared to the current $33 trillion... SIKE! This is a disaster.
The wave of debt issuance is gonna skyrocket. There’s not enough demand, so the Fed will swoop in and print the gap. That’ll just make the crisis worse and ramp up the money supply, fueling inflation and dragging the dollar deeper into a black hole.