Debt Up(date): This Will Not End Well

elephant-in-the-room

When debt increases faster than income, as it has for many years in every country of the world, it means we are borrowing money we cannot and will not repay.

This will not end well.

The end game will probably be a civil society destroying fireball of inflation and/or deflation.

Every day that we choose to ignore the elephant in the living room means we increase the pain and harm that will eventually be experienced.

We are climbing a cliff with a crumbling foundation. A wise person would reverse direction and climb down.

From ZeroHedge today…

US Ends 2016 With $19.98 Trillion In Federal Debt; Up $1,054,647,941,626.91

Putting this increase in context, during Barack Obama’s time in office, federal debt has increased by $9,349,949,902,134.72, or 88%, rising from $10,626,877,048,913.08 on Jan. 20, 2009, the day of Obama’s inauguration to $19,976,826,951,047.80 on the last day of 2016.

That equals $78,553.84 for each of the 119,026,000 households in the country as of September.

 

In fiscal year 2016 (which ran from October 1, 2015 through September 30, 2016), the government’s total interest bill was $432,649,652,901.12.

This works out to be an average interest rate of 2.204%, according to the Treasury Department’s most recent data from November 2016.

But it wasn’t that long ago that interest rates were MUCH higher.

Back in January 2008, for example, the average interest rate on US government debt was 4.785%.

And even that was considered quite low by historical standards.

Today’s rates are less than half that level. And it’s reasonable to expect rates to increase. In fact, that’s already happening.

In late December, the Treasury Department sold $28 billion worth of 7-year Treasury notes at a yield of 2.24%.

2.24% is still pretty cheap. But it’s nearly double the rate from just six months ago.

Back in July, the 3-month T-bill rate was just 0.02%. Now it’s more than 25 TIMES greater at 0.51%.

This is a significant increase in a short period of time.

If the government’s average interest rate returned to 2007 levels, they would be spending nearly $1 trillion each year just to pay interest.

That’s more than they currently spend on Medicare or the US military.

So as you can see, the US government is not only increasing the debt level at an astonishing rate (with absolutely nothing to show for it), but they’re going to have to start paying a LOT more interest.

Remember that they already borrow money just to pay interest on the money they’ve already borrowed.

So higher interest rates mean that they’ll have to borrow even more money to pay interest, which will cause the debt to go up even higher, requiring them to borrow even more money to pay interest.

It’s a never-ending cycle that only ends one way: default.

The idea of ‘growing their way out’ of debt is a total fantasy.

 

And then they conclude with the obligatory denial…

The sky is not falling.

In fact, despite this debt madness, we’re living in a world full of incredible business, investment, technological, and lifestyle opportunities.

It’s truly an incredible time to be alive.

 

Enjoy it while it lasts because it won’t.

Examples Being Set

obama-family-in-hawaii

During his 8 years in office, Obama spent about $90 million on long distance family vacations.

That’s a lot of CO2 from someone who claims to care about climate change.

Real leaders set good examples.

Good intentions are worthless.

Only actions count.

justin-trudeau-in-bahamas

Justin Trudeau, another leader who claims to care about climate change, made 23 international trips to 19 different countries since becoming Prime Minister on November 4, 2015. Plus a family vacation with his 1 more than 2 children to the Caribbean.

It’s no wonder that the majority of citizens are reluctant to change their lifestyles.

Leaders and experts that understand how serious the situation is, like climate scientists, must set low-carbon lifestyle examples.

Obviously, if all leaders cancelled their long distance vacations and banned government travel it would not solve climate change, however it would send a strong message because long distance travel is a high carbon activity that many people enjoy but do not need to survive.

And it would set the table for the much stronger medicine that must follow: economic contraction and a one child policy.

We are out of time.

Trump Climate Irony

Fact 1: Trump denies the reality of human caused climate change and will probably reduce the US climate science budget.

Fact 2: Climate scientists have had zero success at influencing human behavior to reduce CO2 emissions.

Fact 3: Of all the groups in society, climate scientists should be setting a low carbon lifestyle example, but they don’t. See fact 2.

Fact 4: Firing all the climate scientists will definitely reduce CO2 emissions.

Coming to Our Senses

Given limits to growth there are only two possible paths forward:

  1. allow our economies to shrink, or
  2. fight over the remaining scraps and then collapse.

Here is Trump’s latest tweet…

Solving Overshoot with More Overshoot

Experts agree that the secret to population reduction is for everyone to have more wealth.

It’s true we can print money, but we can’t print the natural resources needed to make the new money worth something. And even if we could, the benefit would be outweighed by additional CO2, pollution, and species extinction.

Everyone wants a free lunch but nature doesn’t have any.

Where are the adults?

An Election Worthy of Angst

It’s remarkable how REALLY upset many people are about the US election despite the fact that neither candidate discussed or even acknowledged any of the real issues.

Imagine if both candidates acknowledged limits to growth and offered the only two possible paths forward.

Clinton said vote for me and I will put on the brakes so that we drop CO2 emissions and become poorer (hopefully) slowly together, giving us time to adjust and (hopefully) look after the less fortunate.

Trump said vote for me and I will use debt and the military to keep business as usual going as long as possible until we either destroy the money system and crash catastrophically, or we get into a nuclear war fighting over the remaining scraps.

Now that would be an honest election worthy of angst.