The Naughty List And Grizzly Bears

The official US national debt in 1913 was $2.91 billion. In 1971, when President Nixon lied about temporarily disconnecting gold from the dollar, the official national debt was $398 billion.

By 2019 the official national debt has grown to $23,000 billion.

Politicians borrow and spend to reward cronies and buy votes. They also increase their personal wealth. Human nature changes slowly.

From 1913 to 2019 the national debt increased at a compounded rate of 8.8% per year. From 1971 to 2019 the debt also increased at 8.8% per year. This 106-year trend appears stable and likely to continue.

Can you name three congressmen or one lobbyist who advocate spending fewer currency units next year? Nope! Debt will grow exponentially.

SO WHAT?

The problem with an 8.8% increase in debt every year is that eventually the debt becomes overwhelming. Don’t write to your congressman—he doesn’t care.

Suppose you owed one dollar to the hypothetical Christopher Columbus Bank in 1492. The bank charged 8.8% interest per year. By 2019 the debt would be thousands of dollars—right?

Guess again! By 2019 that $1.00 debt would have grown to $20,110,000,000,000,000,000, or about $21 million trillion, nearly 1 million times the current national debt.

Compounding debt kills.

Suppose our $23 trillion in debt continues to grow, no faster, no slower, even though a nasty recession (lower government revenues and higher expenditures) is coming.

By the election in 2048 the debt will be over $260 trillion. By the year 2100 the debt will exceed $21 thousand trillion.

GRIM! A reset will occur.

From John Mauldin:

“Every borrower eventually repays what they owe, or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away.”

Hyperinflation is one option. Everyone gets paid and dollars, euros, pounds, etc. purchase next to nothing. A billionaire can starve, unable to afford food. Zimbabwe, Argentina, and Venezuela are examples. Note: Argentina lopped off 13 zeros from their currency since WWII. Savings accounts did not preserve wealth. Gold preserved wealth.

From Vladimir Putin:

“The dollar is going to collapse soon.”

“Soon” probably is not next month, but during the next decade is in play.

From Chairman Powell of the U.S. Federal Reserve:

“The US national debt is on an unsustainable path.” [Chairman Powell, are your QE and “not QE” making the debt problem worse? Are Federal Reserve policies part of the problem?]

Question:

The Fed claims US debt is on an unsustainable path at $23 trillion in 2019. It is on track to grow to $260+ trillion by 2048. Why does government allow the debt “train wreck” to accelerate down the tracks toward disaster?

I suggest the United States create an “HONEST MONEY NAUGHTY LIST.” Prominent on the “Naughty List” should be:

• The Federal Reserve
• The U.S. Congress
• All recent US presidents
• The Deep State
• The Military-Industrial-Security-War complex of corporations
• “Big Pharma”
• And tens of others

We should occasionally review the HARD MONEY NAUGHTY LIST and confirm government and banking cartel policies continue to push the US into a catastrophe:

• Borrow and spend is their only fiscal plan.
• Expensive wars will continue. Wave the flag and spend, spend, spend.
• Excess spending leads to consumer price inflation. The government fudges the official statistics to minimize CPI.
• The Fed will levitate the stock market with low interest rates.
• The rich get richer while the poor pay higher credit card interest rates (to the rich).
• Politicians and television proclaim, “Everything is great.” Their credibility is shrinking.

SO WHAT? SPENDING CURRENCY UNITS AND CREATING $23 TRILLION IN DEBT HAS WORKED SO FAR. WHAT COULD GO WRONG?

Billions of dollars in interest must be paid, and lenders expect their loans will be serviced. Eventually the loans will default or be repaid with nearly worthless currency units.

“What could go wrong?” More examples…

1. I’m going to pet the baby grizzly bear. The mama grizzly won’t mind.
2. We should give our reckless 16-year-old son a bottle of Scotch and the Ferrari for the evening. I’m sure he’ll be fine.
3. I jumped off the JPMorgan building. I’m passing the 40th floor on the way down. Everything is fun so far.
4. There hasn’t been a stock market crash in ten years. That’s proof the Fed permanently eliminated market crashes.

Actions have consequences, even if delayed. Uncontrolled spending and massive and unpayable debt lead to nasty inflation, hyperinflation and social unrest. Savings, retirements, corporate profits, and debt paper may crash in a conflagration of hyperinflation. Hard assets will remain. Avoid counter-party risk by owning gold and silver.

From Alasdair Macleod: “America’s trade policy will end up destroying the dollar.”

“Something is amiss systemically, which appears to require continual monetary injections to prevent a financial crisis. The US economy having been already flooded with money following Lehman, this development is deeply worrying and possibly marks a countdown to the next credit crisis.”

The next credit crisis is coming. Assets based on debt will purchase less and hard assets will be revalued higher. Gold will sell for $10,000. It is only a matter of time.

Miles Franklin will convert devaluing debt-based dollar units into real money—gold and silver bullion. I suggest silver coins and bars. Call 1-800-822-8080.

Gary Christenson

The Deviant Investor

*********