May 21, 2024

The Coming Avalanche of National Debt

To have an avalanche, you have to have a lot of snow. The snow piles up all over the hillside during snowstorms, sometimes slowly, sometimes all at once. Then, a trigger turns all that snowfall into a force that can bury the unsuspecting individual and take herculean efforts to get them out.

That’s exactly where we find ourselves with the debt situation in the American Empire. In the 2008 recession, we found that we could use debt to keep our economy running when other country’s economies were retracting. Being the reserve currency, we could practically print money, and we could keep people spending money like there was no tomorrow.

But tomorrow came.

In 2022, at the end of the COVID pandemic, President Joe Biden continued to pump more money into the system. Like most of his policies, it seemed great, but fed inflation which is at its highest point in recent memory.

Unfortunately, the people haven’t totally adapted or accepted the new reality. Since the prices of everything are going up, people are resorting to debt to cover basic necessities. And the government has run up the debt to pay for all its stimulus. All it is going to take is a spark to tumble the family without an emergency fund, or a government that sees a rapid slowing of an economy when people run out of money.

The CEO of the world’s largest asset manager also cautioned that the recent three percentage point increase in U.S. Treasury yields, to 4%—which reflects longer term inflation expectations and the Fed’s aggressive interest rate hikes—is already very dangerous, since it amounts to an extra trillion dollars in interest payments alone over the next decade. 

“The situation is more urgent than I can ever remember,” Fink wrote in his annual letter to investors on Tuesday.

“There’s a bad scenario where the American economy starts looking like Japan’s in the late 1990s and early 2000s, when debt exceeded GDP and led to periods of austerity and stagnation.” 

The national debt is rising at a rate of $1 trillion roughly every 100 days, which itself is putting upwards pressure on consumer prices. That is partly why both assets believed to be inflation hedges like physical gold and Bitcoin—what some view as the precious metal’s virtual cousin due to its limited nature—are both at record highs.

“A high-debt America would also be one where it’s much harder to fight inflation, since monetary policymakers could not raise rates without dramatically adding to an already unsustainable debt-servicing bill,” he added.

Larry Fink joins Jamie Dimon and Jerome Powell is sounding the alarm on ‘snowballing’ national debt: ‘The situation is more urgent than I can ever remember’

What can we do?

  • Live within your means.
  • Put effort into growing some of your own food or making your own things.
  • Practice contentment
  • Save!
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