The U.S. federal government is not like state/local governments, not like euro governments, not like businesses, and not like you and me. It uniquely is Monetarily Sovereign.
It cannot, unwillingly, run short of its own sovereign currency, the U.S. dollar. /
Periodically, we publish yet another shrieking claim that the U.S. federal debt is “unsustainable” and a “ticking time bomb.”
This lie has been told to you every year (really, almost every day) since 1940, and needless to say, that bomb never has exploded.
Rather than repeat the entire litany of lies to which you have been subject, I will list them here as a reference, and add, at the end, new “federal debt is a ticking time bomb” lies as I encounter them:
September 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)
By 1983: “The debt probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”
In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)
Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”
In 1987: Richmond Times-Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT’ TIME BOMB'”
Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”
In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS“
In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.“
Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”
In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”
In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB“
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”
In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.“
In 2010: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”
In 2011: Washington Post, Lori Montgomery:”. . . defuse the biggest budgetary time bombs that are set to explode.”
June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”
On June 15, 2014: CBN News: “The United States of Debt: A Ticking Time Bomb“
On June 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,
On February 10, 2016, The Daily Bell: “Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”
On January 23, 2017: Trump’s ‘Debt Bomb‘: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.
On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”
On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangeros
February 16, 2018 America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.
April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”
January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.
January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking U.S. Debt Time-Bomb) By Gavin Wendt
April 10, 2019, The National Debt: America’s Ticking Time Bomb. TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.
July 11, 2019: National debt is a ‘ticking time bomb ‘: Sen. Mike Lee
SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN SPECIAL TO THE SUN SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.
JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness. there’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.
February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb! The national debt: A ticking time bomb? America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030
April 26, 2020, ‘Catastrophic’: Why government debt is a ticking time bomb, Stephen Koukoulas, Yahoo Finance [Re. Monetarily Sovereign Australia’s debt.]
August 29, 2020, LOS ANGELES, California: America’s mountain of debt is a ticking time bomb The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the U.S. Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?
April 16, 2021, NATIONAL POLICY: ECONOMY AND TAXES / MARK ALEXANDER / The National Debt Clock: A Ticking Time Bomb: At the moment, our national debt exceeds $28 TRILLION — about 80% held as public debt and the rest as intragovernmental debt. That is $225,000 per taxpayer. Federal annual spending this year is almost $8 trillion, and more than half of that is deficit spending — piling on the national debt.
June 17, 2022 Time Bomb On National Debt Is Counting Down Faster Thanks To Fed’s Rate Hike, Tim Brown /We are now staring down the barrel of the end of the U.S. economy based on fiat money, printed out of thin air but charged back to the people at ridiculous interest rates. Now, the national debt is approaching $31 trillion, which is $12 trillion more than when Donald Trump took office in 2017 and more than half of that debt was tacked on in his final year. Then we’ve had the disastrous year and a half of Joe Biden. Now, the Fed is now hiking its rates and that spells even more trouble for the national debt and the economy at large.
December 4, 2022 America’s ticking time bomb: $66 trillion in debt that could crash the economy By Stephen Moore, The national debt is $31 trillion when including Social Security’s and Medicare’s unfunded liabilities. Wake up, America.That ticking sound you’re hearing is the American debt time bomb that with each passing day is getting precariously close to detonating and crashing the US economy.
January 13, 2023. A ticking time bomb in the U.S. economy is running perilously close to detonation. Long considered a harbinger of bad luck, Friday, Jan. 13 came with a warning for Congress that the country could default on its debt as soon as June. With the U.S. reaching its debt limit of $31.4 trillion on Jan. 19, Treasury Secretary Janet Yellen urged lawmakers to increase or suspend the debt ceiling.
February 5 2023 ‘The world’s largest Ponzi scheme’: Peter Schiff just blasted the US debt ceiling drama. Here are 3 assets he trusts amid major market uncertainty Story by Bethan Moorcraft, A ticking time bomb in the U.S. economy is running perilously close to detonation. With the U.S. reaching its debt limit of $31.4 trillion on Jan. 19, Treasury Secretary Janet Yellen urged lawmakers to increase or suspend the debt ceiling.
April 22, 2023 The Debt Ceiling Debate Is About More Than Debt, Jim Tankersley, WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit, and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt. “Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.
If, year after year , you keep predicting something is imminent, yet it never happens, at what point do you reexamine your beliefs? Apparently never, for the debt heads. Truly pitiful. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps
20 thoughts on “A reference of “federal debt is a ticking time bomb” lies.”
Imprimir cromos en la cantidad que se desee puede servir para disminuir las diferencias económicas entre clases DENTRO DE USA , siempre y cuando, los cromos se repartan bien entre la población.
Imprimir cromos en la cantidad que desee, y pretender que terceros países los acepten, solo funciona si tus submarinos nucleares, tus fragatas y tus ejércitos no tienen rival. La cosa cambia cuando sí tienen rival. Y ahora, tienen rival
According to Bing Translator1, the first sentence translates to:
Printing stickers in the amount you want can help reduce economic differences between classes WITHIN USA, as long as the stickers are well distributed among the population.
The second sentence translates to:
Printing stickers in the amount you want, and pretending that third countries accept them, only works if your nuclear submarines, your frigates and your armies have no rival. The thing changes when they do have a rival. And now, they have a rival.
I assume the “stickers” are dollars, and you are saying that now dollars won’t be accepted because other forms of money will take its place.
That might be true if the Republicans are “successful” in destroying the U.S. economy via the incredibly foolish debt ceiling.
What about this simple graphic can’t they [GQP] understand: https://twitter.com/GallmanRussell/status/1538314493842886656/photo/1
It’s not just the GOP. It’s the party not in power at any given moment. Most of them understand it quite well. But they are bribed by the rich not to “understand” it.
The rich want to cut federal spending because the vast majority benefits the “not-rich”: Medicare, Medicaid, Obamacare, poverty aids, etc. The rich don’t even mind higher taxes, especially FICA. The rich get their benefits from tax loopholes, which is how billionaire Trump paid far less taxes than you did.
The primary financial goal of the rich has to do with Gap Psychology. The rich get richer by widening the Gaps below them.
How many in Congress would be able to fully explain our system of self-imposed constraints? https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1825303
Look at this: https://redd.it/12sdu3p Thousands of confused people in Iowa are getting paper weight junk mail.
And with a foreword by Arthur Laffer, the popularizer of the useless Laffer curve
A letter carrier commented: “They were all sent with a tracking number too. Had to deliver a shit ton of them. Dude could have at least printed soft cover and sent via media mail for a fraction of the cost.”
As for Laffer someone who bothered to read the forward says he’s still trying to have it both ways talking out of both sides of his mouth [honestly I didn’t realize he was still alive]: “It’s from Dr. Arthur Laffer, who first says he designed Reaganomics and was a close adviser to Ronald Reagan and then a page later claims to be “an outsider looking in.” Um no, you are the definition of an insider.”
Outstanding compilation!!!! Stephanie Kelton did one like that in a presentation https://youtu.be/WS9nP-BKa3M?t=303
Stephanie Kelton was a professor at the University of Missouri, KC, when I gave a speech there about Monetary Sovereignty: https://mythfighter.com/2010/05/12/the-meteorology-of-economics-speech-at-umkc/
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Superb speech. Even if someone disagreed they would be impressed with your articulate command of the topic!
I do have concerns aboutyour thoughts on taxes. Aren’t sin taxes good; aren’t carbon taxes good; aren’t taxes on high income people good? Aren’t inheritance taxes good?
Yes, you are correct. Sin taxes, carbon taxes, taxes to narrow the Gaps between the rich and the rest, and inheritance taxes are good ways in which the government can control the economy.
That is the true function of federal taxes as opposed to state/local government taxes which also control the economy but primarily provide spending funds to those governments.
And that is the difference. Federal taxes don’t provide spending funds. Sadly, the government’s current tax system is to designed by the rich to widen the gaps between the rich and the rest.
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The problem is that MMT claims T-bonds represent federal borrowing. The federal government doesn’t borrow. Why would it? It has the infinite ability to create dollars. An entity having the infinite ability to create dollars never needs to borrow dollars.
T-bonds are not borrowing. They are deposits into T-accounts that are wholly owned by the depositor, and never touched by the government.
I would agree with you except key central banks in CBDC papers are more open about the fact that central bank money, other than cash, is not useable by the public. It is only useable by the banks. Hence they were able to bail out the banks and buy their toxic assets, but they can’t provide helicopter money for the people or the government who all have to use bank credit money. Central banks like private banks have digital money and all we have to do is make it available to the public. Initially it should not be programmable to stop unwarranted conspiracy theory fears.
“Cash is currently the only central bank money that is available to the general public, and it remains an important and popular means of payment.”and
“Federal Reserve notes (i.e., physical currency) are the only type of central bank money available to the general public.”
Re: “The problem is that MMT claims T-bonds represent federal borrowing.”
How is it they think time deposits are borrowing? To say that is borrowing is a legal fiction within the system’s self-imposed constraints just like the legal fiction of those trust funds that aren’t really trust funds collecting interest on phantom FICA dollars that no longer exist. It is nuts.
Government spending has two immediate and direct macro effects. It: 1. Adds to the net financial assets held by non-government; 2. Creates income equal to the amount spent.
Government spending with interest paid on reserves
The twofold effect of government spending would also be the same if government did away with the fiction of government “borrowing” altogether and simply conducted the following single-step operation in which the policy rate is paid on reserve balances: http://heteconomist.com/wp-content/uploads/2016/08/OMF-Fig-3-e1470012767206.jpg
In this approach, the Treasury or the central bank, or a merged government agency, would spend simply by adding reserves to the banking system and instructing banks to credit the accounts of spending recipients. This would do away with the fiction of the government needing to “borrow” and also make clear that it is the act of government spending itself that creates government money in the form of reserves. (Once again, the real assets acquired by government and the extra net worth for non-government are left out to make clear the increase in non-government net financial assets.)
Benefits of the simpler procedures
1. Be more efficient. There would be no need for superfluous activity (e.g. the Treasury auction) that takes up the time of those involved without serving any public purpose.
2. Be more transparent. There would be no more obscuring of the fact that a currency issuer is the source of the currency and never beholden to private markets or “bond vigilantes” for financing in the government’s own unit of account.
3. Greatly simplify short-term interest rate management. Open market operations are not needed for this purpose. The policy rate is just paid on reserves.
Adopting the simpler procedures would not prevent government from offering interest bearing time deposits to non-government for other purposes, such as to provide non-government with alternative saving vehicles, if this was deemed desirable. But there is no need for these asset swaps, if pursued, to be entwined in short-term interest rate management or be framed as the government “borrowing” from the private sector what it alone can issue. Nor should such Fed deposits be tied to government net spending. Any decision by government to offer bonds to savers is at its discretion and not necessitated by its own spending behavior.
You are correct. As with “trust funds,” the confusion starts with semantics. In the private sector, “bonds” represent borrowing, because the bond issuer needs and uses the dollars paid for them. But T-bonds are not the same because the Monetarily Sovereign federal government neither needs nor uses the dollars.
This always was true, though just partially during those periods when the dollar was linked to gold or silver. After the 1971 “Nixon shock,” the federal government had no need or use for an inflow of dollars.
People always say August 1971 but the fixed exchange rates didn’t actually disappear until March 1973. The Federal government on its various ledgers still values their gold stock at $42.22
“after months of negotiations, the Group of Ten (G–10) industrialized democracies agreed to a new set of fixed exchange rates centered on a devalued dollar in the December 1971 Smithsonian Agreement. Although characterized by Nixon as “the most significant monetary agreement in the history of the world,” the exchange rates established in the Smithsonian Agreement did not last long. Fifteen months later, in February 1973, speculative market pressure led to a further devaluation of the dollar and another set of exchange parities.”
I had always meant to look up WSJ or Barrons from early 1973 at a big library to see if when the major currencies floated against the dollar anyone had an inkling of the historical importance of passing into a fiat world. Pretty sure the West German Mark was the first to float against the dollar on 03/02/73 after they burned through a huge amount of currency reserves attempting to maintain their assigned exchange peg.
President Nixon took the world off the gold standard in 1971. However his aides were concerned that free market operations in the Foreign exchange markets would bring distress and devaluation to many currencies. Therefore many countries were persuaded to enter into a cobbled together arrangement called the Smithsonian agreement. The United States persuaded the G-10 countries to enter into an agreement wherein they would keep their exchange rates pegged to the dollar. However, the dollar would not be pegged to gold. Hence, it was essentially a Bretton Woods agreement minus the gold backing. Also, Central Banks were allowed certain liberties as the value of their currencies was allowed to fluctuate to 2.5% plus or minus of the value of the dollar before their Central Banks were supposed to conduct open market operations.
This arrangement seemed weak on paper [no doubt thought up by a dim bulb like Larry Summer or Jerome Powell]. However, it completely crumbled under the pressure of markets in the real world. The United States trade deficit kept soaring and as a result the value of gold rocketed upwards in 1972. As a result, all the members of the G-10 abandoned the Smithsonian agreement. This ended up in the closure of the Forex markets for a while!
The failure of the governments of the world to create a system wherein the exchange rates of the currencies would be fixed and stable left no alternative other than having a market for freely floating currencies. This is the stage where we find ourselves today. The Forex market as we know today is the result of the failure of the Bretton Woods and the Smithsonian agreement.
“The statutory price of gold is set by law. It does not fluctuate with the market price of gold and has been constant at $42 2/9, or $42.2222, per fine troy ounce since 1973. The book value of the gold held by the Treasury is determined using the statutory price.” $42 2/9 who the hell at Treasury pulled that fraction out of their ass is something strange I always wondered about.
Good comments. Of course, valuing any assets held by the government errand. The government has enough assets to pay for, or exchange for, anything.
Measuring the government’s gold in ounces might make some sense, but measuring it in dollars is Larry Summers silly. One might as well measure the Mississippi River in dollars.
T-bonds represent federal borrowing..”
Maybe he thinks it’s borrowing since interest is paid out.