US Debt Load Tops Fed’s Survey of Financial Stability Risks Persistent inflation no longer top concern By Craig Torres November 22, 2024 The US government’s debt load is now seen as the biggest risk to financial stability, outweighing persistent inflation in a Federal Reserve survey.This is an alternative “Ticking Time Bomb” story we have written about for many years: Historical BULLSHIT Claims the Federal Debt Is a “Ticking Time Bomb”: From Sept. 26, 1940 to October 10, 2024 The first example of “ticking time bomb” claims was from 1940, when the federal debt was $40 Billion. The most recent example was from October 2024, when the federal debt was $33 trillion. The federal debt increased by 824,000% from 1940 to October 2024. That’s eighty years of being wrong about the “time bomb” and still the experts persist in idiocy.
Former Fed Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
Former Fed Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. It’s not tax money… We simply use the computer to mark up the size of the account.
Fed Chairman Jerome Powell stated, “As a central bank, we have the ability to create money digitally.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
Press Conference: Mario Draghi, President of the (Monetarily Sovereign) ECB, 9 January 2014. Question: I am wondering: can the ECB ever run out of money? Draghi: Technically, no. We cannot run out of money.
And still, the “experts” claim the so-called “debt” is “unsustainable” and a “ticking time bomb.” Now we are blessed with Trump’s amateur tag team, Musk and Ramaswamy, who promise to “use a chainsaw” on federal spending. They believe that all federal spending is bad, so it doesn’t matter what you cut so long as you cut. This is what happens when you give a machine gun to children and tell them to take it out and play.“Concerns surrounding US fiscal debt sustainability were atop the list this survey, followed by escalating tensions in the Middle East and policy uncertainty,” the Fed said in its semi-annual financial stability report.Get that? Concerns about the Middle East were less than concerns about the government’s ability to pay its bills. Ignorance is beyond imagination.
The report includes a survey of the Fed’s financial-market contacts conducted from late August to late October by New York Fed staff members. It also includes the central bank’s assessment of developing risks in four main areas, including asset valuations, borrowing by businesses and households, leverage in the financial sector and funding risks. More than half the respondents — 54% — cited fiscal debt sustainability as a salient risk, up from 40% just a half year ago.Aha. In its wisdom, did the report lump personal and business debt with federal debt? It’s not clear. Shame on Bloomberg for publishing such tripe.
More debt issuance by the Treasury could start to crowd out private investment or limit policy responsesif there’s an economic slump, the survey found.And there, again, is the old “crowd out” trope. (See: “The Myths of Crowding Out”) The crowding-out effect claims that when the government borrows more money (increasing federal debt), it can lead to higher interest rates. Higher interest rates make borrowing more expensive for private businesses and individuals, which can reduce private investment and spending. It all sounds very logical until you remember that the Fed controls interest rates. No matter how many T-bills it issues, it sets the rates, and if it doesn’t attract enough investors, it buys them on the open market or even engages in Quantitative Easing. The “limit policy responses” trope assumes the government has a limited ability to spend. Wrong. Its ability to spend is not limited. Even if it didn’t collect a penny in taxes, it could continue spending—double, triple, or more—forever. Remember that 824,000% increase? The government could double or triple that and still pay all its bills on time.
The banking sector remained “sound and resilient overall,” with capital ratios hovering around record levels and high liquidity, the Fed said. But in financial markets, the Fed found valuations remain elevated, liquidity “generally low” and leverage across hedge funds at or near the highest level observed since data became available in 2013. The central bank also singled out life insurers for a steady decline in the liquidity of their assets amid greater use of alternative investments. Taking a look at households, the Fed said credit card and auto loan delinquencies were above average, especially among those with lower credit scores. Overall, they judged vulnerabilities related to household and business debt as “moderate.” “These borrowers hold a relatively small share of aggregate debt, and their high delinquency rates reportedly reflect, in part, more borrowing by some households during and after the pandemic, rather than an abrupt broad-based weakening in households’ ability to repay,” the report said.In short, “We aren’t worried about the private sector’s finances. We’re worried about the federal government’s finances. Incredible. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
The fact that MS, Bernanke, Greenspan, et al, say the Fed cannot fail, and yet we remain on course for disaster, is proof we are either fear-frozen or too specialized to see the general picture. It’s too bad Trump can’t be persuaded to see how MS could make him president for life!
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Lord save us.
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I’m a Canadian and we suffer the same idiotic misunderstandings (real or politically used) about the function of central banks. I often remind people in arguments about the function of the Bank of Canada that it is a Crown Corporation,….a creature of the state. There is of course the usual twaddle from the bank that it has to impose this or that, which gives the government to opportunity hide their support for private finance and taxing…the same old household economics.
During COVID the bank was “loaning” the government 5-8 billion dollars a week. In turn the Gov. deposited bonds to that value in the bank. That is, one is in one pocket of its pants, and the other in the other.
They are as you suggest pressed by private finance to avoid “crowding out” which is often where they belong. Sadly, household economics is a major ideation that blinds us from other roads.
I think your consistent reminder of what officials has said is as much popular truth needed. please keep it up. The darker side of this nonsense in Canada, Britain and the U.S. is there is a sell-off of public assets to private capital. who mismanage and stuff their bags with profits and sideline efforts to have a more equitable distribution of wealth.
thanks for your writing. Helps to keep the spirits up.
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Thanks John,
Your comment help keep my spirits up despite decades of failure in communicating the simplest, most obvious truth in economics: A Monetarily Sovereign government neither needs nor uses tax dollars. It creates new dollars to pay for everything and can do so, endlessly.
I guess the tax-paying populace doesn’t want to believe they’ve been suckers — sending money to the government for no purpose. The rich know it, which is why they send so little.
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The establishment and the rich and powerful are forever going to pretend MS doesn’t exist if they can get away with it. They won’t. The day will come when the gap between rich and poor is so great that affordability will have to be recognized. The rich will have to settle for painless world peace over continuous struggling, misery, & grinding to a halt.
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Trump, Musk, and Ramaswamy understand that we are constitutionally a Monetarily Sovereign (MS) nation. For example, they say there should be no taxes on tips, overtime, or Social Security etc. Words like ‘debt’ and ‘spending’ are frequently used because they resonate with people, validating and reinforcing their existing beliefs. Businesspeople and politicians often repeat the same words to drive their message .
Some of my friends, who are leaders in tech and finance, don’t understand the concept of Monetary Sovereignty. Instead, they repeat the same media-driven narrative that ‘debt is destroying us.’ As you mentioned, the media and think tanks will never allow people to challenge their beliefs or start questioning leaders about the wealth gap.
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Sad, isn’t it?
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