Disgraceful: “Respected” economist repeats all the common myths about our economy.

Imagine someone with these credentials not understanding how federal finance works.

This is a man who spends a good part of his life being asked to pontificate about economics, yet he promulgates the same old intuitive myths that history has disproven.

I’m talking about

“John Howland Cochrane, an American economist specializing in financial economics and macroeconomics. Formerly a professor of economics and finance at the University of Chicago, Cochrane serves as the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution at Stanford University.”

Here he is, on the right, being interviewed on CNN by Michael Smerconish:

John Cochrane (right) being interviewed by Michael Smerconish

I won’t subject you to the entire interview, but rather with the following quotes give you the gist.

John Cochrane: “Sooner or later debt has to be paid off. The real worry for me is there is no plan to pay off this debt.

“Sooner or later bond markets notice you have no plan to pay it off”

Throughout the interview, Cochrane demonstrates he has no idea what Monetary Sovereignty is, and no desire to learn from history.

The federal “debt” (which isn’t really debt as you know it), is instead, the net total of all deposits into Treasury Security accounts.

When you invest in these securities (aka T-bills, T-notes, T-bonds), you actually open a T-security account in your name. It resembles a safe deposit box with one difference: The federal government pays interest into T-security accounts.

The federal government, being Monetarily Sovereign, has the unlimited ability to create its own sovereign currency, the U.S. dollar. Thus, it has no need to borrow dollars and indeed, the federal government does not borrow dollars.

The purpose of normal “borrowing” is to provide the borrower with money to use for some purpose.

But because the federal government has the unlimited ability to create dollars it does not borrow, the T-securities are not “loans,” and the federal “debt” is not a debt.

That is why, for instance, any money you may put into a bank safe deposit box is not considered a debt of the bank, and it is no burden on the bank to “pay off” that box. It simply returns to you what already is yours.

When you open a T-security account, you are aware of the exact date upon which the dollars in the account will be returned to you. That is called the “maturity” date.

During that period of time, your dollars remain in your account, earning interest. They are not used by any agency of the federal government.

At maturity, the dollars in the misnamed “debt”  are paid off (i.e. returned to you) by the simple act of sending the money in your T-security account to your bank checking account.

This is not a burden on the federal government, nor is it a burden on future taxpayers. It is a simple money transfer from one of your bank accounts to another of your bank accounts.

It is not a transfer of dollars from the government to you. “Paying off” federal debt is a transfer of your dollars to yourself.

At one point Cochrane draws a parallel between federal debt and household debt. Thus he demonstrates abject ignorance of federal financing. The federal government is Monetarily Sovereign. You and I are monetarily non-sovereign.

You and I can run short of dollars, which is why we borrow money. The federal government never can run short of dollars, which is why it never borrow moneys.

At one point, Cochrane says:

“The more the government borrows the less is available for private capital.”

This short sentence is wrong on three counts: 

First, the government does not borrow.

Second, the amount available for private capital is based on federal deficit spending and bank lending, not on deposits into T-securities (which in fact are privately owned capital).

Third, according to Cochrane, the federal government has “borrowed” trillions of dollars, yet there is plenty available for private capital. He simply ignores the obvious facts on the ground.

The Cochrane said,

“This is like a financial crisis. It’s like a run on the bank. It’s like an earthquake. You can’t predict it. The sky falls when people lose confidence that the U.S. will pay back the debt.

The next crisis when the U.S. wants to borrow another $10 trillion, and the bond market says, ‘You guys are not worth it.”

The implication is that the federal government can run short of dollars if the “bond market” won’t lend to them. Utter nonsense.

As we’ve said, the federal government does not borrow and cannot run short of dollars. It creates dollars at will, which it surely has proved in the past 12 months by creating trillions of stimulus dollars.

Further, if Cochrane is implying that somehow the federal government will not be able to sell its T-securities, he has it all backward.

The sole purpose of T-securities is not to provide spending money for the government. The sole purposes are:

  1. To help the Federal Reserve control interest rates by setting a bottom rate, and
  2. To provide a safe parking place for unused dollars, which helps stabilize the dollar.

In the event that the federal government wished to sell T-securities but was unable to find a buyer, the Federal Reserve Bank can (and always has) buy whatever it deems necessary.

The Treasury never can be “stuck” with something it really has no need to sell in the first place.

At one point in the interview, Cochrane displays the following graph to shock you:

It shows the absolutely meaningless fraction: Debt/GDP (Gross Domestic Product).

Its rise is a favorite scare tactic by those who cannot explain why the total of deposits into T-security accounts (aka “federal debt”) should have any significant relationship to Gross Domestic Product.

The graph also demonstrates the gigantic increase in the Debt/GDP ratio, which according to debt hawk should by now, have cause an economic disaster of biblical proportions. So where is the disaster?

The fraction Debt/GDP is not predictive of anything and it is not evaluative of anything. It says nothing about future booms, busts, inflations, recessions, depressions, poverty, or prosperity. It is a 100% meaningless fraction that economisfits use all the time.

To demonstrate how meaningless it is, look at these ratios:

Here were some of the lower Debt/GDP ratios a few years ago:

 

Here were some of the higher Debt/GDP ratios at the same time:

Oh, and did we mention that powerhouse Japan’s ratio was 223?

Niow, looking at just the numbers in these two tables, you would expect Lybia to have the healthiest economy, and Puerto Rice to have the sickest, with the U.S. somewhere in the middle.

So called “economists” ignore these obvious facts.

Finally, after briefly admitting that, yes, the government can’t run short of dollars, Cochrane mumbles something about “that would cause inflation.”

Wrong yet again, Mr. Cochrane. Here are excerpts from an article Cochrane wrote ten years ago:

“For several years, a heated debate has raged among economists and policymakers about whether we face a serious risk of inflation.

“That debate has focused largely on the Federal Reserve — especially on whether the Fed has been too aggressive in increasing the money supply, whether it has kept interest rates too low, and whether it can be relied on to reverse course if signs of inflation emerge.

“But these questions miss a grave danger.

“As a result of the federal government’s enormous debt and deficits, substantial inflation could break out in America in the next few years.”

OMG! That was ten years ago, and this guy still is peddling the same old “federal-debts-cause-inflation” nonsense he spouted way back then (!), and he has learned absolutely nothing since. 

Debt and deficits have grown, while interest rates and inflation have stayed low, and still the same old, same old. 

Oh, but the BS goes on and on: 

“If people become convinced that our government will end up printing money to cover intractable deficits, they will see inflation in the future and so will try to get rid of dollars today — driving up the prices of goods, services, and eventually wages across the entire economy.”

The government has run enormous deficits, and people like Cochrane have been telling the people this would cause inflation.

But being smarter than the know-nothing economists, the people have not tried to “get rid of dollars,” and they have not driven up the prices of goods, services, and sadly, “wages across the country” barely have budged.

“This would amount to a “run” on the dollar.

“As with a bank run, we would not be able to tell ahead of time when such an event would occur. But our economy will be primed for it as long as our fiscal trajectory is unsustainable.

And there it is again, the favorite word of the wrong-for-80-years debt hawks: “Unsustainable.”

Any time you read that the U.S. federal debt is, or even soon might be, “unsustainable,: immediately stop reading. The author knows nothing, and reading what he/she says is a waste of your valuable time.

It’s almost as bad as reading that the federal debt is a “ticking time bomb” (which it supposedly has been since 1940, and still ticking).

I am an economist, but for the past 25 years, I have told all who would listen that economics is not a science. It could be. It should be. But it isn’t, because the practitioners deny the obvious and instead rely on their vague intuition.

Not that there aren’t data in economics. There are mountains of data. But econodufuses would rather juggle abstruse data than look at the clear and obvious facts all around them.

They keep predicting causes and effects when the causes keep happening without the predicted effects. 

They talk about ticking time bombs that never explode. 

They talk about unsustainable deficits and debt that have been sustained for 80 years.

They talk about cutting the debt, when every time the debt is cut, we have depressions. (Once, only a recession).

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

They keep making claims that the facts on the ground disprove.

This is science?

And then guys like Cochrane repeatedly go on TV, and write articles, and spout absolute nonsense, with no basis in fact. 

And sadly, people believe it. Even President Biden seems to believe it, and that is the real tragedy.

We could have the Ten Steps to Prosperty (below), end poverty, reduce crime, improve education, and make America that “shining city on a hill,” were it not for the debt hawks.

The debt hawks are to economics as the creationists are to biology. 

Those, who do not understand Monetary Sovereignty, do not understand economics.

…………………………………………………………………………

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 To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest. 

MONETARY SOVEREIGNTY

 

 

There you go again. The same old, wrong story about federal “debt.”

And to quote President Ronald Reagan, “There you go, again.”

Except the first time he was talking about President Jimmy Carter’s charge that Reagan opposed Medicare. This time, we reference the Libertarian ongoing, interminable, economically ignorant claim that the so-called “federal debt” is too high by once again calling it a “ticking time bomb.”

I won’t go into details about why the federal “debt” is not a debt in the usual sense; rather, it is deposits that easily are paid off simply by returning them to the depositors. You can read about that, here.

Instead, we will dive directly into an article written by Todd G. Buchholz, “a former White House director of economic policy under President George H.W. Bush and managing director of the Tiger Management hedge fund, who was awarded the Allyn Young Teaching Prize by the Harvard Department of Economics. He is the author of New Ideas from Dead Economists and The Price of Prosperity.

In  75 years, a 90-fold increase in debt (blue) vs. a 10-fold increase in inflation (red). Still no “time bomb” explosion.

America’s New Debt Bomb, Aug 20, 2020, by TODD G. BUCHHOLZ

Like in World War II, the United States is piling on debt to confront a whole-of-society crisis, raising the question of who will foot the bill in the long term.

Immediately, we come across a misstatement. There is no “bill” for the federal debt. No one ever will pay for the federal debt, not today’s taxpayers nor tomorrow’s. Federal taxes do not fund federal debt.

Federal finances are nothing like personal finances, which require income to fund outgo. The federal government requires no income. It never can run short of dollars, and it does not use taxes to fund spending.

But, unlike the post-war era, the underlying conditions for robust economic recovery today are less than favorable, placing an even greater onus on wise policymaking.

The United States today not only looks ill, but dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshaled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup-kitchen levels.

When someone or something is “dead broke,” they are unable to pay their bills. But the federal government never is unable to pay its bills. Being Monetarily Sovereign, it has the infinite ability to pay bills, even without collecting taxes.

The 2020 federal budget deficit will be around 18% of GDP, and the US debt-to-GDP ratio will soon hurdle over the 100% mark. Such figures have not been seen since Harry Truman sent B-29s to Japan to end World War II.

The debt/GDP ratio is completely meaningless. “Debt” is the net total of deposits into Treasury Security accounts in the 240+ years since the U.S. became a nation. GDP is one year’s total American spending — the ultimate apples/oranges comparison. There is no relationship between the debt/GDP ratio and America’s economic viability.

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?

To answer such questions, we should reflect on the lessons of WWII, which did not bankrupt the US, even though debt soared to 119% of GDP.

The federal government cannot go bankrupt. It is a mathematical impossibility for a nation with the infinite ability to create its sovereign currency.

By the time of the Vietnam War in the 1960s, that ratio had fallen to just above 40%. WWII was financed with a combination of roughly 40% taxes and 60% debt.

Mr. Buchhotz first advises reflecting on the lessons of WWII, then promptly forgets what he has written.

WWII was not finanaced with taxes or with debt. It was financed with federal money creation. Even if the federal government had collected zero taxes and zero deposits, it easily could have paid all war bills. That is the fundamental difference between personal finance and federal finance.

These US bonds were bought predominantly by American citizens out of a sense of patriotic duty.

Fed employees also got in on the act, holding competitions to see whose office could buy more bonds. In April 1943, New York Fed employees snapped up more than $87,000 worth of paper and were told that their purchases enabled the Army to buy a 105-millimeter howitzer and a Mustang fighter-bomber.

It was a con job by the government, to make Americans feel they were part of the war effort. Similar psychological efforts included school children saving and turning in newspapers and housewives turning in used cooking oil.

Neither the newspapers, nor the cooking oil, nor the “war bonds” had any utility for the government.

Patriotism aside, many Americans purchased Treasury bonds out of a sheer lack of other good choices.

Until the deregulation of the 1980s, federal laws prevented banks from offering high rates to savers. Moreover, the thought of swapping US dollars for higher-yielding foreign assets seemed ludicrous, and doing so might have brought J. Edgar Hoover’s FBI to your door.

While US equity markets were open to investors (the Dow Jones Industrial Average actually rallied after 1942), brokers’ commissions were hefty, and only about 2% of American families owned stocks.

Investing in the stock market seemed best-suited for Park Avenue swells, or for amnesiacs who forgot the 1929 crash.

Today, bonds have two primary purposes:

  1. To provide a safe “parking place” for unused dollars (which helps stabilize the dollar) and
  2. To assist the Fed in controlling interest rates (which helps control inflation.

In no case are bonds a method for the U.S. government to obtain dollars. The federal government (unlike state and local governments) creates dollars, ad hoc, by spending dollars.

How, then, was the monumental war debt resolved? Three factors stand out.

First, the US economy grew fast. From the late 1940s to the late 1950s, annual US growth averaged around 3.75%, funneling massive revenues to the Treasury. Moreover, US manufacturers faced few international competitors. British, German, and Japanese factories had been pounded to rubble in the war, and China’s primitive foundries were far from turning out automobiles and home appliances.

Second, inflation took off after the war as the government rolled back price controls. From March 1946 to March 1947, prices jumped 20% as they returned to reflecting the true costs of doing business.

Third, the US benefited from borrowing rates being locked in for a long time. The average duration of debt in 1947 was more than ten years, which is about twice today’s average duration. Owing to these three factors, US debt had fallen to about 50% of GDP by the end of Dwight Eisenhower’s administration in 1961.

The “monumental war debt” (i.e. the total to deposits into Treasury Security Accounts) was “resolved” (reduced) when existing bonds matured and fewer people wanted to make deposits into new bond accounts.

This “resolution” neither benefited, nor was a burden on, the U.S. government. The government has total control over the number and face amount of bonds outstanding.

If it want more deposits, it either can raise interest rates or the Fed itself can create dollars and make those deposits.

So, what’s the lesson for today?

For starters, the US Treasury should give tomorrow’s children a break by issuing 50- and 100-year bonds, locking in today’s puny rates for a lifetime.

The above makes the implicit and false assumption that “tomorrow’s children” will fund federal debt. Again, this belief is based on the false assumption that Federal debt is like state/local debt and personal debt.

Finally, what about the post-war experience with inflation?

Should we try to launch prices into the stratosphere in order to shrink the debt? I advise against that. Investors are no longer the captive audience that they were in the 1940s. “Bond vigilantes” would sniff out a devaluation scheme in advance, driving interest rates higher and undercutting the value of the dollar (and Americans’ buying power with it).

Any effort to inflate away the debt would result in a boom for holders and hoarders of gold and cryptocurrencies.

Utter nonsense. Inflation does not “shrink the debt” (total deposits), and though inflation can shrink real deposits (i.e. inflation-adjusted, total deposits), there is no purpose served in trying to shrink it.

Further, inflation neither is caused nor cured by federal debt. All inflation, down through history, has been caused by shortages, usually shortages of food and/or energy. Inflation is cured by curing the shortages, which sometimes requires increased deficit spending.

The federal debt (total deposits in T-security accounts) is not a burden on the government, not a burden on taxpayers, not a burden on future generations, and not a burden on the economy.

The “debt” has increased massively, with no adverse effect on anyone. But the debt-scare-mongers are immune to learning from experience, which is why we continually add to the following list:

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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.

September 26, 1940, New York Times, Column 8

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.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

On Jun 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

Feb. 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 US Debt Time-Bomb) By Gavin Wendt

[The following were added after the original publishing of this article]

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, 2019National 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, 2020LOS 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 US 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?

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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:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Your periodic reminder. After 80 years, the federal debt still is a “ticking time bomb.”

Here is your periodic reminder. After 80 years, the federal debt still is being called a “ticking time bomb,” the slowest time-bomb in history.

We don’t need to go into too much detail. We’ve said it often enough:

  1. The federal “debt” is not debt in the usual sense. The federal government does not borrow. The so-called “debt” is the total of deposits into Treasury Security accounts at the Federal Reserve. The federal government does not touch these deposits, and the accounts can be paid off instantly by returning the balances to the account owners. No tax dollars are involved. No burden on future generations.
  2. Federal deficits add dollars to the economy. Federal deficits are necessary for economic growth. Recessions and depressions result from decreased deficit growth and are cured by increased deficit growth.
  3. The U.S. government, being Monetarily Sovereign, cannot run short of its own sovereign currency. It never can become insolvent. Even if federal tax collections totaled $0, the federal government could continue spending, forever. That is why the federal government never borrows.
  4. The U.S. debt-to-GDP ratio is absolutely meaningless with regard to federal solvency. The ratio could go to 1,000% and the U.S. government still would be able to pay its bills.

These facts do not penetrate the minds of the debt shriekers, who after all these years still do not understand the financial differences between a Monteraily Sovereign government (the U.S. federal government) and monetarily non-sovereign governments (state & local governments).

The former has the unlimited ability to create dollars. The latter, like you, and me, and the states can become insolvent. Vast difference.

So every year, every month, perhaps every day, we see warnings like this:

29 Aug 2020 LOS ANGELES, California: Commentary: America’s mountain of debt is a ticking time bomb. The United States not only looks ill, but also dead broke.This image has an empty alt attribute; its file name is mountain-of-debt.png

To offset the pandemic-induced “Great Cessation,” the US 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.

The 2020 federal budget deficit will be around 18 per cent of GDP, and the US debt-to-GDP ratio will soon hurdle over the 100 per cent mark.

Such figures have not been seen since Harry Truman sent B-29s to Japan to end World War II.

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?

To answer such questions, we should reflect on the lessons of World War II, which did not bankrupt the US, even though debt soared to 119 per cent of GDP. By the time of the Vietnam War in the 1960s, that ratio had fallen to just above 40 per cent.

World War II was financed with a combination of roughly 40 per cent taxes and 60 per cent debt.

Buyers of that debt received measly returns, with the Fed keeping the yield on one-year Treasuries at around 0.375 per cent – compared to the prevailing 2-4 per cent peacetime rates. Ten-year notes, meanwhile, yielded just 2 per cent, which actually sounds high nowadays.

These US bonds, most with a nominal value of US$25 or less, were bought predominantly by American citizens out of a sense of patriotic duty. Fed employees also got in on the act, holding competitions to see whose office could buy more bonds.

It all is utter nonsense, exactly the same nonsense that has been published and spoken by self-anointed “experts, since 1940. Every year, those same-old warnings about the same-old “ticking time-bomb” that never seems to go off.

It would be laughable if not for the fact that many people still believe this stuff.

Here is a partial list of the “boy-who-cried-wolf” calls that have emanated from the debt scare-mongers.

================================================================================================================================================================================================

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.

September 26, 1940, New York Times, Column 8

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.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

On Jun 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

Feb. 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 US Debt Time-Bomb) By Gavin Wendt

[The following were added after the original publishing of this article]

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, 2019National 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, 2020LOS 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 US 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?

================================================================================================================================================================================================

Oooh, “the approaching fiscal cliff and national bankruptcy” still are approaching — but never arriving. The only fiscal cliff we have is the one that Trump + COVID are pushing us over. The people in America may go bankrupt, but the federal government never will.

And yet, the GOP refuses to implement the latest $3 trillion rescue package proposed by the Democrats because . . . well, because it was proposed by the Democrats and it includes benefits for the poor and middle-income groups, and “not enough” for the rich.

Millions of Americans are jobless and starving, but that ole’ federal debt bomb is still ‘a tickin’.

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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 To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Social Security for all or a reverse income tax

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10.Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb!

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
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.”

…………………………………………………………………………………………………………………………………………….

Well, you can add it to the long list, another information source that claims the national debt is a “ticking time bomb.”

Since 1940, maybe even longer, some “expert” makes that same claim and uses those same words, “ticking time bomb.”ticking time bomb.png

Which is more disturbing, the wrong-headed pronouncement or the lack of creativity?

This time it’s THE WEEK Magazine. Here are a few truly laughable excerpts:

 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.

That means that the total federal debt will balloon to $31.4 trillion over the next decade, pushing the debt-to-GDP ratio to 98 percent, or the highest since World War II.

Nevermind that the “time bomb” crisis has been ticking for 80+ years and still hasn’t exploded, and nevermind that the debt/GDP ratio is absolutely meaningless.

The influential know-nothings will continue to pump the same nonsense into the minds of the populace, who have been trained to fear something — federal deficit spending –that actually is beneficial.

It is absolutely necessary to grow the economy. Without federal deficit spending, we would have nothing but recessions and depressions.

And this wave of red ink is hitting us during boom years, when the country’s deficits should be shrinking so that we can borrow and spend money to stimulate the economy during the inevitable recession to come.

Except for these small facts.

  1. The federal government does not borrow, nor does it ever need to. It accepts deposits into T-security accounts. It never touches those dollars, and it pays off those accounts by the simple expedient of returning the dollars.
  2. The government never, never, never can run short of dollars — its sovereign currency. It always can spend whatever is necessary to stimulate the economy.
  3. Shrinking deficits cause recessions and depressions, which are cured only by increasing deficits.

In short, the author of the above paragraph doesn’t understand the difference between a Monetarily Sovereign government (i.e. the U.S. federal government) vs. monetarily non-sovereign governments (i.e. state and local governments).

The former has a sovereign currency, which it can create endlessly. The latter do not have a sovereign currency, so they often run short of whatever currency they use. It’s Economics 101.

There’s little doubt who’s to blame, said John Cassidy in NewYorker.com.

After campaigning on a promise to pay off the entire deficit, Trump has run up “vast amounts of new debt” to finance a military buildup and the $1.5 trillion tax cut in 2017.

Unfortunately, this relentless fiscal stimulus has achieved little, despite the president’s claims of stewarding “The Greatest Economy in American History.”

Last year, GDP grew 2.3 percent, nowhere near the 4 percent Trump promised, and the CBO now predicts a steady decline to 1.5 percent by 2025.

Let’s stop to examine Cassidy’s strange doubletalk. He admits that “vast amounts of new debt” amount to “relentless fiscal stimulus” — which is correct.

So, if increasing the debt stimulates, what would decreasing the debt do? Right. Decreasing debt recesses. It causes recessions and depressions.

Cassidy doesn’t dispute that. He admits the economy grew. He merely complains that the new debt didn’t grow the economy enough. Doesn’t that indicate there wasn’t enough debt, not that debt should be reduced?

His solution seems to be to stop doing what grows the economy in order to . . . what? Grow the economy less? This is the kind of “logic” to which the public is treated every day.

Americans should be “absolutely furious,” said Jordan Weissmann in Slate.com.

Republicans preach frugality with a Democrat in the White House, but burn money every time they’re in power.

Just watch: If Trump loses, Republicans will “rediscover their old-time faith in fiscal prudence and start shrieking about how the U.S. is on the road to becoming Argentina or Zimbabwe.”

Yes, Americans should be furious about many things — for instance, having a criminal President backed by a Congress filled with Sgt. Schultz wannabes (“I see nothing; I know nothing; I hear nothing”) who turn a blind eye and a deaf ear to the criminality.

But Americans should not be furious about the increased economic stimulus. And there is zero possibility that federal spending will cause another Argentinian or Zimbabwean hyperinflation.

Hyperinflations are not caused by government spending (which actually can cure hyperinflations) but rather by shortages — usually by scarcities of food or oil.

Don’t blame the Trump tax cuts, said Jake Novak in CNBC.com. The U.S. Treasury just booked a record quarter in tax revenue: $806.5 billion. “If tax revenues are rising, then tax cuts can’t possibly be the reason for rising federal debts.” It’s out-of-control spending that’s the cause.

Still, when the deficit bill comes due, said the Los Angeles Times in an editorial, there’s little doubt that the poor will end up paying for our profligacy.

Rather than cut defense or “the vast tax giveaways and subsidies” for the rich, fiscal conservatives will target “safety net programs” like Medicaid and food stamps.

That would be redistributing wealth in the cruelest possible way—“from the impoverished to the well-to-do.”

Total gibberish from Novak. Tax cuts and increased spending both led to increased deficits. But the word “blame” is misused.

Since increased deficits are stimulative, the word “credit” would be more appropriate. The combination of tax cuts and spending increases can be credited for the continuing economic growth.

The Los Angeles Times is correct that the poor will wind up paying, but not because that is a necessary result.

The federal government, being Monetarily Sovereign, does not need to raise taxes on the poor, nor does it need to cut safety net programs. It can create all the dollars it needs, forever.

It will raise taxes and/or cut social programs only because that is what the richest Americans (who run America) want.

The richest of us wish to widen the Gap between the rich and the rest. It is the Gap that makes them rich.

The two ways to widen the Gap are:

  1. Take from the poorer
  2. Give to the richer

Reducing social spending will accomplish #1. The Trump tax cuts accomplished #2.

We’ll finish this post by providing our usual reminder about the ridiculous, misleading, verging on humorous warnings about that “ticking time bomb”:

……………………………………………………………………………………………………………………………………………………..

Back in 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.

September 26, 1940, New York Times, Column 8

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.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

On Jun 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

Feb. 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 US Debt Time-Bomb) By Gavin Wendt

[The following were added after the original publishing of this article]

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, 2019National 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.]

Eighty years of wrong-headed “ticking time bomb” predictions, and still they come. Why are the thought leaders incapable of learning?

My belief: It’s intentional. The rich, who run America, do not want the not-rich to learn that the government can provide all the things described in the Ten Steps to Prosperity (below), without raising taxes.

It’s just that simple.

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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 To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY