The Next Crisis is on the Calendar
Fred, a transgender woman, and Ethel, a transgender man got married 10 years ago. (I want to be woke about this scenario.)
Between them their annual income is $50,000.
But they decided some time ago that their income is immaterial to what they want to spend and actually will spend.
So, the 6th year of their marriage Fred wanted a new kitchen. Ethel, wanting to please Fred, used their credit card to pay the contractor the $10,000 to accomplish the update.
The 7th year they decided they needed two cars, so they bought another one by using their credit card to pay the $20,000 needed.
Year 8, things were getting a little tight financially for the couple, so instead of reassessing their credit card debt and taking steps to avoid filing bankruptcy they had the option to print some money to keep them in the lifestyle to which they had become accustomed. Nobody else had a cash printing press. They had enough to pay the minimum monthly requirement on their credit card with the extra money. The farthest thing from their minds was to pay down the $30,000 in debt they owed. I mean, why would they even consider it?
Enter year 9. Ethel and Fred wanted one of those 70-inch TVs for their living room. No problem for them. They bought a fancy one for $10,000 on their credit card and printed more money to buy it and pay the now minimum monthly credit card payment of $1,000.
So here they are. Their annual income is still $50,000 and they have $40,000 owed on their credit card.
Year 10. Knowing how easy it was to live the good life with their printing press, they decided to buy a new house in a better neighborhood. The difference between what they sold the old house for, and the new home was $20,000 more.
Their credit limit on the credit card was $50,000 but they needed that to be $60,000 now. So, they just increased their credit limit by $10,000 (another option unique to them), put the $20,000 on their credit card and continued to pay the minimum monthly balance which was now $1,500.
The pair was now paying $18,000 a year to the credit card company without paying a dime to reduce the $60,000 debt – which was $10,000 more than what they earned annually.
You and I know we can’t live like Ethel and Fred. We can’t spend more than we earn – at least for very long. We don’t have the option to just print more money or to increase our credit limits. Ethel and Fred live under different rules.
In our little story, Ethel and Fred represent our Congress and the federal government.
Congress and administrations decided to spend more than they had in revenue each year for the last 20+ years. Like Ethel and Fred the government can print more money and itself increase the credit limit on their own credit card. The difference between Ethel and Fred and the federal government is the government is not spending their own money, they’re spending ours.
So, for the last 20+ years, the government has increased its our debt by over $25 trillion to $31+ trillion dollars.
It’s now routine to appropriate money by crazy amounts above revenue via bloated “omnibus” bills. But when that action is taken, Congress doesn’t consider the limit on the debt ceiling it set for itself previously. You see, the debt limit is a separate decision the way they have it set up.
So, like has happened every year since 2000 the Congress is now separately faced with increasing the debt limit so it can spend the total it has previously appropriated for the fiscal year.
There are different estimates as to when the debt limit ceiling will be reached in 2023, but most are sometime in the next few months. The current debt ceiling is $31.4T, set in October 2022. The budget passed by Congress just prior to Christmas is $1T over revenue estimates, so to keep its current spending intact Congress will need to increase the debt ceiling by something around a trillion dollars to pay for the deficit.
It’s a game they play.
They set the budget without considering the deficit it involves, then later when the “crisis” looms for the government, the markets and the economy, Congress gets away with its irresponsible spending by avoiding default by increasing the debt ceiling to pay for it. Cute, huh?
The government, like our unique Fred and Ethel, has a printing press and the ability to raise its own credit limits.
What’s ignored through this whole scenario is the cost of borrowing so much money. As the debt increases, so do the interest payments. The more debt anyone or any government has, the riskier it is for a lender to allow more borrowing. To do so means people and organizations need a higher interest rate in order to buy treasury bonds. Couple that with the Fed raising all interest rates to offset the inflation the increase in the money supply has created. The government has to take more and more of its revenue just to pay the interest.
There’s a wall that sooner or later will be hit for and our Ethel and Fred that will require declaring bankruptcy. The same for our government.
The danger of our government facing bankruptcy is that it would result in total economic chaos at home and abroad. The United States would no longer be a world leader in anything at any level.
The current national debt is 5 times the annual revenue the government expects to receive. Not only that, but it’s also about $10T – or 30+% over GDP – the total annual disposable income of every citizen of the country. That means if every cent of income earned in the US were given to the government it would be about $10T short of paying off the debt.
Short-sighted is too nice a term. It’s totally irresponsible.
We elect people to put us all in financial jeopardy.
***************
Have a great and prosperous week.
Hug somebody
References:
SPIDER Bites
Trivia question of the week: What is the biggest, strongest bone in the human body? (Last week’s ‘common’ answer to how many strings on a violin is 4.) [Special ones may have 5 or 6. Electric violins more.]
We recently had the high school rodeo competition in Ocala. I had not lived in a state where rodeo was an extra curricula option for a high schooler.
SCOTUS announced Thursday it could not identify the leaker on the Rowe vs. Wade reversal last year. It must be somebody’s kid.
More than 65,000 people from NY changed their residence to Florida in 2022.
The rich, ‘woke,’ climate change pontificators, world government advocates and self-proclaimed world leaders – made up of a circle of economic and political ‘elites’ – gathered for the World Economic Forum (WEF) in Davos, Switzerland last week. They flew in there via 1,042 private planes emitting an estimated 9,700 tons of CO2 one way – equivalent to the weekly CO2 emissions of 350,000 combustion engine cars. Globalist WEF founder Klaus Schwab called on participants to “master the future” in the face of the challenges currently facing the world.” They care so much about you and me. Elon Musk declined his invitation. He was working.
U.S. industrial oil production fell for a second month in a row in December amid lower factory output that indicates manufacturers were slowing activity based on the softening demand for goods. Need more proof of a recession or stagflation?
Biden lawyers discovered more classified documents at the Biden offices and home/garage. The partisan DOJ is allowing these people to find and handle those papers without regard to top secret clearances. The FBI is now involved.
Drought stricken California allowed trillions of gallons of water flow into the ocean during recent rain storms there. The farmers and vineyard owners there have to be more than a little annoyed.
After a surge in illegal immigrants primarily from Cuba shut down the Florida Keys’ Dry Tortugas National Park a week ago, Gov. DeSantis activated national guard troops to help the Coast Guard and Border Patrol handle a recent influx of over 12,000 immigrants attempting to enter the US via the Florida Keys. Meanwhile, the Biden administration is now saying the surge in illegal immigration everywhere is the result people fleeing climate change. I guess it isn’t ‘changing’ as much here as elsewhere. Last month border patrol encountered over 250,000 illegal immigrants – another record.
