The USA is in a debt spiral. Federal Debt has cranked up to nearly 130% of GDP.
When you max out your credit card, you could either:
1. Pay it back with cash or
2. Take out another credit card, at a higher rate because your creditworthiness is now lower. (Your Debt to Income ratio is higher)
The United States Treasury has been choosing Option 2 for over 50 years now (through issuing new debt rather than practicing austerity).
The interest rate on that debt is rising fast…as US Treasury rates are rising across the curve.
It is growing TOO EXPENSIVE for the US Government to repay its debt obligations!
The United States government is in a debt spiral.
The interest expense on debt issued to pay down our $30 trillion deficit would EXCEED current tax revenue.
So, what now?
Option 1: Lower the number of reserves the bank must keep on hand to encourage lending and lower rates, or…
Option 2: Monetize the debt, i.e. printing money (pay back debt with cheaper dollars). Money printer go brrr?
This would entail directly injecting banks with reserves to encourage lending.
Direct fiscal stimulus to mailboxes, pushing dollars to become cheaper, thus making US government debt cheaper to pay down!
Instead of an explicit default on debt, this is an implicit default on debt, essentially passing off the debt burden to US citizens.
One caveat: This will not be on the table until CPI inflation is back down to normal, 2-3% levels.
Watch until the end of the video and click the like button if you haven’t already!
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⏰ Timestamps ⏰:
0:00 – Intro
0:35 – Debt is Spiraling Out of Control
2:07 – Creditworthiness And Austerity
3:08 – Interest Rates Are Rising
4:45 – Is There A Way Out?
7:01 – Global Central Bank Balance Sheets
8:08 – How To Position Yourself
9:19 – My Thoughts
12:20 – LOL
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