PERSPECTIVE:
Here are some facts about our national financial situation as of 2/4/21:
Federal Debt - 28 trillion
Federal Deficit YTD - 4.57 trillion
DEBT PER TAXPAYER - $223k
OTHER LIABILITIES:
Social Security Deficit - 22 trillion
Medicare Deficit - 32.5 trillion
Total Unfunded Federal Liabilities (per citizen) - $480k
Source: See for yourself
When I studied economics 43 years ago at Babson College those numbers would have been unthinkable.
One cannot appreciate how financially out-of-whack our nation is without making an historical comparison for context. To give you a sense of historical context let's look at just one detail -- Debt:GDP.
Consider our nation's Debt to GDP ratio. For many decades we have been seeing this rise. The general sense was that as long as the Debt to GDP ratio stayed under 100% we didn't have to worry.
DEBT TO GDP:
1960 - 52%
1980 - 35%
2000 - 59%
NOW - 130% and growing faster than ever!
There is more:
- Personal Debt (per citizen) - 63k
- Student Loan Debt (per student) - 38k
- State Debt (per citizen) - 3.7k
- Local Debt (per citizen) - 6.4k
If these numbers look scary now, wait till you see them in a couple of years! They are worsening at a truly alarming rate!
Most politicians and media are turning a blind eye to the seriousness of debt. Covid has provided a tremendous distraction. China's debt to GDP ratio is several times worse than the USA. How convenient a distraction.
The main reason we are getting away with such perverse fiscal mismanagement is because we have stopped believing debt matters. Under Modern Monetary Theory we can print our way out everything. Everything except two things:
1) The first is inflation. In the event of inflation, the government would use taxes and interest rates to slow down the economy and tamp down inflation. But when the government slows the economy it also increases the need to print more money to pay it's liabilities. Plus, rising interest rates would DRAMATICALLY increase the cost of carrying our debt. Those effects feed back into the problem of insolvency. It is a viscous cycle!
2) On our paper currency is printed "IN GOD WE TRUST." Also printed on our money within the Great Seal of our Nation on the reverse side is the phrase "Annuit coeptic" which comes from the Latin words annuo, "to nod" or "to approve", and coeptum, "commencement, undertaking." It is literally translated, "[providence] favors our undertakings" or "[providence] has favored our undertakings.
If as a Nation we no longer "Trust in God," at some point God will no longer "approve" of U.S. AND, at some point the public will no longer believe in the faith & credit of the United States behind the dollar.
BOTTOM LINE:
America is broke. Then again so is Europe and Asia, etc. People don't know it but that doesn't mean it ain't so. It also doesn't mean that people won't figure it out one day.
There are a number of ways for this to end. NONE OF THEM ARE PRETTY.
WELCOME TO THE GLOBAL RESET AND THE ULTIMATE NEW WORD ORDER.
In the event things get "out of hand, ala a financial crisis worse that the last, and it becomes clear that we cannot print our way out like we have been doing, then money becomes worthless. Here is a possible result . . .
The world will replace currencies, as we have known them for thousands of years, with one new worldwide digital currency and in the process the Central Banks will wipe out most goverment debt. Paper money becomes worthless. Each of us would have to accept the new digital mark that identifies us into order to buy or sell. Hmmm ... what does that sound like?
I know -- it sounds crazy. But I'll bet the Holocaust sounded crazy too Jews and other Germans in the 1920's.
Epilogue:
What is interesting to an investor is how do you play the time in between! I definitely have thoughts and ideas on that.
Plus, in the meantime which could be who knows how long, it goes without saying to count one's blessings and enjoy things in life: e.g. family, food, fishing, farming, friendship, faith, etc.
As wise as it is to plan and prepare for the future, in between the past and the future is the present. We live in the moment.
