The Big Red Elephant In The Room...



A trillion here, a trillion there, what does it matter? After all, the fed can just keep printing money right? We can "quantitatively ease" our way into paying it off right? Well, experts are no longer sure, and it appears that we might have reached a point where we are going to have to see what we can rack up before we have to default on the bill.


There isn't enough money to keep spending like we are, after all, everyone expects to get paid, you do, right? But what happens when then bill comes due and everyone in the chain starts saying, "I can't pay?" Can you imagine being paid by your boss with an I.O.U.?

 
 

That actually happened to my cousin, three times, in the state of California, and his boss? The California State Government. So we've already seen it happen, but what are the broader implications of it?


You see, our ability to deficit spend, a governmental version of living on your credit cards and trying to keep up with the minimum payments, is quickly drying up as the debt continues to mount. The levels of spending that we're seeing now are so mind blowing that we have to begin to ask if we're going to have to start borrowing from aliens in order to keep it going.


Here's the deal, China, Taiwan, Japan, Germany, Mexico, Britain, and many other US Creditors, will only take the devaluation of their investment for so long. Yep, that's right, every extra dollar we print means that we're paying them back that much less in GDP (real money) even though we're paying them the same amount of actual dollars (fake money). What happens when you can't borrow anymore because others are tired of losing money?


For those who aren't following, let me attempt to explain:


Imagine that you came to do work on a farm. The farmer says, "Here is a piece of paper (money) that entitles you to 10 bushels of corn (GDP)." You agree to the deal and do the work, holding on to the money until the crops come due. (This is, after all, how money really works. It is ultimately backed by what our nation produces) Yet, when you start hearing about the farmer giving out other pieces of paper for the same thing, you begin to wonder if the farmer will have enough crop to actually honor all of these papers. You begin to get nervous.


So you go to the farmer and say that you want to exchange your paper for crop now, because you're concerned about his ability to pay when it's time. Only the farmer now tells you that he needs so much to live on, and the rest has to be divided between the paper holders, and that he's sorry, but his needs were too important, and so the paper you have is now only worth 3 bushels on corn. Stunned and angry, you say, "then give me my three bushels of corn and I'm done with you." Except he says, "I can't, it isn't ready yet. You'll have to come back when it is."


What reason do you have to believe that he'll honor his original word, let alone do further work for him in the future. This, however, is what we do to many countries, and we are hedged by the fact that the dollar is the global reserve currency. Except that it might not be forever, and what happens then? What happens when our creditors say, "nope," to our requests for further assistance? What happens to all of our "full of cheap goods and Wal-Mart" stores when China says that they aren't going to loan us anymore money to buy their stuff with future dollars because they aren't confident that the money will be worth squat in the future?


Are we ready for that? In a word, nope.


American manufacturing is decimated, President Biden is further devastating it with his insane carbon limits, and then you have the American people who are so used to dollar store shopping and grocery prices that are subsidized (so that everyone is on food stamps whether you know it or not) that they'll likely revolt when the prices begin normalizing on them. And that doesn't even take into account the fact that we'll also have to build the REAL infrastructure to manufacture again, so we'll have to pay those costs as well.


But wait, there's more!!


You see, the other terrible ticking time bomb is that these same countries, mainly China, will likely attempt to call the debt. We don't have the money to pay it, so what then? Could we really end up like Greece and have to declare a national bankruptcy? Unfortunately, yes. That is the most likely outcome.


Austerity measures will go into place, welfare, SNAP, section 8, child tax credits, and so many other social programs that people have come to depend on will all get reduced, if not cancelled outright. That will leave millions with nothing to face the rising onslaught of price increases. It's like the great depression all over again.


If Bill Clinton's housing bubble was a grenade, and George Bush's .com bubble was a mortar, then the potential default is like a modern nuclear bomb just waiting to go off. The clock is ticking, and we've only got so long to defuse it.


Oh wait, it gets even better!


You see, the last time the US looked at major quantitative easing to ease our budget, China went on the global platform and said, "Do not dishonor our investment." They decided to make a global statement that they are not intending to let the debt slide in any way, quantitatively or qualitatively.


So what happens when we declare bankruptcy and declare their entire investment void without return? Well, you don't have to be a rocket scientist to put two and two together there do you?


Do you still wonder why China continues to steal our military technology? Do you still wonder why they are the only other country to rival us in military spending? Do you still wonder why they continue to pump out jets, submarines, aircraft carriers, and tanks in mass quantities?


If you do, then I recommend you go back and read Adam Smith's The Wealth of Nations.


The reality is that such a declaration could indeed lead to war, and further, a war in the middle of an economy in ruins. We will be vulnerable, and I honestly wonder if this current generation of Americans has enough self sacrifice in them to be able to fight, let alone win, a REAL war.


So, cheer the stimulus payments. Cheer the free college. Cheer tax increases that don't actually close the budget gap because we're only prying it open wider with increased spending. Cheer the out of control and reckless spending that is clearly leading to insolvency. It'll come back to bite us.


The only alternative to the above scenario? THE GREAT RESET


Let me just clue you in, that is far worse for Americans than even the above scenario.


There are no good answers at this point, and President Biden just continues to throw money around like we have it when most Americans are still net takers from the government through unemployment rather than net contributors through taxes. We're spending ourselves into an unrecoverable position...


...and there will be hell to pay when the bill comes due.

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