The American debt is soaring. The explosion of the budget deficit and the war against Russia weigh heavily on the system.
A debt that is growing exponentially…
The total debt of the United States increased by $275 billion in ONE DAY. It now reaches 33,440 trillion dollars.
Exactly two weeks ago, the US debt crossed the $33 trillion mark. This means that the debt has increased by $32 billion per day over the past two weeks.
The United States has always been in debt. The first millions were borrowed during the War of Independence. The debt will reach two billion dollars at the end of the Civil War, in 1865. A straw when we observe the trajectory of the debt since:
1929: 17 $000,000,000
1940: 43 $000,000,000
1950: 260 $000,000,000
1960: 290 $000,000,000
1970: 370 $000,000,000
1980: 900 $000,000,000
1990 : 3,200 $000,000,000
2000: 5,800 $000,000,000
2010: 13,500 $000,000,000
2020: 26,900 $000,000,000
2023: 33,440 $000,000,000
Fortunately, low inflation has kept rates low since 2008. At the time, peak conventional oil caused the worst economic crisis since 1929. However, the world moved forward thanks to China’s oil revolution. shale which helped keep inflation at a low level.
But it seems that this respite is over. The reason is the all-oil peak reached in November 2018 and the strong geopolitical tensions (euphemism) to which the drop in Saudi oil production is not unrelated.
Hence the rise in rates from central banks. Without much effect so far on inflation, let’s say it.
On the other hand, the debts are such that the payment of interest begins to cause fear…
Inflation remains despite rate hikes
The Fed’s key rate is now 5.50%. And according to the CEO of JP Morgan, Jerome Powel could even raise it to 7%.
In 2022, debt interest cost the U.S. government $476 billion. It’s now almost $1 trillion.
And since the Biden government has no intention of downsizing, these interests force us to go into even greater debt. In other words, interest is paid with more debt.
This paradox is, however, offset by the reduction in private sector debt. This is how the Fed hopes to control inflation: smaller home loans.
The reduction in the money supply (and inflation) is already having an effect with a delinquency rate in the United States (on credit cards) which has just crossed the 9% threshold among 18 to 29 year olds. And 7.5% among 30 to 39 year olds:
We must hope that inflation calms down soon, otherwise it will cause bank failures. Payment defaults led to the collapse of Lehman Brothers in 2008.
Unfortunately, with the price of a barrel at $100, inflation does not seem to be fading any time soon. The scarcity of naphtha partly explains this, but let’s not forget the war in Ukraine.
NATO and Russia are truly playing double or quits. The end of the privilege of the dollar is in the balance and everything suggests that the BRICS no longer intend to give gifts to the Americans.
For now, the dollar is appreciating thanks to the sacrifice of the Japanese vassal’s currency. This helps to weigh on inflation. But what will happen if the BRICS refuse to give in?
Can’t tap a ponzi
It is possible that the Fed will tighten the screw further if inflation worsens this winter. The United States will then enter a recession and all eyes will turn to the banks.
“I’m not sure the world is ready to support 7% interest rates”has declared Mr. Dimon to the Times of India.
“I ask people in the business world if they are ready for something like 7%. In the worst case, it would be 7% and stagflation [inflation + récession]. If volumes are lower and rates higher, there will be stress in the system”he added.
The Fed will then have to reopen the floodgates with yet another QE (debt purchases). It is then that everyone will remember that the fiat system is a ponzi that we cannot wean off new money for long. Raising rates is just a show-off that won’t last.
Another crucial question is how long will the war in Ukraine last? The Secretary General of NATO recently declared that Ukraine’s accession to NATO is only a ” a matter of time “.
To which the provocateur and former Russian president Dmitry Medvedev answered October 1: “It appears that Russia now has no choice but to engage in direct ground conflict with NATO.”
Washington thinks that a world war could prevent rebellious countries from getting rid of the dollar. Why prevent it? So that the value of the greenback does not collapse despite an abysmal trade deficit.
The rebels are nevertheless at work. The US 10-year borrowing rate has just crossed 5.80%, the highest since… 2007.
We must take the lead in the face of this extremely inflationary international chaos. Bitcoin is the store of value asset that is on the rise, up 70% since the start of the year.
Might as well embrace it before the big governments of this world realize that it is the stateless, uncensorable reserve currency that everyone has been waiting for?
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