The federal government now spends twice what it takes in tax revenue. While debt service alone eats nearly 2/3 of individual income tax. So when you write that check to the IRS next month, rest easy knowing most of it is going to Wall Street and China. The federal spending borg is eating everything in sight, crapping out wars and welfare for migrants. And leaving the people they serve to fight over the crumbs.
The federal government now spends twice what it takes in tax revenue. While debt service alone eats nearly 2/3 of individual income tax.
So when you write that check to the IRS next month, rest easy knowing most of it is going to Wall Street and China.
The federal spending borg… pic.twitter.com/auViiJBI3r
— Peter St Onge, Ph.D. (@profstonge) March 25, 2024
Episode 49 of the Podcast is live! – Japan Enters Stagflation – Americans Giving Up on Owning a Home – Congress Presses Fed for Higher Inflation – Russian Sanctions Threaten the Dollar – Commercial Real Estate could Topple “Hundreds” of Banks – Peter St Onge
Understanding Debt-to-GDP Below, you’ll see a chart that displays the debt-to-GDP level for the United States, as well as other countries. The last time this level was reached was during World War II. We decided to create a brief write-up on this metric and showcase the debt-to-GDP ratio across the largest economies. The debt-to-GDP ratio is a critical metric that measures a country’s public debt relative to its economic output. It’s an important indicator of a nation’s fiscal health and its ability to service and repay its debt obligations. While a high debt-to-GDP ratio isn’t necessarily a cause for immediate concern, it can raise questions about a country’s long-term financial sustainability. To better understand the nuances of this metric, let’s consider the United States government as a business.
Like any company, the U.S. needs to manage its finances carefully, balancing its income (tax revenue) with its expenditures (government spending). If the business consistently spends more than it earns, it will accumulate debt, which must be serviced through interest payments and eventually repaid. However, unlike a typical business, the U.S. government has a unique advantage: it controls the currency in which its debt is denominated – the U.S. dollar. This means that, in theory, the government could “print” more money to pay off its debt obligations. However, this action would likely have severe consequences, such as inflation, erosion of confidence in the dollar, and potential economic instability. While the ability to create more currency might seem like a tempting solution, it’s essential to consider the broader implications. Excessive money printing could lead to a devaluation of the currency, making imports more expensive and potentially triggering a vicious cycle of inflation and diminishing purchasing power for consumers and businesses.
Additionally, a loss of confidence in the U.S. dollar could have far-reaching consequences for the global economy, as the dollar is the world’s reserve currency and is widely used in international transactions. Countries and investors may be reluctant to hold or accept dollars if they believe the currency is being devalued through excessive money printing, potentially leading to a loss of the dollar’s privileged status. Therefore, while the U.S. government may have the technical ability to “print its way out of debt,” such a strategy would likely be counterproductive and could undermine the very foundation upon which the country’s economic strength is built. Instead, a more prudent approach would be to focus on sustainable fiscal policies that balance government spending with revenue generation, while promoting economic growth and maintaining confidence in the stability of the U.S. dollar.
This could involve a combination of measures, such as restructuring government expenditures, implementing targeted tax policies, and fostering an environment conducive to business investment and job creation. It’s important to note that the debt-to-GDP ratio alone does not provide a complete picture of a country’s fiscal health. Other factors, such as the composition of debt (domestic vs. foreign), the maturity profile of the debt, and the overall economic conditions, also play a crucial role in determining the sustainability of a nation’s debt burden. In summary, while the U.S. government’s control over its currency may provide a theoretical avenue for addressing debt through money printing, such a strategy would likely have severe consequences and should be avoided. Instead, a nuanced approach that balances fiscal prudence, economic growth, and confidence in the stability of the U.S. dollar is more advisable. Maintaining a healthy debt-to-GDP ratio is important, but it should be viewed within the broader context of a country’s overall economic and financial landscape. – Reef Insights
The last time the United States saw this level of debt-to-GDP was during World War II: https://t.co/jNCGPzL8r8
— Reef Insights (@ReefInsights) March 25, 2024
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