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Thread: National debt

  1. #1
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    Default National debt

    Is the USA debt a calamity ?

    This is an interesting report by Ken Fisher (The Globe and Mail, November 17, 2023)

    A few points:

    ----few people fathom just how manageable is the USA (and Canadian) debt

    ----Debt-to-GDP is down from 2020

    ----debt-to-GDP ratio includes bonds which USA government owns to itself,
    so some bonds are assets, some bonds are liabilities, cancelling each other

    ----Debt to GDP compares debt (balance sheet item) with GDP, which is cash flow,
    apples to hockey pucks. Debt accumulates over time while GDP measures annual
    activity.

    ---- a clearly better indicator for debt sustainability is Annual Tax Revenues/ Interest Payments.
    For q2 2023 this ratio is 14.8 %....which means quite sustainable

    ----as proof Moody's downgrade of USA debt did not affect markets

    ----household debt / service was about 15 % in Q3 2023. That looks manageable.

    ----USA credit card debt is 1.17 trillion $ but bank deposits are 17 $ trillion.

    ----the chances that debt becomes a calamity are beyond remote.

    A bull market might be in the offing.

  2. #2

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    Quote Originally Posted by oak333 View Post
    Is the USA debt a calamity ?

    This is an interesting report by Ken Fisher (The Globe and Mail, November 17, 2023)

    A few points:

    ----few people fathom just how manageable is the USA (and Canadian) debt

    ----Debt-to-GDP is down from 2020

    ----debt-to-GDP ratio includes bonds which USA government owns to itself,
    so some bonds are assets, some bonds are liabilities, cancelling each other

    ----Debt to GDP compares debt (balance sheet item) with GDP, which is cash flow,
    apples to hockey pucks. Debt accumulates over time while GDP measures annual
    activity.

    ---- a clearly better indicator for debt sustainability is Annual Tax Revenues/ Interest Payments.
    For q2 2023 this ratio is 14.8 %....which means quite sustainable

    ----as proof Moody's downgrade of USA debt did not affect markets

    ----household debt / service was about 15 % in Q3 2023. That looks manageable.

    ----USA credit card debt is 1.17 trillion $ but bank deposits are 17 $ trillion.

    ----the chances that debt becomes a calamity are beyond remote.

    A bull market might be in the offing.
    - debt, no matter how poorly it is managed, is always manageable, until it is judged not to be. The judges in this case are the creditors. ( remember dollars are debt also - just with no interest expense attached to them or any term)

    - 2020 was an artificial distortion. Of course if you close down a chunk of the economy ( reduce the denominator) and greatly increase the numerator (debt), as it turned out, unnecessarily to a great extent for both, then you are going to get an aberant year. The debt/GDP ratio has been on a steady march upwards since the start of this century, averaging roughly almost 3% a year. ( recently has been even more) 3rd Q 2019 was 105% and this 3rd Q will be around 122% ( that is 4.25% per year). Compounding not used but you get the drift.

    - the 20% or so of the gross public debt that is intragovernmental should be considered even more real debt than that owed to regular creditors. It is the savings of working people held in TRUST for their retirements. This is not the governments money, in fact it is worse than the 7 trillion of debt that it shows, as these trust funds net, are grossly underfunded. The government spends all the money each year that comes in for these trust funds including the interest and then simply borrows that amount that is excess to
    compensate the Trusts. The paltry interest from the LT government treasuries ( say 3.5% on average) obviously will never sustain those funds at their contribution levels.
    You would need at least double that, which the Canadian model is structured is what it has averaged at least. Further if the government reduce the payouts or increased the contribution, this would have negative implications for GDP.
    This pending problem is for another thread.

    - I agree to a point. The interest rate changes from year to year, sometimes significantly, and the US government's debt maturity, for some reason?, is skewed shorter term.
    This makes the total amount of debt much more relevant. Also the fact that its debt is constantly increasing faster than its income is a just concern.
    Lets look at its debt coverage ratio. Not much to look at as it is negative. It spends more than it takes in, even if you subtract the interest expense portion.
    The actual interest as a % of revenue I calculate is about 22% ( say 3% x 34 trillion or about 1 trillion in interest gross / 4.5 trillion in revenue = 22.22%.
    Forget about that difference, the simple fact is that no creditor would lend to any entity in the private sector that had a negative interest coverage with all trends pointing even worse.

    The only thing the US government has is faith, trust or whatever you want to call it. That can last 50 more years or be gone tomorrow.


    - The private figures are based on repayment of at least some principal ( mortgages, car loans, people who actually pay off their CC's etc. )
    For those that do not you get the privilege of paying 20%+.
    Can you imagine someone walking into the bank and saying I would like to borrow a massive amount of money and I want the best rate of any customer and I am not going to pay any principal or interest back you can just keep lending me that back with extra spending money to boot, and by the way I have spent more than I make (even though my income has gone up a lot) for the past 20 years. Good luck if you are a private entity.

    - People have been conditioned to think of ' governments' as some form of deity that cannot fail. They are simply a collection of people, pooling some of their resources together for
    supposedly beneficial purposes that can best be done at a larger level. They can fail, and have always failed, when they stray from that mission. ( ie. start spending beyond their means is the most common). It just takes a long time for it to happen, and often when it is happening it is not apparent, or it is being hidden.
    The chances that debt becomes a calamity is a certainty, not beyond remote as long as we continue along the path we have been and are on. Most knows this, some just shrill otherwise for possible short term benefit, others just trust that things will change, or others maybe have just drank so much of the Kool aid that they cannot think clearly anymore.


    - As for a bull market may/might be in the offing - the word may/might is an interesting one. Martians may land tomorrow. It means nothing without probabilities attached.

    It would surprise no one that the market may go up 20% or down 20% in the next year. It has little relationship with the health of the treasury or the economy in the short run.

    One thing is certain, long lasting significant bull markets do not usually start at historically high valuations, quite the opposite. Of course ' this time may be different'

    Just my thoughts on Ken Fisher's thoughts Oak333, for what they are worth.

  3. #3

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    I've said for many years to never take seriously what you hear on CNBS because of the all day brokerage commercials, one of which is Fisher Investments. Ken Fisher is a shill that is simply talking his book.
    Metals are for Investors who take more risk with what’s Real, and less with what’s not. Author unknown

  4. #4

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    Lena telling it like it is below link.

    Novembers monthly statement just in from US treasury.

    A staggering 314 billion deficit in just November - The entire GDP of the US in all of 1950 was less than that, near the height of its dominance. We are talking
    about just what the US Treasury spent over and above what it took in, in just 1 month. Of course according to some the US economy is just powering along.

    Another interesting point brought up, in just the first 2 months of this fiscal year, interest payments were 66.5 billion more than in the same 2 months in the prior year.


    The old robber barons of old could learn a thing or two from the current crop.

    https://www.youtube.com/watch?si=pRg...ature=youtu.be

  5. #5

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    Thank you brutus2 that was easy to watch...
    Thomas Jefferson is credited with writing, “When injustice becomes law, resistance becomes duty.” The seceding states in the Civil War period issued a similar declaration using the word “tyranny” as opposed to “injustice.”

  6. #6

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    Good Video from Heresy Financial on why the National debt Matters.
    As usual he keeps it simple, just ignore the 2 minute advertisement in middle.

    1) Why it matters
    2) How the Fed/Government will try to inflate it away
    3) Why it will not work.

    Basically those that believe it does not matter is that they say it is just money going from one pocket to another.
    He explains it may be going from your pocket but not much of it is going to your other pocket but probably someone else.

    https://www.youtube.com/watch?v=QvjaO2_mNs4

  7. #7

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    Quote Originally Posted by brutus2 View Post
    Good Video from Heresy Financial on why the National debt Matters.
    As usual he keeps it simple, just ignore the 2 minute advertisement in middle.

    1) Why it matters
    2) How the Fed/Government will try to inflate it away
    3) Why it will not work.

    Basically those that believe it does not matter is that they say it is just money going from one pocket to another.
    He explains it may be going from your pocket but not much of it is going to your other pocket but probably someone else.

    https://www.youtube.com/watch?v=QvjaO2_mNs4
    Most people associate money as a medium of trade and called currencies, debt credit, money printing of inflation/deflation/stagflation. This is the greatest deception that all "Experts" and school professor has taught almost all.

    You have to realise that money has intrinsic zero values in the beginning and always kickstart by war. Who want to be loot and killed or prefer to get a tokens or money notes so that you are empowered to use this digits to "buy" from another and those who reject it will be reported to Empire and be killed.

    If you understand military of conquer all with threat of brute force, money is an invisible weapons of digits that is empowered to "buy" backed by lethal force. Money is never back by trust. It is back by fear of being killed and this create the same blackmail psychology which is later describe as "faith" or trust or gold backed. All the wonderful veil when removed and exposed, all currencies are just invisible weapons created to rule all.
    He who knows nothing is closer to the truth than he whose mind is filled with falsehoods and errors. ~ Thomas Jefferson

  8. #8

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    The bull market is on. The fed is outlaying nearly 4 trillion a year, that's some serious spending power, this economy cannot go into recession or slow down with that kind of bling. Consumer confidence is flying high as wage spiral inflation continues, that's spending power, and we see it in record levels of consumer and government debt. Life has never been easier for so many.

  9. #9

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    National debt? It's not debt, it's savings. You just have to rethink how you see things!

    See: https://www.youtube.com/watch?v=MB2yvvswjNg

    So have your brain removed and learn woke speak and you'll own nothing and you will be happy.
    Do your own due diligence

    I stand united with my friends & family in Canada who seek freedom.

  10. #10

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    Quote Originally Posted by LongDonSilver View Post
    National debt? It's not debt, it's savings. You just have to rethink how you see things!

    See: https://www.youtube.com/watch?v=MB2yvvswjNg

    So have your brain removed and learn woke speak and you'll own nothing and you will be happy.
    That woman is simply mad. Enough said.

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