Uncle Sam's Unpayable Debt
Projected US-government deficits are properly called "unfunded" liabilities precisely because they cannot be legitimately paid. These debts can only be paid in diminished dollars, i.e., by inflation.
Happy New Year, and welcome back to HardmoneyJim!
I recorded the attached podcast on Friday, January 13. As usual, you can enjoy it at 1.25x normal speed. I’ve attached a pdf file transcript to for those who prefer to read and pause on the charts.
My aim in the next three podcasts is to explain:
First, on today’s podcast, what is happening with government debt and the problems it presents to US-elected politicians?
Second, on January 10, how will our politicians have to deal with this growing debt problem, that is, how will they react to this debt problem which is of their own making?
Third, on February 4, how will emerging monetary policies affect your financial life, and what can you do to protect yourself against the coming “financial repression”?
Please feel free to engage in the comments below. And if you like what you see and hear, please smash the “like” button below.
In addition to today’s podcast, I’d like to recommend two links.
First is George Reisman’s latest blog on western civilization. Dr. Reisman is Professor Emeritus of Pepperdine University, and the author of Capitalism: A Treatise on Economics.
Second is a video on money creation titled “Mommy, where does money come from?” by John Titus, brought to my attention by a friend. I do not know much about Professor Titus, so I cannot as yet recommend anything else he has done, but this video is a must-see.
Thanks for listening and reading!
HardmoneyJim
January 14, 2023
Jim, I thought the last podcast was great. Here are some questions that went through my mind. Just pointing them out in case any give you fodder for installments 2 and 3. Keep up the great work!
1. I feel like I’ve been hearing about the train wreck coming from US debt for at least 30 years. I think about Ross Perot, as an example, emphasizing it. Eventually it seems like the math dictates that the wreck comes. But understanding the timing of it is critical to investment decisions. How close are we to the wreck? If you had to give an inside date and an outside date, what would they be?
2. I took solace in your graph about USA has a hard time getting above 20% tax capture no matter how high the marginal rate. But I wonder whether what is more meaningful is what is the most any country has successfully captured because seemingly USA could adopt their system. For example, Spain has their wealth tax. If you lived in Barcelona, you might lose 2% per year of your worldwide wealth above 800,000 euro. The wealth tax, in particular, makes me nervous. It feels like all we need is a charismatic person to gain power who thinks like Elizabeth Warren.
3. What happens to the S and P 500 and US real estate in your scenario? Are they solid or bound to suffer?
4. For younger generations, do you consider international options? For example, if you think about grandkids, would they be best off not being raised in the USA? I’ve had friends move to Singapore, Tel Aviv, Dublin, etc. What disturbs me is that economic chaos is often accompanied by political chaos. If we anticipate economic chaos here of a large magnitude, and hence potential for political chaos of a large magnitude, I wonder: Are there other countries doing things right?