Wise Owl Trading

 Some thoughts  12/24/2020

If 2020 was dominated by the huge human costs of Covid-19, the years ahead will be all about the nasty and dismal economic aftermath, including the massive Tsunami wave of US debt and corporate debt.

During 2019, the assclowns spending fools in Congress suspended the debt ceiling until after the 2020 presidential election (bless them). While they sought to avoid a repeat of the 2011 and 2013 debt crises during an election year, new spending contributed to King Trump’s new military rearmament push. Now the new

Congress must decide the future of the debt ceiling by the summer 2021.

By the end of this year Covid 19 cases worldwide could be heading into the 80-100 million. As a result of utter mismanagement, and we could easily exceed 20 million. While this nasty pandemic continues to spread and the health system becomes more overwhelmed, the King-Trump White House has taken upon themselves record amounts of debt at a record pace.

 Remember that during his campaign, King Trump pledged to eliminate our national debt completely in 8 years. At the time, total public debt was closing in on $19.7 trillion. In the past 4 years, it has rocketed to more than $27.7 trillion, a staggering $8 trillion.

 Of course, all major economies have taken record amounts of debt during this nasty global pandemic. But the United States is not like other economies. First, it has more Covid-19 cases relative to all other major economies. The US remains the world anchor economy. The, US dollar dominates international transactions. As a result, massive excessive US debt will have a disproportionate nasty economic global spillover.

Due to the lecherous enabling manipulative FED, depressing interest to near “0” screwing over savers and others as a share of GDP, the cost of servicing US debt has deteriorated since 2000, even as federal the amount of debt has ballooned. The incessant manipulative environment of low interest rates has made it far easier that it should be to service and pay down the massive debt loads. Nevertheless, the likely policy stance of the Biden administration whether implicit or explicit, will likely be predicated on unsustainable debt-taking in the future.

According to the recent projections by the nonpartisan Congressional Budget Office, federal debt held by the public will surpass its historical high of 106% of GDP in 2023 and will continue to climb thereafter. By 2050, debt as a percentage of GDP (a vastly undervalues matrix) will amount to close to 200% of the GDP. Despite peaceful conditions, it is already at the level seen during World War II; by 2050, it could be twice as high

 

Worse yet, our debt is likely to increase far faster than most so-called gurus anticipated (JMHO). Current projections do not include the actual costs of the pandemic stimulus packages, for one. 

Deficits will more than double from an average of 4.8% of GDP from 2010-19 to excess of 10.9% through 2041-50 adding to more debt. As a result, net spending for interest will account for much of the massive increase in total deficits in the past two decades. In the CBO’s projections, growth in outlays will continue and accelerate to outpace growth in revenues, resulting in larger and larger unsustainable budget deficits over the long run...measured as a share of GDP, net spending for interest could increase 4x to 5x over the last 2-decades of the projection period.

The New Biden administration has promised to be tough on China, Russia, and several other countries, which could translate to rising defense and security costs which, in turn, would further amplify our ballooning massive wave of debt, twin deficits and real interest rates. Remember what history has taught us repeatedly that when great powers fail to balance their wealth and their economic base with their military power and strategic commitments, they risk vast overextension. In the coming decades, that will likely become a US risk.

 

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