In our previous Substack post highlighting Dr. Jerome Corsi’s The Little Red Book of Democrat Socialist Lies: The 2020 Presidential Election Edition, we began to exposed the Left’s “solution” to monetary issues, “Just Print Money.” We continue to explode the myths of Modern Monetary Theory (MMT).
Kimberly Amadeo, “How the Fed Monetizes the U.S. Debt,” TheBalance.com, updated Jan. 6, 2019:
“During the Obama era, the Federal Reserve played an active role in allowing the Obama administration to deficit spend. Under Obama, the Fed kept interest rates artificially low at zero or near-zero by a policy known as “Quantitative Easing.” Under “QE,” as the policy was then known, the Federal Reserve “monetized the national debt” by buying federal debt, adding some $4.5 trillion by purchasing Treasury bills, bonds, and notes, as well as by adding government-created mortgage-backed securities to its balance sheet.”
Kimberly Amadeo, “Interest on the National Debt and How It Affects You,” TheBalance.com, updated March 13, 2019:
“Now, with a Federal Reserve in a more combative position with the Trump administration, interest on 10-year Treasuries is projected to increase to 3.7 percent by 2026.”
The consequence of these rate increases is that interest payments on the national debt are projected to reach $762 billion, taking up approximately 12.9 percent of the federal budget – a doubling from 2016, Obama’s last year in office, when interest payments on the national debt totaled $240 billion, 6.2% of the federal budget.
James Grant, “Time to Worry,” Washington Examiner, Oct. 30, 2018:
“In 1988, on a debt of $2.6 trillion, the Treasury paid interest of $152 billion. In fiscal year 2018, with approximately $21.5 trillion in national debt, the Treasury paid interest of $371 billion.”
Bill Chappell, “U.S. National Debt Hits Record $22 Trillion,” NPR.org, Feb. 13, 2019:
“If interest rates rise, the cost of servicing the national debt will grow accordingly. The national debt problem is growing, not diminishing – even without Democrat socialists engaging in MMT unlimited deficit spending. In February 2019, the U.S. national debt topped $22 trillion, reflecting a rise of more than $2 trillion from the first day President Trump took office on Jan. 20, 2017.”
“United States Gross Federal Debt to GDP,” TradingEconomics.com, no date:
Since 2012, the ratio of government debt to U.S. GDP (gross domestic product) has exceeded 100 percent, a dramatic change from 1981, when Reagan took office and the ratio of national debt to GDP was approximately 30.6 percent
Jeff Cox, “That $22 trillion national debt number is huge, but here’s what it really means,” CNBC.com, updated, Feb. 13, 2019:
“– a level that was only seen only once again, when President Clinton and the Republican-controlled Congress carved out a short-lived government surplus and the ratio of national debt to GDP fell to 30.9 percent in the second quarter of 2001.”
Congressional Budget Office, “The 2017 Long-Term Budget Outlook,” CBO.gov, March 30, 2017:
“Even the Congressional Budget Office, which calculates a more conservative ratio of the national debt held by the public to GDP, acknowledges that beginning in 2017 this ratio reached 77 percent – the highest level ever reached of publicly held national debt to GDP, with no end in sight.”
The CBO projects that growing budget deficits will boost the national debt sharply over the next 30 years, where the ratio of publicly held national debt will reach 150 percent of GDP by 2047.
The Deficit Impact of Social Security and Medicare
The CBO acknowledged the major culprits for the increase in federal deficits anticipated over the next 30 years are anticipated increases in Social Security, Medicare and government interest payments on the national debt. If the Democrats continue their hard-left descent into socialism, the probability of having a consensus in Congress to redefine major social programs including Social Security and Medicare is remote.
FACTS:
1. The pendulum in U.S. politics is certain to swing in a more leftist direction within the time frames projected for the dollar crisis to intensify. A return to the White House by a Democrat is probable, if not in 2020, then in 2024, or soon thereafter.
2. The dollar may remain stable in the immediate future, but betting on the long-term stability of the dollar is a questionable proposition, especially given the reality that congressional politics appear likely to remain hopelessly deadlocked for some time into the future.
3. Armed with the MMT promise never to stop federal deficits, resulting in ever-increasing federal debt, Democrat socialists once they regain the White House and control over Congress can be expected to open the floodgates in their enthusiasm to create new federally-funded entitlement programs designed to create constituencies dependent upon government largesse from cradle to grave.
4. While federal debt at 100 percent of GDP may be sustainable for an economy the size of the United States, will the economy be equally robust servicing a higher ratio of debt, when federal debt reaches 200 percent of GDP or 300 percent of GDP?
5. Even economists as far to the left as Paul Krugman worry about the spending that the MMT theories are capable of unleashing. A government that loses the ability to finance a growing national debt through issuing bonds will have no recourse under MMT theories but to run the printing presses. “And while it may literally be true that a government with its own currency can’t go bankrupt, it can destroy that currency if it loses fiscal credibility,” Krugman wrote in 2011: Paul Krugman, “The Conscience of a Liberal,” New York Times, Aug. 15, 2011.
SOCIALIST GOALS:
Establish a set of affirmative rights that include: a free education, free medical care, a government-funded minimum monthly income, and a government-funded retirement security. This will make the populations more dependent upon the government to provide all aspects of general health and welfare.
To replace the “negative freedoms” as defined by the Bill of Rights, with a set of “positive freedoms” that will expand entitlement programs and position government, not God, as the source and reason for establishing human rights that all U.S. citizens (as well as non-citizens living in the United States) can share without discrimination regardless of their ability to produce economic resources by their own efforts and abilities.
SOCIALIST LIES:
“A capitalist system by its very nature generates economic gaps between “the rich” and “the poor,” such that income inequality necessarily results, and minorities suffer economically because the privileged classes utilize prejudice and discrimination to preserve their economic status at the top.”
“Only when the wealth production is divorced from concepts of private property resulting from capitalism can a socially just system of distributing economic benefits be provided to all without fear that those disadvantaged by age, illness, race, or other class-defined discrimination will suffer economically, losing their rights as human beings protected by the state to enjoy the positive freedoms that government insures all are entitled to enjoy.”
CONCLUSIONS:
Fiat currency printed by government without restraint will inevitably undermine the value of the currency, such that rampant inflation will destroy the value of all goods and services valued in the fiat currency itself.
For investors concerned about retirement security, the need to diversify investment portfolios with a carefully calculated percentage of gold and silver has never been more compelling.
Do those dots connect? You decide.
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