America's Foreign Bankruptcy...

United States Government’s Debt Disaster of$33+ Trillion of Colossal Debt. Skyrocketing Government Spending, insufficient Tax Revenues, and ever-deepening Deficits. The US Treasury has run out of other People's Money to borrow and steal.

Interest paymentsdoubled since 2020, and pushed the Government off the Fiscal Cliff like Wile E. Coyote. The Federal Reserve’s 2023 Rate hikes added to the turmoil.A recent US Treasury Auction turned Horrific and CHAOTIC.No one wants our Phony Monopoly Money nor our Worthless Treasuries...

The chickens already came home to roost for the US Treasury. The origin is profligate Government Spending which spikes during Crises, Spending is increasing alarmingly outside of Crisis periods. Tax Revenues aren't keeping up. Government expenditures spiked during the 2020 Crisis, ignoring those spikes, annual Spending increasedby $1.6 Trillion since 2019, while Tax receipts increased by about $600 Billion. Yet again, Do The Math...

The Government is forced to borrow to make up the difference, What do we call this, Ladies and Gentlemen?! Yes we call it, DEBT! Total Public Debt balloonedover $32 Trillion, over 180% percent of Gross Domestic Product (GDP), excluding Government Spending and Transfers.

Due to the unpopularity of Stratopheric Prices and the inexorable tendency for the Market to reestablish Interest Rates that accord with people’s real time preferences, the Fed allowed Interest Rates to rise, combined with Government's skyrocketing interest payments which were over $500 Billion in 2020, now they've doubled.

Congressional Budget Office projections show interest payments will swallow the Budget. The Government will be forced to use More Debt to pay off Past Debts.

Figure 1: Congressional Budget Office: Deficits as a percentage of GDP

Source:The 2023 Long-Term Budget Outlook(Congressional Budget Office, June 2023), figure 1-1.

On top of all of this, the US Treasury is running out of Creditors and Buyers for its Debt. The Fed, which has always been a ready buyer of Government Debt with newly created money, is allowing its holdings of US Treasury Securities to roll off its balance sheet. It cannot resume Monetizing the Debt without exacerbating Inflation which exaserbates Higher Prices, which is still above its stated target of 2% percent.

Figure 2: Treasury Securities held by the Federal Reserve

Source: “Assets: Securities Held Outright: U.S. Treasury Securities: All: Wednesday Level,” FRED, Federal Reserve Bank of St. Louis, last updated November 22, 2023. Data fromFactors Affecting Reserve Balances, Federal Reserve Statistical Release H.4.1 (Board of Governors of the Federal Reserve).

Like the Reserve, Foreign Governments (China and Japan) reduced their purchases of Treasurys, leaving the US with a smaller Customer Base for its Debt. Robert P. Murphy showed recently, theproportion of Debtheld by Foreign Governments declined since 2014.

Figure 3: Federal Debt held by Foreign investors as a proportion of Debt held by the Public

Source: “Federal Debt Held by Foreign and International Investors (FDHBFIN)”and “Federal Debt Held by the Public (FYGFDPUN),” FRED, Federal Reserve Bank of St. Louis, last updated September 1, 2023. Data from the U.S. Department of the Treasury Bureau of the Fiscal ServiceTreasury Bulletin.

This too-much-supply and not-enough-demand phenomenon came to a head at an October Treasury auction that turned into afiascowhen 30-year yields reached 4.837 percent and primary dealers, required to purchase any leftovers, had to mop up over 18% percent of the auctioned Debt. Everybody’s appetite for US Government Debt is done with including Foreigners, the Government's own money printer and favored Financial Institutions.

What does this mean for next year, when $7.6 Trillions in Government Debt willmature? This is a third of all of the US’s outstanding Debt, which means a ton of supply is hitting this market with already declining demand forcing the Government to tighten its belt (flying pigs are more likely), it'll have to replace maturing Debt with more new Debt.

Here are some possible and likely scenarios:

A Financial crisis and official Recession occur, giving the Federal Reserve “permission” to flood the Bubble Economy with new money, lower Interest Rates, and make another massive purchase of Government Debt, like prior Crises. The issue with this scenario is that the Federal Reserve still battling Inflation. We'll have 1970s-style Stagflation, the Federal Reserve will be forced to choose between dealing with unpopular Inflation and unpopular Unemployment. If we're capable of learning from experience, we know what it takes to get out of such a painful but healthy and necessary correction precipitated by a Volcker-style sharp increase in Interest Rates. Treasury auctions continue to flounder, leading to a Debt Crisis.

Treasury yields skyrocket as the whole world loses confidence in the US Government’s ability to repay its Debts. It’s difficult to imagine such a globally catastrophic scenario, especially since the US has its own money printer. It seems the Federal Reserve the US Government would happily choose to inflate to avoid that outcome. The US Government performs a “soft default,” similar to itsactionsin the 1930s and in 1971, in which the Dollar is transformed to rescue the Government from its Debt obligations.

In the 1930s, the Government devalued the Dollar by changing its Gold redemption ratio from $20.67 to $35.00 per ounce, as well as limiting and prohibiting Gold ownership for US Citizenry. In 1971, Nixon “temporarily” (read: permanently) reneged on the US’s promise to redeem Foreign Government's Dollars for Gold. The US will implement aCentral Bank Digital Currency(CBDC). A CBDC could be programmed to have negative interest rates and other incentives that would push CBDC holders to buy Government Debt, this Tyrannical move would be disastrous, but the ability to control Interest Rates, increase Tax Revenues, and direct and stimulate Spending makes this option very attractive to a Debt and Crime-Riddled Government.

Of course, we'll see a combination of these unfold in 2024 and beyond. The opportunity to protect and position oneself is still open, alot of the American Public and Voters will figure this out, too little too late...