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The Debt Crisis Is So Bad

I preach a lot about the national debt, but that’s because it is truly an existential threat. The Congressional Budget Office and Bloomberg have recently made this even clearer.

According to the CBO, debt will be 116% of GDP by 2034. That’s already pretty bad—it’s even higher than WW2—but the reality is likely to be much worse since the CBO makes a bunch of very optimistic assumptions. Basically, they assume that GDP will grow at 2%, inflation will return to 2%, and interest rates will go back down. But, if you take the market’s current view on interest rates, the number rises to 123%, and if you assume that most of Trump’s tax cuts stay in place, it gets even worse.

Bloomberg ran a million simulations, and in 88% of them, debt rises at an unsustainable level. At 123% debt to GDP, it would cost as much just to service the debt as we are spending on the entirety of social security right now. At 139%, we would have a higher debt ratio than Italy…which is a place you never want to be.

Unfortunately, as Bloomberg notes, it would probably take a crisis like the Treasury market getting routed due to credit rating downgrade or a bankruptcy in social security and medicare for our incompetent ass politicians to do anything. After all, politicians are always looking to spend more money.

So, we’re probably going to have a currency crisis at some point. When that happens, the only way out is extremely painful austere measures or inflating the debt problems away. And governments always choose to inflate. This is why I’m so invested in crypto, and it’s why I’ll be taking profits into real estate and Bitcoin this cycle, not cash.

If we want to avoid this fate, there are only 3 things we can do:

1) Boost productivity through technological advancements, which in practice means a lot of AI and nuclear energy. This is ideal and definitely possible, but it is anything but assured, considering the technological leap required.

2) Boost productivity through population growth, which in practice means a whole lot of immigration considering that our birth rate is flushing down the the toilet. I’d love for this to happen, but there’s no political appetite for it right now.

3) Cut government spending a lot, which would mean cutting social security and medicare. I’ve been vocal about wanting to do this not just for the debt relief but also because they are just plain ineffective programs, but like immigration, there’s no political appetite for this right now.

So, for the time being, we pretty much look screwed.

Buy crypto.

Extras

• Is social media really behind the teen mental health crisis?

• Half of Russian-made chips are defective. And we’re supposed to be scared of them?

• Births in Italy have dropped for 15 straight years.

• OpenAI board member Larry Summers thinks AI could replace ‘almost all’ forms of labor, especially knowledge work.

• Americans are really concerned about inflation, crime, and illegal immigration.

• Turning our back on Chinese professors would be so damn stupid.

• Build that Mexican relationship baby.

• Which jobs are being replaced by AI? Freelancers.

• Reminder that pharma companies are paid primarily for research, not production.

• The surveillance camera rollout continues.

• Gambling is changing sports for the worse.

• School absences are absolutely exploding.

• The DHS is going to finally stop buying access to your phone movements.

• Truth Social is a money-losing machine.

• Drone warfare is so scary.

• China is going to beat us back to the Moon aren’t they?.

• It’s not looking good for Ukraine.

• The population could drop below replacement level as soon as 2030.

• Stop stupid purchases 2024.

• Hello QE, my old friend.

• US household net worth has increased by $11.4 trillion in the last year.

• Your air conditioner may be a narc.

• AI warfare has fully arrived.

• Everyone in Japan will have the surname “Sato” by 2531.

• Terraform has made carbon-neutral natural gas.

• You have no idea how the cops are using your data.

• Are you sure that buying your house is the right decision?

• Ukraine is joining NATO. To me, that seems like an low-reward, high-risk play at the moment.

Until next time, ✌️

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