Fed chairman Janet Yellen’s song-and-dance about why the Fed can’t raise interest rates now is a charade. It has nothing to do with the economy. It has to do with civil unrest. We are sustaining an astronomical national debt of $18.2 trillion (I ingore an additional $95.9 trillion in entitlement shortfalls.) by keeping interest rates artificially low. If the Fed raises interest rates for banks, the U.S. will have to pay higher interest on its t-bills (currently .09% on 90-day t-bills). Our annual interest costs on the ND now amount to about a quarter of a trillion dollars. If interest rates were eventually to increase to historical norms by a factor of 5, our debt service would increase to $1.25 trillion (do the math). That would absorb all of federal spending ($3.7 trillion) after Medicare ($931 billion), Social Security ($869 billion), and Defense ($596 billion)(again, do the math). There would be nothing left for discretionary non-defense spending. Nothing for foodstamps, aid to mothers with dependent children, the National Endowment for the Arts, the nationals parks. Nothing. That’s when the civil unrest will start.
So what’s the Fed to do? I would say, start telling us the truth and stop slinging bullshit about labor markets, productivity and wages. The fact of the matter is the Fed can’t raise interest rates until we get our fiscal house in order, which suggests Congress must be on a short leash. We don’t have 10 years, as all the plans seem to suggest. The Fed can’t keep interest rates at effectively zero for another decade. I would say Congress has no more than the end of the next President’s first term — 2020 — to reach a balanced budget, and that’s just a start. I wonder how many Americans understand that, even then, until we achieve budget surpluses and use them to pay down the debt, we will achieve no debt reduction. We will just be treading water.
So how do we take just the first step and balance the budget? Given the partisan divide in Washington, it is not possible to pick and choose programs to cut or reforms to make (like taxes). We must take an across-the-board approch and impose spending cuts and surtaxes of equal amounts to eliminate our budget deficits. Only then can we begin the second step of paying off the debt. It may well not be possible. Donald Trump says $24 trillion is the breaking point. I have no idea where he came up with that. $18 trillion in dollar bills can make 9 round-trips from the earth to the sun. That’s 1800 million miles, or 1.8 trillion, or about 30% of a light year! Think about it. Try prozac for the resultant despair.
SO SAYS THE SENTINEL.
National Debt: $18.198 Trillion
Annual Budget Deficit (add to ND): $492.740 Billion
Annual Interest on ND (@.09%!): $242.253 Billion
Unfunded Entitlements (SS/MC/MC/OC): $95.876 Trillion
Debt per Taxpayer: $966,407
WE ARE BANKRUPT AND INSOLVENT.