The total outstanding debt owed by the US government is rising at a historic rate.
The Treasury’s FiscalData platform shows $97.7 billion was added to the national debt between August 16th and August 22nd, bringing the grand total to $32.759 trillion at time of publishing.
In a new blog post, finance guru Larry Mcdonald analyzes what he refers to as America’s “jaw-dropping” pace of spending over the last two decades.
“Since 2020, the US government has spent a jaw-dropping $25 TRILLION. To put this in perspective, the market cap of the S&P 500 is $37 trillion. Spending since 2020 is equivalent to 68% of the entire S&P 500 market cap.”
The bestselling author and CNBC contributor says years of “financial repression” are likely ahead, and the Fed’s goal is essentially to keep the real return people earn on savings below the rate of inflation.
“It is an old truism that inflation is a tax, and that raising taxes outright is considered an unpalatable risk politically…
[Fed officials] want to slow-walk financial repression, keeping government interest expense below the rate of inflation by a modest yet significant degree which means keeping what savers can earn lending to the US government below the rate of inflation.”
Assuming significant tax increases and spending reductions are unlikely to clear Congress, Mcdonald says the Fed is walking a tightrope and looking to play the long game.
“The US government’s financial repression is a back door way of lowering government debt thereby improving the debt-to-GDP ratio to a sustainable level…
The Fed doesn’t want inflation to go away. It wants inflation to stay above the US government’s average interest rate expense. The secondary, but vital concern, is to do that without causing hyperinflation. Hence the slow walk. It’s a 15-year program, not a 15-month program.”
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