Dear Reader,
Mr. Barry Ritholz of the eponymous Ritholtz Wealth Management:
- We were warned that deficit spending would crowd out private capital, choke off innovation and new company formation; it will send the costs of U.S. borrowing skyrocketing higher, making the debt impossible to manage; force the U.S. dollar to be radically devalued against all other currencies, thereby devastating the U.S. economy; cause rampant inflation, spiking prices to levels not seen before; last, act as a drag on the overall economy.
- That none of these things occurred makes me wonder why we still pay attention to these deficit hawks.
The blind man leaps from the 100-story structure. Ninety floors down he concludes he will plunge forever in safety.
‘Nothing’s happened yet so why should it happen now?’
There you have Mr. Ritholz and his fellow deficit doves. They believe the United States government can continue piling up deficits in ongoing safety.
Yet what if the United States is 90 floors down?
So Far, So Good
I concede there is a certain degree of justice in Mr. Ritholz’s comments. For decades deficit hawks, so-called, have yelled wolf.
The national debt has scaled $1 trillion, they shrieked. The dollar is doomed, the world will heave it overboard, the United States economy is destined for the gutter.
They wailed the identical laments at $2 trillion… $5 trillion… $10 trillion… $20 trillion… $25 trillion… $30 trillion.
United States national debt presently totters at $36 trillion. Total United States debt — both public and private — comes in at $102.5 trillion.
And the doomsday cries we still hear.
Yet the dollar remains king and the United States economy has avoided the Grim Reaper’s dreaded tap. There have been shakes, there have been wobbles.
And it is entirely possible the United States economy is presently descending into recession.
Recent unemployment data indicates that it is.
Yet recession is not depression. It is certainly not collapse.
Not Weimar Germany
It is true, inflation has enjoyed itself quite an inning since 2022. Yet it has not proved the inflationary hell of prophecy.
I believe moderate inflation will continue to hagride the American economy — but nothing nearing hyperinflation.
The United States is not the Germany of the Weimar Republic. Nor, in my telling, will it be anytime soon. Nor is it an Argentina or Zimbabwe.
The United States simply enjoys too many natural advantages, divinely gifted. As Germany’s iron chancellor Bismarck once jested:
“God has a special providence for fools, drunkards and the United States of America.”
America’s Natural Advantages
In private moments, I often sink to my knees in gratitude. Why did God plop me down in this Eden, this El Dorado, this Elysium. What did I do to merit such divine favor? Consider:
God filled two oceans — one Atlantic, one Pacific — to moat the United States off from marauders. Against its land borders north and south He positioned two geopolitical bantamweights.
He blessed the United States with vast tracts of wealthy, fertile land… an extended capillary system of internal waterways… natural harbors from which to send items out… and to take items in.
What other nation has enjoyed such natural, God-granted riches? None approaches it.
Has God burdened the United States with a Baltimore… a Detroit… a Cleveland?
Has He populated its capital with an endless roster of rogues, rascals, cadges, chiselers, grifters and swindlers?
Well, friends, maybe He has. Yet even The Almighty must be granted space for error. Perhaps it is not even error — but intention.
He has a mischievous, even puckish sense of humor, this God. I hazard He delights in pulling noses and yanking legs.
Yet the cardinal fact cannot be denied: He has showered America with immense natural extravagance.
Only Americans themselves could make a botch of it. Yet it appears they are determined to do precisely that.
A Date With Reality
Here I return to the abovesaid Ritholz. He waves off all dreads that deficit spending “will send the costs of U.S. borrowing skyrocketing higher, making the debt impossible to manage.”
Yet he might have another guess. Reports the Peterson Foundation:
The Congressional Budget Office (CBO) projects that interest payments will total $892 billion in fiscal year 2024 and rise rapidly throughout the next decade — climbing from $1 trillion in 2025 to $1.7 trillion in 2034.
In total, net interest payments will total $12.9 trillion over the next decade. Relative to the size of the economy, interest will rise from 3.4% of gross domestic product (GDP) in fiscal year 2025 to 4.1% in 2034. The previous high for interest relative to GDP in the post-World War II era was 3.2% in 1991 — that ratio would now be exceeded in 2025.
Here you have it in graphic form:
More:
- In fiscal year 2024, the federal government will spend more on interest than on defense as well as non-defense discretionary, which includes funding for transportation, veterans, education, health, international affairs, natural resources and environment, general science and technology, general government and more.
- In fiscal years 2024–2027, interest payments will exceed the amount that the federal government spends on Medicare… According to its latest long-term projections, CBO projects that interest will become the largest category in the federal budget in 2051 — exceeding the amount spent on Social Security that year.
What then, Mr. Ritholz? Will deficits finally matter?
Debt Beyond Endurable Limits
Under present and anticipated conditions, I do not believe the United States economy can push along much — not even under Mr. Trump’s stimulating influence.
Like a pack mule loaded beyond endurable limits… the United States economy is debt-loaded beyond endurable limits.
The legs are simply unequal to the burden upon the back. Yet I do not believe the legs will buckle under — not fully.
I refer you once again to America’s vast advantages. They will likely keep the beast upright, though vastly hobbled.
I embrace instead the gradualist theory of decline. It will likely proceed in the manner that grass sprouts and paint solidifies.
An Endless “Damp and Drizzly November”
In my estimation this economy confronts a future not of abrupt collapse — but of gray and twilight, of habitual malaise.
Of, in Herman Melville’s phrasing, a “damp and drizzly November.”
I expect an endless string of damp and drizzly Novembers… as month chases month… and year chases year.
It will feature its false dawns, its false starts, and its false joys.
Of course I may be wrong.
Artificial intelligence and other technological wizardries may vault us up from languor — and into an infinitely productive and prosperous future.
It is possible. Yet is it likely?
I am far from convinced that it is. Thus I am reduced to hope. And as Herr Freddy Nietzsche lamented:
“Hope… is the worst of all evils because it prolongs the torments of man.”
Regards,
Brian Maher
for Freedom Financial News
P.S. Legendary economic forecaster Porter Stansberry fears the election was rigged.
Not in regards to who would become president — Trump won fair and square.
But it was rigged in terms of what happens next. Porter believes our fate is sealed.
No matter who actually won the election, he fears a chain reaction has already been triggered that could wipe out the finances of millions of unsuspecting Americans.
If you own a stock portfolio, have savings in the bank, or contribute to a 401k, you are at severe risk.
Trump can’t stop it. No one can.
But you can prepare yourself — and potentially profit from it if you know what steps to take.
In this emergency broadcast, Porter shows you how to create wealth from these events, while millions watch their portfolios destroyed.
It was recorded before the election. But Porter’s thesis remains intact.
