The U.S. government pays the interest by issuing new debt. But that new debt increases total debt and (eventually) drives up interest rates, which requires more borrowing to pay the annual interest payments. Another year older and deeper in debt! A reset will occur when the debt load becomes too heavy.
WHY DEEPER IN DEBT?
Governments spend currency units, corporations demand their payoffs, the warfare and welfare lobbies own congress and the “borrow and spend” circus performs.
“The real story is we made a significant investment in the military which is very, very important, and to get that done we had to increase non-military spending.”
The Deep State extracted its share of the swag, participants collected their payoffs and debt expanded. Borrow and spend is the lifeblood of the Wall Street and D.C. circus.
But it extends beyond Washington D.C. Consider these massive debt burdens in the U.S.:
· Sub-prime auto loans. Defaults will rise in the coming recession.
· Over $1 trillion in credit card debt. More defaults coming.
· Over $10 trillion in mortgage debt. The 2008 recession hammered mortgage debt and related derivatives. The next recession could be worse.
· About $1.5 trillion in student loan debt, much of which is deferred or in default. The next recession will illuminate the lunacy in this program.
· Public and private pension liabilities are underfunded by many $trillions even though stock markets trade near all-time highs. The next recession will push many pension plans over the abyss.
· U.S. government has unfunded liabilities of $100 – $200 trillion. Those liabilities increase every day and will be defaulted or paid in mini-dollars.
Summary: Congressional promises and boondoggles push the U.S. deeper into debt.
From David Stockman:
“That’s how the Warfare State-Welfare State system works, greased by the Deep State and its fetid ecosystem of bureaucrats, “think-tanks,” lobbyists, lawyers, pundits, carnival-barkers, grifters and other thieves.”
Another government contract, weapons system, wars, expanded welfare, free cell phones, ethanol subsidies, food stamps (SNAP), foreign aid to buy US weapons… and the circus descends deeper in debt.
BUT LET’S NOT TAKE IT TOO SERIOUSLY:
The Treasury Department issues bonds and sells them to the Fed. The Fed creates the dollars and buys the bonds. Insiders collect their swag, the government pays off corporations and voters, and those new dollars devalue existing dollars. Prices rise and the circus rolls down the road toward debt-ruin.
The game works until confidence in the currency and/or the Fed breaks. That confidence has not broken yet, but it will.