The Black Swan in Plain Sight—Debt Out The Wazoo

The comments above & below is an edited and abridged synopsis of an article by David Stockman

Rising debt (the black swan) is in plain sight. The artificial cash flow from unsustainable borrowing is keeping the illusion of growth and prosperity alive. Yet the debt madness ($225 trillion outstanding globally) is heading for a financial and economic dead end that will crush today’s fiscally profligate politicians and financial punters in a devastating reset of bond yields.

Wolf Richter’s recent chart of the exploding US public debt is a wake-up call. In the weeks since the public debt ceiling was suspended, the national debt has spiked by $640 billion, about $16 billion per business day.

The US Treasury will continue to borrow heavily until the current debt ceiling suspension expires on December 8, when it will return to divesting trusting funds and employing other gimmicks which circumvent the ceiling, while waiting for Congress to raise the ceiling or authorize a new suspension.

This pattern played out during the debt showdowns of 2013 and 2015, when the resulting temporary suspension resulted in borrowing spikes of $464 billion and $650 billion, respectively.

So Washington has suspended it way into a $5.7 trillion increase in the public debt in just 6 years, during a period that supposedly constitutes the 3^rd-longest business expansion in US history.

The latest spike is a warning. In the 12 months since the last election, the net public debt has risen $870 billion to the current total of nearly $20.28 trillion.

The debt is increasing at a rate of just under $1 trillion annually, yet there is virtually no one in Washington, or in the Wall Street casino, who has noticed. Nor have they noticed that revenue collections continue to weaken.

Stockman discusses revenue collections, Federal incomes taxes, wage rates, the offshoring of the US economy, an unprecedented demonetization campaign, the burgeoning Treasury float, China’s red Ponzi, and the state of the US stock market.

You can’t borrow your way to prosperity—that’s the oldest rule in the book of sound money and sustainable finance. And it’s about to be learned all over again.