When This Happens the U.S. Will Be Just Weeks Away From a Debt Crisis

Source: https://www.investmentwatchblog.com/when-this-happens-the-u-s-will-be-just-weeks-away-from-a-debt-crisis/
Published: Oct 9, 2021
Author: staff
Post Date: 2021-10-09 11:15:43 by Horse
Views: 589

By Graham Summers, MBA

The market has rallied aggressively on the belief that a Debt Ceiling deal will be made.

Celebrating a Debt Ceiling deal is like polishing the brass on the Titanic.

The U.S. has $28.8 trillion in debt. Two years ago, it was just $22.7 trillion.

The Trump administration spent like socialists, running $1 trillion deficits even when the U.S. economy was GROWING.

That deficit then ballooned up to $3 trillion when the pandemic hit. And now, the Biden administration is now looking to outdo even President Trump’s spending spree.

By practically all measures, the U.S. economy is in recovery as it reopens. And yet, the Biden administration is looking to run AT LEAST a $3 trillion deficit this year… an amount that could potentially rise to $5 trillion or even $6 trillion if President Biden manages to get his infrastructure deal and other stimulus programs passed.

Meanwhile, inflation has ignited.

The “inflation is transitory” argument has been thoroughly debunked to the degree that even clueless Fed officials are admitting it. The official inflation measure (the Consumer Price Index or CPI) claims inflation is 5.3%.

See also Japan faces its own power crisis via its enormous energy imports

However, the CPI has been tweaked aggressively to understate inflation over the last 30 years. If we were to measure CPI today the same way it was measured in 1970, REAL inflation is at 14%.

Yes, 14%.

And the bond market knows this.

Even the Fed’s $960 BILLION QE program, which is designed to SUPPRESS bond yields is failing. Bonds know inflation is roaring which is why yields are once again rising rapidly.

When they break that downward trendline, the U.S. will be just weeks away from a crisis.

The last time the line broke in 2018, it was because the Fed was raising rates at a pace of FOUR per year while also shrinking its balance sheet buy $500 billion.

This time around, the Fed has rates at ZERO and is running $120 billion in QE per month (a record). Even if the Fed tapers QE by $15 billion soon, it will still be running over $100 billion or $1.2+ TRILLION in QE per year. See also Panic At Sea: 500,000 Containers Stuck At US Ports As Supply Chain Crisis Goes From Bad To Worse

In simple terms, this time around, when bond yields begin to break out, it will be when the Fed is already pumping its brains out.

And that’s when the End Game begins for the U.S.’s debt situation.

The ONLY way the U.S. can continue to service its mountain of debt is if interest rates remain low. So, if interest rates are rising when the Fed is already engaged in EMERGENCY levels of intervention, it’s GAME. SET. MATCH.

When will this happen?

Put another way, when does the next crash hit?

To figure this out, I rely on certain key signals that flash before every market crash.

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#1: BTP Holdings    To: Horse (#0)

The ONLY way the U.S. can continue to service its mountain of debt is if interest rates remain low. So, if interest rates are rising when the Fed is already engaged in EMERGENCY levels of intervention, it’s GAME. SET. MATCH.

When will this happen?

Put another way, when does the next crash hit?

Nikolai Kondratiev was a Soviet economist. He predicted the U.S. would emerge from its Great Depression.

When it was shown he was correct, Stalin sentenced him to hard labor. That was later changed to death. ;)

en.wikipedia.org/w iki/Kondratiev_wave

BTP Holdings posted on 2021-10-09 13:56:09   Reply   Private Reply

#2: Dakmar    To: Horse (#0)

If the peasants are scrambling for their lives from the Wermacht, they prolly won't be buying new homes to replace the one that was just firebombed.

Dakmar posted on 2021-10-09 15:57:51   Reply   Private Reply

#3: Horse    To: BTP Holdings (#1)

He was a piss poor economist.

Horse posted on 2021-10-09 19:52:27   Reply   Private Reply

#4: BTP Holdings    To: Horse (#3)

He was a piss poor economist.

I suppose that would depend on your point of view. But he sure was right about the Kondratiev wave. ;)

BTP Holdings posted on 2021-10-09 20:09:01   Reply   Private Reply

#5: Horse    To: BTP Holdings (#4)

He was wrong about that too.

Horse posted on 2021-10-10 07:56:17   Reply   Private Reply

#6: BTP Holdings    To: Horse (#5)

He was wrong about that too.

The history of the Kondratiev wave can be found at Wikipedia.

If you can show us your PhD as an accredited economist, please do so. ;)

BTP Holdings posted on 2021-10-10 10:28:27   Reply   Private Reply

#7: Horse    To: BTP Holdings (#6)

Long wave theory is not accepted by most academic economists.

He has no theory. Just an observation that somehow things go in cycles of 40 to 60 years.

Gibberish. I follow the credit cycle. I follow the accumulation of unpayable debts.

He must be less vague about his timeline and be more specific as to why these things happen.

Horse posted on 2021-10-10 11:44:35   Reply   Private Reply

#8: BTP Holdings    To: Horse (#7)

He must be less vague about his timeline and be more specific as to why these things happen.

Kondratiev predicted the U.S. would emerge from its depression in the 1930s.

When he was shown to be correct, Stalin sentenced him to hard labor. That was later changed to death.

BTW, the Great Depression was caused by the banks who refused to make loans. This contributed to the short supply of money.

There were soup lines in many large cities.

In the town I live in now the people in town had nothing. But those on the farm had milk and a garden. :-/

BTP Holdings posted on 2021-10-10 13:38:17   Reply   Private Reply

#9: Horse    To: BTP Holdings (#8)

There would have been no Depression if we had Irving Fisher's 100% Money. That would be a non-interest bearing currency like Lincoln's Greenbacks. And a ban on fractional reserve banking so the Treasury would create all currency and checking account money. The problem with out system is that we have to borrow money before it is created and when we cancel debts in bankruptcy and foreclosure, we are shrinking the money supply and the economy.

Kondratiev was a moron. He had no way of predicting the future except to say that there would be good times and bad times in the future. He was a MORON.

Please don't write to me about him anymore. I knew the difference between interest bearing and non-interest bearing currencies when I was 9 years-old. I could have had a PhD in economics but we have people in every community looking for honest, educated, intelligent people who are fearless and willing to challenge authority. Their job when they find people like that is to terrorize them into submission. Failing that, they kill them.

Horse posted on 2021-10-11 01:23:08   Reply   Private Reply

#10: BTP Holdings    To: Horse (#9)

He was a MORON.

I suppose Stalin felt the same when he sentenced him to DEATH! ;)

BTP Holdings posted on 2021-10-11 05:45:52   Reply   Private Reply

#11: Horse    To: BTP Holdings (#10)

So what about Stalin. I TOLD YOU I DID NOT WANT TO TALK ABOUT HIM ANYMORE. HE HAD NO THEORY. HE JUST NOTICED THAT BAD THINGS HAPPENED EVERY FEW DECADES. SO WHAT? HE IS THE EQUIVALENT OF A METEOROLOGIST WHO SAYS SOMETIMES IT RAINS AND SOMETIMES WE HAVE SUNNY DAYS.

THE MAN WAS AN IDIOT. I DO NOT WANT TO TALK ABOUT HIM ANYMORE. PERIOD.

I AM NOT ANGRY WITH YOU. I JUST DO NOT EVER WANT TO TALK ABOUT HIM EVER AGAIN.

Horse posted on 2021-10-11 07:28:50   Reply   Private Reply

#12: BTP Holdings    To: Horse (#11)

So what about Stalin.

Stalin is history now, but he had dramatic effects on how the Iron Curtain was erected.

George Patton was right. We should have kicked their asses back into Russia where they belonged while we had the men and equipment there to do it.

Germany's Blitzkreig on the Eastern front laid waste the the Soviet plan to launch a surprise attack on Germany after the Molotov-Ribbentrop Pact of non-aggression was signed. ;)

BTP Holdings posted on 2021-10-11 07:50:57   Reply   Private Reply