Borrowing from the Federal Reserve involves the creation of new money, that is inflation. Inflation is not bad, but it can be if it gets out of control, and since the borrowers who lend to the US government are running out, the US may have no other choice...
Is Hyperinflation a Certainty? Let's talk about that today.
The Problem: The US economy is crushed by debt
The US government has a huge debt, roughly 21.5 Trillion dollars, and unfortunately this year alone it has grown by an additional 956 Billion dollars at the time of this post and we still have 1/4 of the year left this year...
The US Debt Clock:
This is not sustainable, and the "Gross Debt to GDP ratio" which is in excess of 104% is a major red flag, telling us that things are reaching unsustainable levels as we speak.
What does that indicator mean? Spoiler, it ain't good...
"Gross Debt to GDP" means @ 104% means:
- the US debt ($21.5 Trillion) exceeds the "US Gross Domestic Product (GDP)"
- that means EVERY penny earned in America, this year, couldn't satisfy the total US debt.
- the US ranks fourth worst among G20 countries...
Why does this matter?
This data is terrifying because it begs the question: how can the US remain solvent at this rate?
The Answer: "We can borrow our way out of this mess!"
I know! Can't the US just borrow more money to "grow" the economy?
No, and here is why.
Who does the USA borrow from?
- American people, state and local governments (6 Trillion)
- Social Security, Medicare, etc. ($5 Trillion)
- Foreign governments ($4 Trillion)
- Foreign people; and ($3 Trillion)
- Federal Reserve ($2 Trillion)
The problem is all but one of these entities is either unable, or increasingly unwilling, to lend the US more money. The states are themselves in financial trouble, some like Detroit risking bankruptcy. The Social Security and Medicare plans are constantly needing those funds to pay out, so they cannot be investing in gov't bonds at this time. Foreign gov'ts and people are theoretically available but look at China, Russia, etc, they are all moving away from the US dollar, selling bonds, and now trading oil with gold instead of green-backs.
So that only leaves the Fed, and yes the Fed will "loan" money to the US anytime, anywhere, and in any denomination, but guess what, when they do it, they don't actually do so with their own money, they simply print US dollars and exchange their monopoly money for US treasury bonds...
The US cannot do that trade without tempting fate in the form of hyper inflation.
So again, is Hyper inflation a certainty?
Maybe there is a way out, I certainly hope there is. If the US defaults on its debt, the global economic fallout will be worse that 2008, and even worse than the crash preceding the Great Depression.
I am heavily researching this topic right now and I am deep into. There are many more angles to consider about this topic, and I am planning to discuss some of those in future posts, if you like that kinda thing, stay tuned. In summation though, as far as I have seen, most people make the situation seem dire, and highly unlikely that we can avoid that total melt down of the global economy. Sure some people dismiss that possibility but not typically with any substantive arguments.
So, in conclusion, it seems like most serious critical thinkers believe that economic collapse is coming... most, but not all.
Dark times but there is Hope:
As a glimmer of hope amidst this dark topic, I found one such critical thinker who admits the graveness of the situation and at the end of the 18 minute video, gives a possible solution. If you want to better understand the US debt, and whether we might avoid economic collapse I recommend watching that linked video.
The video is from Learn Liberty on Youtube, and the video has 350,000 views. The video is called:
10 Myths About Government Debt:
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