Give Me Liberty, or Give Me Debt. Pick One.

The flag maker got it wrong: It was supposed to say, “Don’t lend to me.” (Wikipedia Image)

In September, the national debt of the United States passed $20 trillion for the first time in history. Three months later, it  passed $20.6 trillion. That’s $600 billion in debt added in three months. The tax cuts just passed by Congress will shortly add another $1.5 trillion.

In the past two years, corporate debt in America has increased by over $568 billion (pikers — Congress did that in three months!).  And all the lines on all the graphs charting the borrowing of money are pointing at the sky.

In September, the total debt owed by American consumers approached $13 trillion. Consumer debt set a record in the third quarter of 2008 and has topped the record every quarter since. The world economy crashed and burned in 2009, but consumer debt never went down. Now, household debt is rising 60 percent faster than incomes are rising. Laissez les bons temps rouler.

With regard to the national debt, there seems to be a new consensus of economists emerging that says that when you consider everything, and analyze the data properly, as only a called and ordained economist can do — the national debt don’t matter a damn.

(I had a friend who was an economist. “What that means,” he used to say, “is that if you forget your phone number, I will be happy to estimate it for you.”)

If you say anything these days about government “spending taxpayer dollars,” you will earn the sneering condescension of the New Age economists. One of the proponents of their case is Stephanie Kelton, former chief economist for the Democratic staff of the Senate Budget Committee. In an article titled “The Deficit Doesn’t Matter,” professor Kelton says the following:

“If I’m the U.S. Congress and authorizing the spending, I can sit down and go: “We’re going to do $1.4 trillion in infrastructure. How are we going to do that? I just authorized it. That’s how.” The bottom line is, if Congress authorizes spending, the money will be spent.”

So what we’ve suspected all along is true, according to this insider economist: when the federal government wants to spend money it simply creates it. The rest is bookkeeping, and nobody cares what the books say.

Corporations have been on a borrowing bender since the Fed made borrowing money virtually free. Outstanding corporate debt has doubled since 2009, with each year breaking the previous year’s record. And what have the Masters of the Universe done with the money? Bought their own stock (to enrich the remaining stockholders, such as themselves), bought each other’s companies (often to obscure the fact that the original company wasn’t doing so well), and gave themselves astronomical bonuses for their good behavior. (Now, however, we are told they are going to change that behavior and use the windfall from the new tax cuts to create jobs and enrich workers. No, seriously.)

The debt taken on by these corporations has been affecting them like opioids affect an addict: it is now estimated that one of every ten corporations is a zombie that could not survive without steady injections of cheap borrowed money.

Speaking of zombies, American consumers are no longer treading water, they’re under it. The Christmas shopping season just over is rated by retailers a success, but they achieved their happy numbers only  because the average shopper went more than a thousand dollars deeper in debt to buy the latest plastic junk for their kids. Add up the credit card debt, the student-loan debt, the car payments, the mortgage (and maybe the payday loans necessary to make the payments on the others) and you get a picture of bubbles in the water.  

According to Moody’s Investors’ Services vice president Rita Sahu, “Auto loan delinquencies are above pre-crisis levels at around 2.3 percent, and credit card charge-offs have increased sharply to around 3.6 percent as of the third quarter 2017.” Non-bank lenders are seeing 90-day delinquency rates four times those of conventional banks and credit unions. According to Deutsche Bank, The percentage of families with more debt than savings is higher now than at any point since 1962, while the median American family’s net worth is lower than it’s been in nearly a quarter-century.

Interest rates are going up. The country, its corporations and consumers are going to have to pay more and more each coming month and year just to pay the interest on their loans. Paying them back? Forgettaboutit.

What they should have known, and what they must learn now, is that you can have liberty,  or you can have debt. Pick one.

 

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7 Responses to Give Me Liberty, or Give Me Debt. Pick One.

  1. The govt debt has already blown past the point it is unpayable. No worries now about adding more. Just as the climate is screwed, right? Past the point of no return. Burning more fuel to attend another conference on climate change won’t make any difference! And will make the Gaia Huggers richer. ALL humans are the same, it is in their nature.

  2. SomeoneInAsia says:

    QUOTE: ***With regard to the national debt, there seems to be a new consensus of economists emerging that says that when you consider everything, and analyze the data properly, as only a called and ordained economist can do — the national debt don’t matter a damn.***

    None so blind as those who will not see.

    Or whose eyes have been pasted over with shit.

  3. Roy says:

    Google “All governments lie”

  4. Tom says:

    Thanks Mr. Lewis.

  5. Chris says:

    Hi Tom,

    There is an old saying about whomever controls the debt, controls the asset. That ties in nicely with your essay. It is a shame people don’t realise that side of the equation.

    Anyway, down under the situation with car loans is a similar exercise: Fitch says car loan delinquencies reach five-year high.

    That was a year and a half ago, I can only imagine that things would be worse now?

  6. Ric says:

    National debt trulely doesn’t matter. It’s a CONfidence game. Central banks provide the loan….and then return the interest only payments at year end…minus “expenses”. Doesn’t matter how high the rate goes. Most people know this, but seem not to accept it. A little different for the little people due to the fact principle needs to be repaid also. But in this environment that can be rolled also. Personally, I don’t see an endgame ever. Japan carrys triple the debt of US-no alarms yet.

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