Is That The Debt Bomb We Hear Ticking?

While most people’s attention is on the upcoming elections our economy teeters on the brink of disaster. President Obama and the MSM want us to belive that the economy is getting better; that we really are seeing the benefits of his policies. But we on Main Street do not see the economy improving. We know that the government manipulates the numbers to make them look better than they are. But there are some numbers the government can not hide.

Ted, the Country Thinker, is worried about his son’s future because of the recent fall in bond prices and the accompanying increase in the interest rates. He likens it to an earth tremor that may be a precursor to a major earthquake.

… when I opened today’s Wall Street Jour­nal and scanned the top bar, my jaw nearly hit the floor when I saw how Trea­suries per­formed last week. The inter­est rates on 10-years soared 15% in a sin­gle week. That is not a minor move in a mar­ket where moves are gen­er­ally tiny when com­pared to the vastly more volatile stock and com­mod­ity mar­kets. It was a “Black Fri­day” event that the aver­age Amer­i­can didn’t notice.

[…]

* Higher inter­est rates mean higher debt ser­vice costs. It means more gov­ern­ment spend­ing and higher deficits with­out any Con­gres­sional “assistance.”

* If inter­est rates on our debt reach lev­els con­sis­tent with the Bush and Clin­ton years (5–6%), our debt ser­vice costs will more than dou­ble, which is the fis­cal equiv­a­lent of pass­ing a few more Oba­maCares. If the bond mar­ket has indeed been in a bub­ble for the last few decades, and rates “nor­mal­ize” at a higher level yet (above 7%, say), it will be like pass­ing another Oba­maCare or two.

Brian at the Frankenstein Government blog is even more discouraged than Ted. He is hearing The Warning Bell Tolls On the USS Debt Titanic.

 By my ‘ciphering, we are past the mathematical zenith of our national debt trajectory. The question of collapse is no longer “if” in my mind, it is simply a matter of when. You do not have to be a mathematical genius to see this. We simply do not have the capacity to dig ourselves out of this mess like we have in the past. The difference this time is that we have lost as many as 30 million taxpaying jobs in the past 10-15 years. Remaining jobs are paying squat. Inflation is kicking all of our collective asses irrespective of those fraudulent numbers our government puts out. Those numbers exclude food and energy, they exclude rising taxes, they exclude rising rents and insurance, and they exclude dwindling salaries or excess capital which people are now using to pay for their own health care needs (which are also rising) in between bankruptcies.

They can’t skew every number- there is one number that never lies. U.S. tax receipts. They are down 9 billion year over year through February. So while your government and head cheerleader (and media) talk big recovery- the facts do not reflect that.The stock market is a paper tiger propped up with counterfeited FED generated federal reserve notes and laundered through primary dealers.
Can you envision the miracle that makes this mess go away? I can’t.

I think you will find it worth your time to read both of these articles. Brian’s article has some interesting links that you may like as well.

To complete our trifecta of bad news, I paid a visit to  Zero Hedge  this morning and found this interesting tid bit in an article about raising gold prices.

Gold will have a “sharp” rally as the U.S. boosts monetary stimulus because of a faltering economy in the coming months, Societe Generale said in a report that was picked up by Bloomberg.

Data on U.S. gross domestic product in the first and second quarters will “surprise dramatically to the downside,” the bank said today in a report.

So, if Societe Generale  is correct, we are about to get some that typically “unexpected” news that our GDP growth rate is not so good. This would mesh perfectly with Brian’s comment on our tax revenue shortfall. I have to wonder how long after that news breaks before the credit rating agencies downgrade the US debt again. If this were to happen our cost to finance our debt will go up. Consider this. No matter who wins the presidential elections, the national debt by 2016 will be close to $20 trillion. If interest rates are pushed up to a modest 5%, our annual debt service cost will be approaching $1 trillion. Of course, we all know that we don’t have a trillion dollars to service our debt so we will have to borrow more and the death spiral begins. So, while Ted is feeling tremors and Brian is hear the bells of the Titanic, I am hearing the ticking of the debt time bomb that no one has a clue on how to disarm it.

Well, that’s what I’m thinking. What are your thoughts?

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26 thoughts on “Is That The Debt Bomb We Hear Ticking?

  1. The key figure in our debt bomb, helicopter Ben, has no intention of righting the ship. If you haven’t yet, check out this interview with him – http://www.theatlantic.com/magazine/archive/2012/04/the-villain/8901/

    He truly believes we can violate a law of physics, if you will, in that each action has a reaction. He doesn’t believe we have to account for past transgressions and so we get things like QE on top of QE.

    Bernanke doesn’t seem to be aware of cumulative actions bringing us down, or chooses to ignore it. Either way, we are screwed.

  2. Thank you for the nod, Jim! Sadly, I think Brian is right. It’s not just the size of our publicly-held debt (75% of GDP, up from 40% in 2008). The rate we are accumulating debt is astonishing. Between the baby boom retirement and skyrocketing M/M & SS costs, health care inflation, and ObamaCare coming on line, we cannot afford higher-than-anticipated interest expense piled on top.

    So let’s dial up a few more wars, so we can bring the end on sooner rather than later!

  3. It’s a good day for Paul Ryan to announce his new “Path to Prosperity” budget.

    All I can imagine as a way to save things is tremendous economic growth coupled with drastic reductions in government spending.

    What could spur tremendous economic growth? Energy production. Tax reform. Reduced regulation.

    Cutting spending should not be that hard. We’ve been wasting a trillion dollars a year with no discernible benefit for the last three years (going on four). Keep in mind that the Dem spending since 2007 hasn’t purchased anything. Moreover, the economic growth comes with jobs and increased tax receipts (so infrastructure, teachers, etc. can be paid for on a pay as you go basis rather than with borrowed money) so deficit spending is not needed to pay for things like unemployment benefits and other programs for the poor who might be able to get jobs and become un-poor (jobs instead of welfare… Democrat heads will explode!).

    Perhaps with serious spending reductions and a growing economy our debt rating would not increase, giving us a chance to tip the scales in the right direction.

    (I know I’m being hopeful, here. We need a big change in government to get this done. Even Ryan’s plan is factoring in “political realities” and moving in the right direction more slowly than he’d like.)

      1. I don’t think implementing it is the point of it. Everyone knows nothing constructive will happen until January 20, 2013, and then only if we elect a majority in the Senate and a different president. It’s largely a political document, which is not to say it’s not a decent plan as well. The point is that it magnifies the failing of Democrat control of the country and points to the fact that there is a better way.

    1. Pat slided in ahead of me.. Anti-Federalist Post- Pat was excellent as well. Better push the darn button now!

      1. Thanks…. I have to say, I’m just as worried as Ted and Brian. I did a post about the debt time-bomb at my site too. It’s the knife at our throats. It’s funny how people understand their personal debt time-bombs on their credit cards, but don’t understand what service on a $16 trillion dollar debt means. As my dad would say, it’s like burning money in the street. A total waste, particularly considering that we’re getting no value in return for the money borrowed and spent in the first place. It’s like running up credit card debt at a strip club.

        By the way, Ted wrote a great book called “The Eagle Has Crashed”, available at Amazon in both paperback and e-book, that goes into what we can expect as this debt bomb explodes. Truly a good read! It’s fiction… or at least it is today. Could be fact tomorrow.

  4. Ted “The Country Thinker” Lacksonen’s point about 10-Year Treasury yields rising so much in a week is highly meaningful.

    Ironically, in “InformthePundits” earlier today I published two graphs showing 10-Year bond yields over time. The first covers 1990 to present and the second from January 2011 to present. The 2nd one shows Ted’s jump within context with other fluctuations.

    Though the jump is not all that unusual it comes on the heels of an article in the Financial Times on March 5th reporting that investors are abandoning U.S Treasuries for more lucrative investments.

    Since that FT article came out 10-Year yields have risen nearly 18%!

    It could be just a blip, but I don’t think so. Yields have nowhere else to go but up and that spells trouble for national debt growth, given that most of it is now sovereign debt growth.

    The age of low yields may be at an end and a steady inexorable climb in the making.

    .

  5. I’m almost thinking its time to leave the country. Of course, the problem is, no where else I would want to live is in much better shape.

  6. Truly scary Jim. Economics is not my strong suit, but is it possible that we could hang on until another administration could do something about it?

      1. Not to get off topic but I would like to see you do an article on Shall Issue, May Issue, etc.
        I am very anti-Shall Issue (states ‘oking’ citizens to carry guns), but I am VERY pro gun. Why? Please read my entire response.

        Concealed carry is a rouse. It is your INALIENABLE RIGHT to carry. There are over 20k UnConstitutional gun laws, with the states vying to take those rights away, or grant those rights. State can NOT (or are NOT supposed to) infringe upon those INALIENABLE GOD given RIGHTS. Whether that law says you can’t/can carry doesn’t matter, it is anti Constitutional either way. Which means EVERYONE can carry. Now I do believe that the Constitution should be amended for convicted violent felons, etc, but that’s a whole nuther scussion.

        CONGRESS SHALL MAKE NO LAW!

        Does that make sense?

        Sorry just ranting.

  7. Not being a math genius here, I chime in to say I appreciate the input from all of you on the subject. The debt clock is ticking away on my blog and I look at it every day thinking there is no way out of this mess. Jane Doe, otherwise known as me, can’t get an investment interest rate over 1%, even with a fair sum to invest. (relatively speaking…no Soros or Buffet here) Am I sacrificing for the nation by having no growth on my money?

    I long to see the debt clock moving in the other direction, but it won’t happen with the bunch of lunatics in charge now. I honestly can’t imagine there is a path to fiscal sanity other than a slow slog over decades and decades. At least we’ll all be in the poor house together…right?

    1. You can’t earn anything on your money because the Federal Reserve has artificially held interest rates down since the Clinton days. They have pumped so much money into the system that is sitting on the sidelines that they now have boxed themselves (us) in a corner. When the economy starts to grow this money will not stay on the sidelines. The Fed will have two choices: run away inflation or or force a default. The only way out is to stop borrowing and start paying down the debt rapidly. With the Republicans and the Democrats that is not likely to happen. I’m sorry, Cheryl. I really am.

  8. National Debt is a joke. Just as inflation, GDP, and unemployment are. Just another ‘manipulated’ figure.

    National Debt does not include the real cost of the Banker Bailout (estimated ~16 TRILLION with a T), and it also EXCLUDES the losses of Fannie and Freddie. Makes you wonder. What else is excluded?

    BTW this for those of you who don’t know is REAL owed NOW debt. NOT unfunded liabilities. The 15.4 trillion number is nothing more than a ruse.

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