MB 360–It is rather clear that we are spending beyond our means like a young college graduate with their first paycheck. Consumer debt continues to spin wildly out of control and the government continues to spend money that it does not have. This works until it doesn’t. Of course the usual debt ceiling slash political charade continues once again for the umpteenth time but there might be an unusual spike in gross national debt in October. The gross national debt may jump up a whopping $800 billion next month. This spending on the government credit card is typical and somewhat silly but what isn’t silly is that this debt needs to be serviced at some point. Right now the US finds itself in a favorable position in that people are willing to lend to the country in massive amounts. Yet that can turn around rather quickly. American consumers are once again going into massive debt and spending beyond their means. Should it be a problem that gross national debt is likely to go up by $800 billion in one month?
The massive debt boom that is coming next month
This pattern of debt ballooning quickly is not unusual. For example you can see the pattern of these debt ceiling charades happening over the last few years:
Based on the above and the way we’ve been spending in recent months, you can expect the debt amount to jump by $420 billion within a few days followed by a sustainable increase to $800 billion over the next 30 days.
These are significant issues and will put our total debt squarely above $20 trillion ($20.6 trillion to be exact). And the amount of spending just doesn’t seem like an issue even if there is no money on hand to conduct this level of money being blown through the system.
It is funny to see the debt to the penny figure reported on the US Treasury website:
Source: US Treasury
We are already beyond that amount. It is very clear that the US government will use political jousting to win favors but the reality is there is regular spending that just doesn’t stop. And guess what? It hasn’t stopped and just because we’ve reached another debt ceiling and the government will need to act, it doesn’t stop people from acting holier than thou even though most are broke and living on borrowed funds.
If Congress doesn’t allow the debt ceiling to rise we will be in absolute trouble and it would send world markets into deep chaos. And we actually have this within our own right to do, so why would anyone commit this financial suicide? Of course the debt ceiling will be raised. But it is nonsensical to keep doing this over and over when we already know that we can’t control our spending habits.
What you do is you debase your underlying currency. The US dollar is not based on any precious medal. The Roman Empire was also spending beyond its means and decided to dilute its currency as well which was backed by silver:
Less and less of the money in circulation was backed by anything valuable until at the very end, coins had very little silver content. So what happened? Inflation, higher taxes, and ultimately a currency that had little value took a major hit to Rome and their trading power. This of course took a very long time but in the span of history, it wasn’t all that long.
So here we are, expecting to see an $800 billion jump in the total debt we hold within a month or so. Does that even sound like a good thing?