Guest Post by Nick Giambruno
Contrary to conventional wisdom, higher interest rates mean more inflation in the environment today.
That’s because the federal interest expense increases as interest rates rise.
As the federal interest expense rises, so does the budget deficit.
As the budget deficit increases, so does the currency debasement needed to finance it.
Skyrocketing interest expense will have an enormous impact on the US budget.
Even according to the US government’s rosy projections, the interest expense on the federal debt will exceed $1 trillion for the first time in 2024… and it shows no sign of slowing down. On the contrary, it’s growing exponentially.
First, it’s essential to understand the basics of the US federal budget.
Let’s zoom out and look at the largest components of the US federal budget from the latest available data in the chart below. (Click image to enlarge.)
The biggest expenditures for the US government are so-called entitlements. It’s not likely any politician will cut these. On the contrary, I expect them to continue to grow.
With the most precarious geopolitical situation since World War 2, so-called “National Defense” seems unlikely to be cut. Instead, military spending is all but certain to increase.
Income Security is a catch-all category for different types of welfare. That’s unlikely to be cut too.
Unless it becomes politically acceptable to cut things like Social Security, military spending, and welfare, efforts to make a dent in expenditures won’t be meaningful.
Further, interest expense (Net Interest above) is set to explode higher.
The US government projects that the federal interest expense will exceed $1 trillion in 2024 for the first time. That means the interest expense will exceed defense and everything else in the budget except for Social Security, which it will also likely exceed soon.
As the cost of debt service is taking up a larger portion of the budget, there is less for other expenditures. That means the government has to borrow increasingly larger amounts to maintain basic functions.
However, it’s worse than issuing more debt to cover Social Security and the military.
The US government is now borrowing money to pay interest on the federal debt, which has a compounding effect as the federal debt and interest expense grow exponentially.
I suspect we are close to the inflection point where it gets out of control. 2024 could be the year that it becomes evident the US is trapped in a debt spiral.
Here’s the bottom line with the budget.
THESE PRODUCTS ARE SELLING FAST
The most significant expenditures have nowhere to go but up.
But don’t count on increased revenue to offset these increases. Even if tax rates went to 100%, it would not be enough to stop the deficits—and the debt needed to finance them—from growing.
The US government is out of options.
Therefore, the question is not whether it will default but how.
When faced with a choice, politicians always choose the most expedient option. In this case, that means issuing more debt rather than making tough budget decisions or explicitly defaulting.
There is a big problem with that, though.
As the amount of debt skyrockets, the interest rate rises to entice buyers and holders.
Allowing interest rates to rise high enough to entice natural buyers would bankrupt the US government because of the higher interest costs, which are set to become the largest item in the budget.
So, I would not expect the Fed to raise interest rates much more. In fact, they have already paused the rate hikes and are signaling a pivot to easing again, likely for this exact reason.
That means the Fed has effectively given up on bringing price inflation down even though the year-over-year change in the CPI remains above 4%, more than double the Fed’s target of 2%.
In other words, even with their own crooked statistics and rigged game, the Fed has failed even to come close to their inflation target. It’s a massive failure.
Bloomberg is already hailing it “The Great Monetary Pivot of 2024.”
It’s crucial to understand that by surrendering to inflation, the Fed is returning to the same policies that caused prices to rise in the first place.
So, if higher interest rates are off the table and cannot entice more natural buyers, who will finance these growing multi-trillion dollar budget deficits?
The only entity capable is the Federal Reserve, which buys Treasuries with dollars it creates out of thin air.
That’s why I am convinced extreme currency debasement is the inevitable outcome.
All the rest is noise.
The US government’s only practical option is ever-increasing currency debasement… and it could devastate most people.
I suspect it will all go down soon… and it won’t be pretty.
It will result in an enormous wealth transfer from savers and regular people to the parasitic class—politicians, central bankers, and those connected to them.
Countless millions throughout history were wiped out financially—or worse—because they failed to see the correct Big Picture as their governments went bankrupt.
Don’t be one of them.
That’s exactly why I just released an urgent new report with all the details, including what you must do to prepare.
It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.
Click here to download the PDF now.
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But does it, really?
Here’s a fact; manifest reality works as long as people believe in it. It doesn’t require facts, logic, or even the truth about what it is or does to work. It’s one of the most amazing things that human beings do as a species, create their own world out of nothing but words and have everyone go along with it even when it’s obviously false. There’s simply no way to fully grasp how it is done other than to observe that it functions.
Until they stop believing. Then it is completely over, like waking up from a dream.
I think that the majority of the people who keep pointing out that this system cannot possibly go on are too firmly rooted in logic and reason to grasp that manifest reality doesn’t follow those rules. The guy who wrote this is absolutely certain that if he points out the unsustainability of this system it’s all over, but manifest reality don’t play that game. Most people, including a lot of people who post here and know better, are still too firmly attached top the system as it exists to quit it. They know that the wheels could come off any second, but they still have IRA’s and 401K’s. They understand how dependent they are on this overly complex and fragile food system that doesn’t even satisfy their nutritional needs, but they still go to the grocery store and haven’t even learned to garden.
They speak like they know, but they live like they don’t.
Their belief is what keeps the plates spinning, not the stability of the system itself.
Will it end? Of course it will, just like everything eventually does, but using the metrics of accounting is no more utile in determining when than a Magic 8-Ball.
Outstanding comment HSF.
This just awakened me to the Corrupto Currencies .. It is a manifestation of a thing that does not exist in a real World, but exists in their belief. Even the images of Gold Bit Coins are fake.
Succinctly HSF?
Everyone has a plan….until they get punched in the mouth by reality.
“But does it, really?”
“I think that the majority of the people who keep pointing out that this system cannot possibly go on are too firmly rooted in logic and reason to grasp that manifest reality doesn’t follow those rules.”
This is brilliant.
Belief is powerful and, were we a closed economy, then your statement would be true. However there is still a link between deficits and dollars which will come unglued when the eurodollars become worthless. It is still the belief that the dollar is the currency of choice for 80%+ of transactions in foreign markets, but many analysts say that simply isnt the case anymore. More recent numbers put the percentage down around 65%-70%. These dollars are often sourced by way of US T-Bills/Bonds/Notes and debt auctions. While the Fed can paper over an auction from time to time in the name of supporting market ‘liquidity’, foreign countries can see this is happening as well and will gradually, but steadily discuss the use of their currencies in lieu of these dollars amongst themselves. Total dollars outstanding are disbursed 50/50 domestically to overseas and it will be these overseas dollars that sink the boat… not the domestic usage or belief.
My statement is true.
You quite literally confirmed it with your own words-
It is still the belief that the dollar is the currency of choice for 80%+ of transactions in foreign markets, but many analysts say that simply isn’t the case anymore.
Those analysts in your statement proved my other point. They say it isn’t the case, but it is, isn’t it? Their reliance on observable reality has no effect on what is actually taking place in manifest reality.
I know, it’s mind-blowing if you think too hard about it.
Like I said, everything comes to an end at some point and nothing disappears faster or with greater effect than a manifest reality that no one believes in anymore. It’s coming, but not because of the size of the debt. I predict you’ll see it at a quadrillion dollars before it’s all over, that is if we live long enough.
Exactly. My “conservative” money manager, (that money which is out of debt which is not much any more), says he doesn’t understand, but that he does understand that it will keep on going. And i say, until it doesn’t. But I am in my somewhat older years so what the fuck, war is good for wall street, eh?
My novice stupid sheeple advise: Number one, get the fuck out of debt, number two, ride the market with leftover and hope the can gets kicked down the road, number three invest in hard assets – land, precious metals, barter items etc., number four, get skills especially growing and fostering your own food., number five, store enough for your kids and grandkids to have a base for the remnant to survive, number 6, enjoy yourself doing whatever and fuck the elite.
There, novice stupid advice from a realist. Whatever. We all die man, live like it.
This note is backed by ‘ the full faith and credit of the United States ‘.
Until it isn’t.
RIGHT-ON BROTHER!!!
The “Problem” is BE-LIE-VING ” or a “System of Beliefs and Believers” who Foolishly still think they OWE this criminal syndicate ANYTHING!!!
Remember the “Tiny Dot” video on YouTube about HOW this system works???
Its INCREDIBLY SIMPLE FOLKS…STOP “BELIEVING IN IT”!!!
HSF – great post. And want to see the logical, reasonable sane posters here lose there minds, point out that the Social Security Ponzi scheme is unsustainable, given that in real terms people keep taking out double what they put in, and that it will eventually crater. But, but, but – I paid in!
You can convince someone of about anything so long as his or her income isn’t dependent on believing otherwise.
Every ss check I get I count as a blessing and not as the money they stole from me, taxed me on, then gave a bit back to me, then taxed me on again. I figured start collecting as soon as possible, you may not get anything else, a bird in the hand, as they say.
I just started taking my SS. Waiting is a fools errand. Did the math on taking it now or waiting. Every month I would have waited added $15 per month to the benefit. Given that I’m 64.5 if I had waited until 65 to start benefits I would have been 75 years old to break even. By investing the current benefit I will have more $ than I would have had by waiting. I just wish I could get what I put in with a little interest in a lump sum. I’d do that in a New York minute.
You have actually inverted the author’s thinking, just that you are stating nobody can know what will crash those beliefs.
I dispute that.
HSF Good comment. We would like to garden but tbe top 3 feet of topsoil is dirt from an 80 foot embankment that was cut for a boat ramp. Hard and sterile barely describes it’s growing abilities. You can plant peppers and tomatoes and within 1 week they will be DEAD. Plant seeds and there will never be a sprout. Grocery store for us and the farmers market.
Raised beds or fabric containers or even plastic bags. You can easily grow a lot of potatoes, beans, tomatoes carrots etc. The grocery store and probably farmers market will fall with the money.
It’s both fake and diabolical. As if the Devil’s own had created it?
Money is fungible. At any time an entity has debt and is borrowing money to fund continuing operations that entity can be said to be borrowing money to pay interest on debt. It’s a good scare line but meaningless in any real sense in the current situation. Actually the whole idea of money as applied to the circumstance of our federal government’s economy is meaningless at this point. Confidence is the key now. Just that. Nothing else.
As soon as the belief that things can continue as they are is obviously broken the rush for the exits will begin. That break and rush won’t be visible to the proletariat until it’s too late for us to escape the consequence. That’s what WWIII is actually for.
This “System” is CAUGHT already…and WILL BE EXPOSED…THEN DESTROYED…NOT BY WW3, BUT BY “OUR ORIGINAL” Creators.
VERY ODD Folks:
Here there is a “Situation” globally where EVERY Human Being from EVERY Nation OWES a “Criminal Syndicate” called “International Bankers/Central bankers based off PURE FRAUDULENT PRACTICES?!?
HOW IS THIS BS STILL BEING EXPRESSED ALL OVER THIS PLANET???
THERE IS “NO DEBT”… TO BE REPAID!!! GET-IT YET FOLKS???
ALL this BS is based on the “Birth Certificates” WITCH WAS NEVER “FOR SALE”…REMEMBER ANYONE?!?
THE “VATICAN” CREATED THIS “SYSTEM OF DEBT”!!!!
Remember WHO “The Whore of Babylon” presided over…ALL THE KINGS OF THE ENTIRE EARTH ?!?
Oh, the Vatican, huh?
I thought it was the Phoenician Navy, or was it the Knights Templar?
I always get the patsies confused.
No, it was some “witch”, “which” was never for sale. fucking ‘tards. And that whore must have been pretty fucking hot, no? Didn’t she have 7 heads or some shit, does that mean she had 7 hoo-hoos? I bet they stunk tho. though.
Everything stunk in the pre plumbing days.
The people doing this could care less, because they’ll be unaffected while your family tries to keep their social credit score up for the opportunity to eat out of a dumpster.
That’s why despite all of this morons like Kerry suggest things like spending a quadrillion dollars on imaginary climate change.
Gee, who woulda thunk this?
And guess how they will address that little problem? Why, inflation! They will attempt to inflate the debt, and interest, lower. If they can keep inflation up, it will devalue the debt in real terms. Driving workers into higher tax brackets will also help.
The old X-2 up the middle! Has worked in the past.
So, all I gotta do is believe everything is fine and it’s all good? O kayyyy…. easier than I thought…
If that’s what you got out of it, then go all in.
Are we ALL not already “all in”?
Between 1913 and 1921, Col. Edward Mandell House, who was the agent provocateur of the Rothschild, the head of the European Central Banks, was assigned to oversee President Woodrow Wilson and the Congress in the implementation of the central bankers’ plans. ( Creation of the federal reserve )
( Birth certificates are the ” collateral.” )
“[Very] soon, every American will be required to register their biological property in a National system designed to keep track of the people and that will operate under the ancient system of pledging. By such methodology, we can compel people to submit to our agenda, which will affect our security as a charge back for our fiat paper currency. Every American will be forced to register or suffer not being able to work and earn a living. They will be our Chattel and we will hold the security interest over them forever, by operation of the law merchant under the scheme of secured transactions. Americans, by unknowingly or unwittingly delivering the bills of lading to us will be rendered bankrupt and insolvent, forever to remain economic slaves through taxation, secured by their pledges. They will be stripped of their rights and given a commercial value designed to make us a profit and they will be none the wiser, for not one man in a million could ever figure our plans and, if by accident one or two would figure it out, we have in our arsenal plausible deniability.
( He figured it out. )
The game is almost up. They know people are aware of this monumental fraud , so they will pull the plug themselves. Then , get ready for that favorite word of theirs again , a ” transition ” to a new way after this great reset.
“so they will pull the plug themselves”
Correct.
What most ‘conspiracy theorists’ overlook, is that you don’t need some perfect plan to do an evil deed, you just need to watch the unsustainable edifice wobbling towards it’s implosion, then at some point pull the plug on it yourselves, after you have positioned yourself to profit from it.
They will just print to cover the Deficit, not through open channels but by back door methods.
They offer the World nothing but a promise to pay…. by printing into existence your required interest payment.
They thank you for your stupidity as they know another one is born every minute.
yet the government is talking trillions in reparations and quadrillions in climate change money. What could go wrong?
one trillion = 1,000 billions
one quadrillion = 1,000 trillions
HSF is correct. Another example is many experts say that the Social Security Fund will go broke, some say it already is, in the near future and that benefits will need to be delayed and reduced. Yet everyone continues to pay into the fund, and many believe they will receive their full SS benefit. They believe the fund will somehow be magically fixed/funded. Counter argument is that we are “forced” by government to pay in, so they owe us. Those are the people who don’t seem to understand the US government does as it pleases with the SS fund and at some point, will probably tell everyone…..and its gone!!!!
Not so fun fact: A stack of $1 dollar bills would be 97,457,031 miles high. Our national debt is over $33 trillion by now…the ability of the FED to create numbers is unlimited, buy PM’s.
They just print what they want. DEBT be DAMNED.
Until they can’t pay the interest, then no one buys printed securities. It is called a “financial meltdown”!
The USSR did that, which is why the country is Russia today.
35 before me.
I doubt it will be read.
I must ask. Where is that Trillion$ going and how is it used?
I have not seen any evidence of all that money is actually in circulation for any purpose.
It can not be buried for some future need.
I think the better question is ‘Where is that Trillion$ coming from?’
Your bank account!
Every government that is capable of creating its own currency in large quantities eventually inflates it to the point of worthlessness. Much more so when printing is not required because a computer can do it electronically with no actual physical representation of anything. Pulling the plug on the computer makes all of those big numbers disappear immediately.