In the fourth quarter, government debt outgrew GDP by 40%. Today we explore our nation’s current fiscal state. Which is so bad the Treasury Department is fudging the numbers…
From Phillip Patrick for Birch Gold Group
President Biden’s economic legacy might boil down to his administration getting in its own way.
By the looks of it, things could get much worse for the foreseeable future, before they get any better. On top of everything else that has transpired during Biden’s first term, even more disturbing facts are starting to come to light.
Let’s take a brief look at recent developments that have the potential to affect the next decade (or more) of economic outlooks in the United States.
Debt outpacing growth at a “scary rate”
Most of the economic growth during the fourth quarter of last year will likely be attributed to an increase in holiday spending that was reported by the National Retail Foundation.
Nonetheless, the year-over-year GDP ended up higher than expected, according to Wolf Richter. But that good news comes with an important caveat:
Current-dollar GDP grew by 5.8% in Q4 year-over-year, and it did so despite the 5%-plus interest rates, and that was pretty good. But the current-dollar government debt, oh dearie, it grew by 8.2%!
…went in the wrong direction, as the government opened the spending floodgates and piled on debt at a scary rate, despite decent economic growth.
That’s a 41% difference between economic growth and government spending One step forward, 1.4 steps back…
It only gets worse from here. Looking at the longer term data reveals that debt has been outpacing real economic growth at more than double the rate since Biden took office.
Here’s how the most recent official data breaks down…
The Federal debt held by the public grew roughly 17.9% from Biden’s inauguration to October 2023. Yet the real GDP (which is adjusted for inflation) has only grown about 7.2% during the same time frame.
In other words, debt outgrew economic growth by 149%! (Feel free to check my math.)
But just when you think the situation couldn’t possibly get any more insane, it doesn’t look like the government spending spree is going to slow down anytime soon.
Over the ten years from 2024 – 33, the total deficit is projected at $17.16 trillion, and in no single year therein will the projected deficit be less than $1.5 trillion.
Responsibility is now defined as spending at least $1.5 trillion more than the government extracts in revenue every single year for the foreseeable future. Moreover, federal outlays (spending) are projected to increase from $6.9 trillion in 2024 to over $10 trillion in 2033.
Now, it’s easy to let these numbers become meaningless. So let’s put them into perspective:
- $1.5 trillion dollars is the approximate GDP of the entire nation of Spain
- $1.5 trillion dollars is what both Saudi Arabia and the UAE, two famously wealthy oil-producing nations, produce every year combined
…in other words, $1.5 trillion dollars is a lot of money!
So how will the government pay for it?
Streitel has some bad news about that:
politicians could confiscate all the income of everyone earning over $65,000 per year and only barely pay for this year’s spending.
Clearly taxation isn’t going to work – which means the government will turn to the other time-tested method of “paying,” currency devaluation.
One thing we know for sure: These budget deficits may result in increased economic growth. Whether or not they do, they definitely result in a debt that must be repaid.
Repaid either by taxation, or currency devaluation.
Either way, we pay the price.
We aren’t just talking about $1.5 trillion, either – the spending deficits from all previous budgets ($6 trillion since Biden’s inauguration) won’t be offset in any meaningful way at any point in the foreseeable future. The debt is just too big.
So much for the present, and future, of Bidenomics.
Meanwhile, though, Washington D.C. is packed with enablers playing shell games to cover up just how bad the situation is.
Here’s one “mistake” they can’t sweep under the rug any longer…
Is Yellen’s Treasury Department trying to hide something?
Lately, the Treasury has been putting a weird spin on its borrowing.
Wolf Richter summarized the problem in another article:
And today, the Treasury Department announced in its “Marketable Borrowing Estimates” that – despite the fiscal deficit that has ballooned in recent months – it would have to borrow less in Q1 than it had forecast in the October announcement, and that it would have to borrow relatively little in Q2.
As you’d expect, anxious lenders are relieved when the Treasury says the government is borrowing less – and they demand a lower premium when they loan the federal government money.
The official January press release from the Treasury Department confirms that the agency would be borrowing quite a bit less in the second quarter, to the tune of $500 billion less in fact:
During the January – March 2024 quarter, Treasury expects to borrow $760 billion… The borrowing estimate is $55 billion lower than announced in October 2023, largely due to projections of higher net fiscal flows and a higher beginning of quarter cash balance.
During the April – June 2024 quarter, Treasury expects to borrow $202 billion…
The key word here is expects.
Because the Treasury’s last set of expectations were more than a little off-base:
That’s right – the government borrowed 94% more than projected during July-September last year, and then 93% more than projected October-December last year.
Janet Yellen underestimated just a bit – turns out her department borrowed almost TWICE as much as advertised.
This is clearly an effort to make the true state of the government’s debt-fueled spending spree look only half as insane as it really is.
Oh, by the way, even if the current estimate for the first quarter of the year is on target, the government will have borrowed $2.55 trillion in nine months (July 1, 2023 – March 31, 2024).
If history is any indication, the truth will be much worse.
The Treasury is attempting to mislead both the public and potential creditors about its real borrowing needs.
That’s the biggest, reddest flag I’ve ever seen. If the nation’s fiscal situation is so horrendous the Treasury Department is desperately trying to pretty it up?
It may be too late to solve the problem…
Opt out of the federal wealth confiscation plan
As I’ve just showed you, the government debt is far too big to ever repay by conventional means. I’d love to see Congress try to pass a 100% tax on everyone making $65,000+ a year.
That means the government will inevitably turn to Plan B: Inflating away the debt. Printing new dollars to pay off old debts.
And when that happens, the purchasing power of the dollar will plummet. Ask Argentina how that plan works out.
That’s why it’s smart to make sure your savings are diversified with an uninflatable asset nobody can simply print more of. Of course, I’m talking about physical precious metals.
Throughout human history, physical gold and silver have been the safe haven assets of choice. Their inflation-resistant characteristics are an outstanding counterweight to the dollar, whose purchasing power declines daily.
The price of physical gold remains relatively stable in the face of economic turmoil (sometimes even rising on safe-haven demand). In fact, the price of gold grew almost 13% overall in 2023 (beating inflation).
Of course, getting your hands on some precious metals is just one of many different ways to improve your nest egg’s resistance to inflation. You can get the rest of the story behind diversifying with precious metals in our free information kit.
Phillip Patrick is Birch Gold Group’s primary spokesman and educator. He was born in London and earned a politics and international relations degree at the prestigious University of Redding in Berkshire, England. Growing up in London, he saw the risks of government overreach and socialist policies first-hand. He spent years as a private wealth manager at Citigroup on Lombard Street (the Wall Street of London). He joined Birch Gold Group as a Precious Metals Specialist in 2012.
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