Debt

Fed Raises Rates in the Midst of Epic Debt Bubble.... What Could Possibly Go Wrong?

Fed Raises Rates in the Midst of Epic Debt Bubble.... What Could Possibly Go Wrong?

The Fed raised rates by .25% and set a hawkish tone for 2017, with plans to raise rates three more times next year.  Yeah right!  Rates can't go much higher without causing serious problems to the economy, the financial system, and to US government finances.   

The problem with raising rates is the debt bubble that the Fed so willfully ignores.  Each quarter point makes things more difficult for businesses and consumers.  Here are just a few examples: 

Debt-Liquidation Inflation

Debt-Liquidation Inflation

Debt problems are not new.  The United States is not the first nation to rack up debts that cannot possibly be paid back through taxation.   This is an ancient dilemma, with ancient “solutions”.   A government can deal with a debt problems in one of two ways:  1) Bankruptcy.  2) Inflation.  As you will see, the latter is the most common resolution, historically, and quite likely the future of the United States of America. 

US Government Credit Card Debt

Every American knows that the US government has a debt problem.  Most can quote the $19 trillion debt number.  Many know the estimates of unfunded liabilities of $100 trillion or more.  Some even understand the use of fiscal gap accounting that shows the government is actually in the hole by $210 trillion in terms of present-value of future deficits and debt.  But what does all this actually mean?  How bad is it, really?