{"id":1200552,"date":"2020-08-06T14:50:43","date_gmt":"2020-08-06T19:50:43","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=109554"},"modified":"2020-08-06T14:50:43","modified_gmt":"2020-08-06T19:50:43","slug":"hell-is-truth-seen-too-late","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1200552","title":{"rendered":"\u201cHell Is Truth Seen Too Late\u201d"},"content":{"rendered":"

This post \u201cHell Is Truth Seen Too Late\u201d<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

\u201cHell is truth seen too late,\u201d wrote Thomas Hobbes \u2014 sternly, grimly, gravely.<\/p>\n

We fear the United States will see truth too late\u2026<\/p>\n

The truth, for example, that a comatose economy does not simply jolt to life at a button\u2019s touch\u2026<\/p>\n

That extravagant debt levels murder growth\u2026<\/p>\n

That the costless midday meal has no existence.<\/p>\n

Someone, somewhen, someway, must pay.<\/p>\n

How Can It Continue?<\/b><\/h2>\n

The United States economy has hemorrhaged perhaps $25 billion each day of this economic coma.<\/p>\n

No economy can withstand months and months and months of it.<\/p>\n

The lights must wink on, the machinery must begin to whine, the workers must punch the clocks again.<\/p>\n

The entire economic and financial system was dreadfully indebted before the pandemic.<\/p>\n

Now it is plunging deeper and deeper into debt without the economic activity to brunt the cost.<\/p>\n

GDP has contracted at a savage rate \u2014 as government spending has expanded at an equally savage rate.<\/p>\n

That is, Americans are purchasing more and more lunch on more and more credit.<\/p>\n

The Most Gluttonous Debt Binge in All of History<\/b><\/h2>\n

United States national debt has expanded $3 trillion in a mere six months \u2014 the most gluttonous debt binge in all of history.<\/p>\n

At $26.6 trillion, national debt presently equals some 130% of the gross domestic product.<\/p>\n

Never has the ratio been higher.<\/p>\n

Today\u2019s debt-to-GDP ratio outdoes the previous record of 121% from 1946 \u2014 after the United States emptied its pockets to scotch the Axis.<\/p>\n

Today it has emptied its pockets to scotch the virus.<\/p>\n

This year\u2019s budget deficit is already racing for $4 trillion. But it could rise to $6 trillion after another serving of lunch.<\/p>\n

Democratic and Republican \u201cnegotiators\u201d are hard at work in the kitchen\u2026<\/p>\n

A 6-Inch Sandwich or a 12-Inch Sandwich<\/b><\/h2>\n

Only its dimensions \u2014 a six-inch sandwich \u2014 or a 12-inch sandwich \u2014 are at issue.<\/p>\n

Bloomberg:<\/p>\n

\n

The negotiators are trying to reconcile differences between the $3.5 trillion Democratic plan passed by the House in May and the $1 trillion package that Senate Republicans introduced last week.<\/i><\/p>\n<\/blockquote>\n

But, it is an election year.<\/p>\n

Republicans do not wish to sport the black hat\u2026 and appear indifferent to suffering humanity, to hungry humanity.<\/p>\n

Thus, we expect the 12-inch submarine sandwich. Or perhaps, a 10-inch submarine sandwich.<\/p>\n

Either way, it goes upon the credit card.<\/p>\n

The Lunch Bill Comes Due<\/b><\/h2>\n

Here is the difficulty of course:<\/p>\n

Government claims no resources of its own. It collects them in one of two ways.<\/p>\n

It presses a pistol against the citizen\u2019s ribs\u2026 and plunders his wallet.<\/p>\n

Or it takes to the credit markets, empty cup in hand.<\/p>\n

But even if the government borrows, the pistol goes against the ribs.<\/p>\n

Recall, the citizen must pay taxes to service the lending.<\/p>\n

And how \u2014 again \u2014 does the government haul in taxes?<\/p>\n

Either way\u2026 the citizen pays. His lunch bill comes due.<\/p>\n

In days such as these, we might recall the timeless principles of economics\u2026<\/p>\n

Quack Panacea for Economic Ills<\/b><\/h2>\n

Here is Henry Hazlitt from his masterly primer on economics, Economics in One Lesson:<\/i><\/p>\n

\n

Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to \u201cinsufficient private purchasing power.\u201d The remedy is just as obvious. All that is necessary is for the government to spend enough to make up the \u201cdeficiency\u201d\u2026<\/i><\/p>\n

Here we shall have to say simply that all government expenditures must eventually be paid out of die proceeds of taxation; that to put off the evil day merely increases the problem\u2026 Once we look at the matter in this way, the supposed miracles of government spending will appear in another light.<\/i><\/p>\n<\/blockquote>\n

The supposed miracles of government spending spring from Lord Keynes and his famous multiplier\u2026<\/p>\n

The False Miracle<\/b><\/h2>\n

It is the miracle of water into wine. It is the miraculous multiplication of five bread loaves and two fish into food for the multitudes.<\/p>\n

It is the free lunch.<\/p>\n

This is the promise of the Keynesian multiplier and its devotees.<\/p>\n

It may appear miraculous under debt-free conditions.<\/p>\n

But today\u2019s system is so soaked through with debt\u2026 additional debt does not yield wine\u2026 but vinegar.<\/p>\n

It divides, not multiplies, bread and fish.<\/p>\n

Each dollar borrowed since 2008 has yielded under $1 of growth. It is perhaps 40 cents, by some estimates we have encountered.<\/p>\n

It is a sort of miracle in reverse, an anti-miracle.<\/p>\n

It merely piles up to unholy levels of debt. And debt drains the future\u2026 leaving it barren and empty.<\/p>\n

Plunging into debt introduces a sort of hand-to-mouth living. It diverts cash flow to the service of existing debt \u2014 often unproductive debt.<\/p>\n

And so, investment in the future is sent channeling backward. It is a titanic larceny of the future.<\/p>\n

And artificially low interest rates are the stickup gun…<\/p>\n

The Curse of Artificially Low Interest Rates<\/b><\/h2>\n

Lance Roberts of Real Investment Advice:<\/p>\n

\n

Low to zero interest rates incentivize non-productive debt. The massive increases in debt, and particularly corporate leverage, actually harm future growth by diverting spending to debt service\u2026<\/i><\/p>\n

The rise in corporate debt, which in the last decade was used primarily for nonproductive purposes such as stock buybacks and issuing dividends, has contributed to the retardation of economic growth\u2026<\/i><\/p>\n

The massive debt levels being added to the backs of taxpayers will only ensure lower long-term rates of economic growth.<\/i><\/p>\n<\/blockquote>\n

It is the economics of the hamster wheel \u2014 frantic \u2014 but stationary.<\/p>\n

We therefore expect no V-shaped recovery like the \u201crah-rah men\u201d croon about.<\/p>\n

We expect, rather, a protracted guttering along, a futile running in place, a languishing in purgatory.<\/p>\n

More, More, More!<\/b><\/h2>\n

But the good Dr. Paul Krugman does not believe present borrowing is adequate to purposes.<\/p>\n

He exhorts the government to load on additional debt because interest rates are so low:<\/p>\n

\n

The government will be able to borrow that money at incredibly low interest rates. In fact, real interest rates \u2014 rates on government bonds protected against inflation \u2014 are negative. So the burden of the additional debt as measured by the rise in federal interest payments will be negligible.<\/i><\/p>\n<\/blockquote>\n

Yet is borrowing at extremely low rates a warrant to plunge deeper into debt?<\/p>\n

It is true, the government can presently borrow at low rates. But this is likewise true…<\/p>\n

Rates will not remain forever low. Invincible time will balance the scales ultimately.<\/p>\n

Heading for Hell<\/b><\/h2>\n

When rates do return to historical averages \u2014 3-5% \u2014 debt service could wash out the entire budget.<\/p>\n

Prior to this crisis, the Congressional Budget Office already projected debt service would scale $915 billion by 2028 \u2014 nearly 25% of the entire budget.<\/p>\n

Only the Lord \u2014 the Lord above, that is \u2014 knows the ultimate figure. But it will likely be far higher than prior estimates.<\/p>\n

How will the government afford to pay for anything else? And how is America to rebuild its finances?<\/p>\n

We do not pretend to know. Perhaps it cannot.<\/p>\n

If hell is truth seen too late\u2026 the nation may be careening for a very hot place.<\/p>\n

The mercury is already rising \u2014 fast.<\/p>\n

Regards,<\/p>\n

\"Brian<\/p>\n

Brian Maher
\nManaging Editor, The Daily Reckoning<\/i><\/p>\n

The post \u201cHell Is Truth Seen Too Late\u201d<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post “Hell Is Truth Seen Too Late”<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

A warning for the United States from Thomas Hobbes… The false miracle of the Keynesian multiplier…<\/p>\n

The post “Hell Is Truth Seen Too Late”<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[484,3724,366,4532,463,4533],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1200552"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1200552"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1200552\/revisions"}],"predecessor-version":[{"id":1200553,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1200552\/revisions\/1200553"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1200552"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1200552"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1200552"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}