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Endgame

Interest Rate Response

I don’t read ZeroHedge much anymore because they don’t understand and/or deny the relationship between energy, overshoot, and the economy.

Today the US Fed lowered the interest rate so I had a peak at ZeroHedge to see what the knuckleheads were saying. It seems we’re approaching a Minsky Moment.

https://www.zerohedge.com/news/2019-07-31/endgame-starting-2024-all-us-debt-issuance-will-be-used-pay-only-interest-debt

Endgame: Starting In 2024, All US Debt Issuance Will Be Used To Pay Only For Interest On Debt

As we first pointed out back in March, when looking at the US ‘income statement’, most concerning by far is that for the first four months of fiscal year 2019, interest payments on the U.S. national debt hit $221 billion, 9% more than in the same five-month period last year, with the rate of increase breathtaking (see chart below). As a reminder, according to the Treasury’s conservative budget estimates, interest on the U.S. public debt is on track to reach a record $591 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to almost 3% of estimated GDP, the highest percentage since 2011. In fact, as of June 30, US interest had already surpassed $600 billion.

In short: in the stylized cycle of the US “Minsky Moment”, the US will enter the penultimate, Ponzi Finance,phase – the one in which all the new debt issuance is used to fund only interest on the debt – some time around in 2024.

From that point on, every incremental increase in interest rates, which will eventually happen simply due to rising inflation expectations, will merely accelerate the ponzi process, whereby even more debt is sold just to fund the rising interest on the debt, requiring even more debt issuance, and so on, until finally the “Minsky Moment” arrives.

At that point, while we don’t know yet what the next reserve currency – either fiat, hard or digital – after the US dollar will be, we urge readers to own a whole lot of it.

In case you don’t understand any of this, let me simplify:

We are using more debt to fix too much debt, and not one of our brilliant leaders understands that fossil energy depletion is at the core of the problem and therefore more debt is a really bad idea.

 

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