Revisiting Debt Out the Wazoo!

It makes gold glitter and silver shine!

It’s always the same thing:  governments go bankrupt and their money fails because they can’t control their spending.  Politicians spend, spend, spend money they don’t have to buy the voters love and affection.  This helps them get reelected.

Then when the bill comes due for all their spending, they act like the national debt came from some alien ship in outer space that they had nothing to do with.  But the get their light sabers ready and promise to fight inflation.

So here we go again.  It’s time to check in on DEBT OUT THE WAZOO!

That’s financial blogger Wolf Richter’s colorful term for America’s recklessly ballooning national debt.  

One year ago the national debt was $35.1 trillion.  Today it’s $37 trillion.  Washington added $1.9 trillion dollars of debt in 12 months.  

Now $37 trillion, the debt out the wazoo will reach $37.8 trillion by year end.

But wait!  There’s more.  There’s hidden debt, an iceberg below the surface!  It’s another $100 trillion.

All that debt cannot be paid in a straightforward, honest way.  But Washington has a secret weapon.  Here’s former Federal Reserve chairman Ben Bernanke letting the cat out of the bag. 

The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.  By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

That’s it.  Washington has the means to “default” on its debt by printing money, by reducing the value of the dollar and thereby reducing its real debt.  By inflation.

So gold keeps climbing.  

Protect yourself and your money.