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Uh, there are a number of different, uh, organizations and economists out there saying that they believe that the US, uh, will be paying more than a trillion dollars annually in interest payments, uh, for the national debt by 2030, 2033, whatever it is. no, no, not by 2030. Maybe even by the end of this year, but certainly by next year the the interest tab, you know, assuming just a Fed 5% rate, right?
Fed funds rate, which we're going to be at, you know, in March or, you know, the Fed's going to hike rates another 50 base points or so, that's what it says. Um, we should be at a trillion in interest by the end of the year, if not next year. But, we're not going to stop there. I mean, then we'll be 2 trillion.
And And what happens when the national debt is 50 trillion and interest rates uh are 10%? Well, that's that's 5 trillion a year in interest on the national debt. I mean, it's so I mean, it's it the numbers are enormous because the debt is going to keep going up and interest rates are going to have to keep going up because the more debt we have, the more inflation we're going to create and the more inflation we create, the higher interest rates have to be.
This is an unsustainable. Even uh Powell admitted that what we're doing is unsustainable. It is unsustainable. When is it going to end? Only when there's a crisis and a crisis is coming uh because the politicians will not act in advance of a crisis to avert one. They will wait until there is a crisis and then they will try to react to the crisis after it happens.
And so, there will be a debt crisis. The only question is when and I I I think it will be a currency crisis as well as a debt crisis because the response to a debt crisis is to print more money and that creates the currency crisis. Describe a little bit more in detail how you expect that crisis to play out, both the debt and the currency crisis.
Like, what would your expectation be with either the sequence of events or the things people should pay attention to? As buyers for US Treasuries or dollar denominated debt in general disappear, nobody wants to loan money anymore because the interest rate is not even close to compensating you for what you're losing, especially when the dollar really starts to fall.
You know, then you know, your foreigners are not going to want to loan us money uh if the dollar is going down against their you know, their base currency. Yeah, so uh you're going to start to see a loss of of of buyers. And then the Fed is going to step in with an even bigger quantitative easing program to pick up the slack to buy the bonds that nobody else wants.
Well, where does the Fed get the money to buy those bonds? It has to create it. And that means it expands the money supply. So, it creates even more inflation, which will push the dollar even lower, and that will force you know, even more people to want to get rid of US bonds. Assuming there are still some private buyers around, you know, now you're going to chase them out.
And now the Fed is going to have to expand its QE program even more because if the Fed doesn't step into the market, interest rates really go up. You know, look what happened in 1980 with Volcker. They went up to 20%. They could go higher than that now. I mean, we have a lot more debt now than we had back then.
Uh so, in theory, we should you know, rates should go higher now than they were back in 1980. But of course, since we have so much more debt than we had back then, the economy would completely implode. It would be just a meltdown. So, they're not going to let that happen, but the only way they can prevent that from happening is by creating more inflation.
And that's really what leads to the currency crisis because the markets figure this out finally. Nobody wants our dollars. You know, I think it'll start abroad where foreigners don't want our dollars, but then Americans won't want the dollars either because they won't be able to buy very much with them.
So, I mean, the whole world will be trying to get rid of them. Do you think the United States debt limit gets increased? Could the US default? And how does the debt limit play into monetary policy and the Fed decision-making? It be increased, unfortunately, because it's always increased. But, every time we get close to having to increase it, the Republicans make a big deal about it so long as there's a Democrat president.
Because when when Trump was president or when Bush was president, they they didn't care. They raised the debt ceiling. But, once you have a Democrat in the White House, then all of a sudden you get a few Republicans who say, "Oh, wait, we don't want to raise the debt ceiling. Well, we want to cut spending." Well, why don't you cut spending when you got the White House?
You know, because they don't actually want to cut spending. They just want to talk about it. And and so, you're going to get some Republicans talking about how we have to get a handle on the debt, but at the end of the day, we never get a handle on the debt, and we're going to increase the debt ceiling.
Now, you know, we would all be better off if we never increased the debt ceiling, had they never raised it the very first time. You know, we've had it for like 100 years, but we'd be better off if the initial debt ceiling was still in place, so we didn't have all this debt. The reason we have so much debt is because they keep raising the ceiling.
And it's nonsense to say we have to raise the ceiling to pay our bills. If we wanted to pay our bills, we wouldn't have to raise the ceiling. We would just pay our bills. The reason we want to raise the debt ceiling is so we can continue to not pay our bills, so we can go into debt instead of paying our bills.
But, the problem is paying the bills actually costs money. Nobody wants to pay the bills. The politicians want to keep on kicking the can down the road, so they want to raise the debt ceiling again so that we can continue to not pay our bills and have the debt national debt go up to 35 trillion, 40 trillion, 50 trillion, you know, infinity and beyond.
But, the problem is going to come when we reach a ceiling that we can't raise, and that is the lending ceiling. That is the willingness of the rest of the world to loan us money. You know, because when that when we hit that ceiling, then then we're done. But, he and here's the crazy part about it is, we tell our creditors, "If we can't borrow more money, we will default.
Well, we're basically telling the creditors that this is a Ponzi scheme. Because we're only going to pay back our current bondholders if we find somebody dumb enough to buy new bonds. And then we can take that money and use it to pay off the guys who own our bonds now. I mean, but why would you deliberately loan money to a government if they're telling you right off the bat, if we can't borrow more money, we're just going to default and you're never going to get your money back.
You know, the the politicians should be saying, if we don't raise the debt ceiling, we are going to cut Social Security, we're going to cut Medicare, and we're going to prioritize interest on the national debt. Or we're going to have an emergency tax hike. We're going to raise everybody's taxes so we can pay the debt.
No, they don't say that. They say if we can't borrow more money, we're defaulting. So, I mean, so how much longer can this go on? Because default is inevitable. It's only a question of when. Now, of course, the other thing that that they can do if they're not going to default, well, they just print.
Well, then there's hyperinflation and that's the same thing. It's actually worse than defaulting. Could we see a world over the next 10 or 20 years in the United States where inflation is 10 or higher uh on an annual basis? I think so, although I don't think our creditors will put up with 10% inflation uh that many years in a row.
Especially when the interest rates are well below that and they're really getting killed. But, you know, inflation is a form of default. If the central bank prints a bunch of money and you have 10% inflation and we have a $30 national debt, we've just repudiated 3 trillion of the 30. I mean, it it is a slow default.
That's what it is. It's just a different way of defaulting. You do it through inflation instead of just reducing what you pay, but it's the the impact is the same for the bond holders. Either you get all your money back, but you can't buy as much, or you get less money back, but you can actually buy the same.
Let's say there's 10% inflation. If I got 90 cents on the dollar, well, that's the same as getting 100 cents on the dollar with 10% inflation, or I can get 90 cents on the dollar with no inflation. But, you know, prices are going to go up a lot more than 10%. I mean, you you they could double, they could triple, they could quadruple, and that is a huge haircut.
You know, the bond holders end up losing 70, 80% or more of the value of what they loaned. And, you know, that's like the government paying off 10 cents on the dollar, 20 cents on the dollar.
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