Foreigners Are Dumping U S Debt At A Record Pace, And Our 20 Trillion National Debt Is Poised To Become A Major Crisis

http://www.dcclothesline.com/2017/01/23/foreigners-are-dumping-u-s-debt-at-a-record-pace-and-our-20-trillion-national-debt-is-poised-to-become-a-major-crisis-2/

1-24-2017-10-01-29-am

by Michael Snyder

While most of the country has been focused on the inauguration of Donald Trump, a very real crisis has been brewing behind the scenes. Foreigners are dumping U.S. debt at a faster rate than we have ever seen before, and U.S. Treasury yields have been rising. This is potentially a massive problem, because our entire debt-fueled standard of living is dependent on foreigners lending us gigantic mountains of money at ultra-low interest rates. If the average rate of interest on U.S. government debt just got back to 5 percent, which would still be below the long-term average, we would be paying out about a trillion dollars a year just in interest on the national debt. If foreigners keep dumping our debt and if Treasury yields keep climbing, a major financial implosion of historic proportions is absolutely guaranteed within the next four years.

One of the most significant aspects of the “Obama legacy” is the appalling mountain of debt that he has left behind. As I write this article, the U.S. national debt is sitting at 19.944 trillion dollars. During Obama’s eight years, a staggering 9.3 trillion dollars was added to the national debt. When you break that number down, it comes to more than a hundred million dollars every single hour of every single day while Obama was living in the White House. In just two terms, Obama added almost as much to the national debt as all of the other presidents before him combined.

What Obama and the members of Congress that cooperated with him have done to future generations of Americans is beyond criminal.

Unfortunately, hardly anyone is talking about this right now, but the consequences are about to start catching up with us in a major way.

The only possible way that our game of “borrow, spend and stick future generations with the bill” can continue is if the rest of the world participates. In other words, we need them to continue to buy our debt.

Unfortunately for us, a major shift is now taking place. According to Zero Hedge, the most recent numbers that we have show foreigners dumping more than 400 million dollars of U.S. debt over the past 12 months…

The wholesale liquidation of US Treasuries continued in November, when according to the just released TIC data, foreign central banks sold another $936 million in US paper in November 2016, which due to an offset of $892 million in buying one year ago, means that for the 12 month period ended November, foreign central banks have now sold a new all time high of $405 million in the past 12 months, up from a record $403 million in LTM sales as of one month ago.

This isn’t a catastrophic emergency just yet, but if we continue down this road we will eventually get there. The only way that the U.S. government can continue on with business as usual is if it can continue to borrow billions upon billions of dollars at ultra-low interest rates. Now that Treasury yields are rising, some people are beginning to get quite nervous

As we pointed out one month ago, what has become increasingly obvious is that both foreign central banks, sovereign wealth funds, reserve managers, and virtually every other official institution in possession of US paper, is liquidating their holdings at a disturbing pace, something which in light of the recent surge in yields to over 2 year highs, appears to have been a prudent move.

In some cases, like China, this is to offset devaluation pressure; in others such as Saudi Arabia and other petroleum exporting nations, it is to provide the funds needed to offset the drop in the petrodollar, and to backstop the country’s soaring budget deficit. In all cases, it may suggest concerns about a spike in future debt issuance by the US, especially now under the pro-fiscal stimulus Trump administration.

Someday historians are going to look back in horror at what took place during the Obama years.

The amount that was added to the national debt during his years comes to “approximately $75,129 for every person in the United States who had a full-time job in December”. There is no possible justification for this. But because there haven’t been any catastrophic consequences so far, most people assume that this theft from future generations of Americans must be okay.

In a previous article, I explained that government debt greatly stimulates the economy. If we had not borrowed and spent 9.3 trillion dollars over the past eight years, we would be in the worst economic depression in U.S. history right now.

But most people don’t understand this. They don’t get the fact that we are living way, way above our means. And they also don’t get the fact that the only way that Donald Trump can keep the party going is to borrow and spend just like Obama was doing.

And even with all of Obama’s recklessness, he was still the only president in all of U.S. history not to have a single year when U.S. GDP grew by at least three percent. The following comes from the Hill

Despite the trillions of dollars in government spending pumped into the economy every year under Obama, America has never once enjoyed an annual GDP growth rate at 3 percent or higher, making Obama the least successful president—at least when it comes to economics—in modern history.

A historically sluggish GDP isn’t the only concern worth mentioning. Under Obama’s tenure, average annual food stamp enrollment has risen by more than 15 million (compared to 2008). The home ownership rate is the lowest it has been since 1995, the earliest year provided in the U.S. Census Bureau’s most recent report. The Bureau of Labor Statistics reports more than 590,000 Americans say they are not in the labor force because they are discouraged, a figure that’s 26 percent higher than even the worst annual average under George W. Bush. Additionally, the employment-population ratio has been continuously below the 60-percent threshold under Obama; the last time it was this low was 1985.

Now that Donald Trump is president, he is going to have some very hard choices in front of him.

If Donald Trump and the Republicans stop borrowing and spending so much money, the economy will immediately start suffering.

But if they do continue down the same path that Obama put us on, it is a recipe for national suicide.

So either we take our medicine now, or we risk completely destroying the bright future that our children and grandchildren were supposed to enjoy.

Wake up America, because time is running out.

Courtesy of The Economic Collapse Blog


Trump Hits DC With $10.5 Trillion in Cuts

http://www.dcclothesline.com/2017/01/22/trump-hits-dc-with-10-5-trillion-in-cuts/

 by Tim Brown

Well, this certainly sounds promising, if it comes to pass. Named and unnamed sources inside the Trump transition team have said that President Donald Trump has been working with others to bring about a massive reduction in spending.

The Hill reports:

“The proposed cuts hew closely to a blueprint published last year by the conservative Heritage Foundation, a think tank that has helped staff the Trump transition.

“Similar proposals have in the past won support from Republicans in the House and Senate, who believe they have an opportunity to truly tackle spending after years of warnings about the rising debt.

“Many of the specific cuts were included in the 2017 budget adopted by the conservative Republican Study Committee (RSC), a caucus that represents a majority of House Republicans. The RSC budget plan would reduce federal spending by $8.6 trillion over the next decade.

“Two members of Trump’s transition team are discussing the cuts at the White House budget office: Russ Vought, a former aide to Vice President-elect Mike Pence and the former executive director of the RSC, and John Gray, who previously worked for Pence, Sen. Rand Paul (R-Ky.) and Speaker Paul Ryan (R-Wis.) when Ryan headed the House Budget Committee.

“Vought and Gray, who both worked for the Heritage Foundation, are laying the groundwork for the so-called skinny budget — a 175- to 200-page document that will spell out the main priorities of the incoming Trump administration, along with summary tables. That document is expected to come out within 45 days of Trump taking office.

“The administration’s full budget, including appropriations language, supplementary materials and long-term analysis, is expected to be released toward the end of Trump’s first 100 days in office, or by mid- to late April.”

The Departments of Energy, Commerce, Transportation, Justice and State are all going to be facing massive cuts in spending, including the elimination of some programs in some of the departments.

Additionally, the Trump team is looking towards the privatization of the Corporation for Public Broadcasting, as well as the elimination of the National Endowment for the Arts and National Endowment for the Humanities.

The Hill went on to provide a few specifics of the cuts.

“At the Department of Justice, the blueprint calls for eliminating the Office of Community Oriented Policing Services, Violence Against Women Grants and the Legal Services Corporation and for reducing funding for its Civil Rights and its Environment and Natural Resources divisions.

“At the Department of Energy, it would roll back funding for nuclear physics and advanced scientific computing research to 2008 levels, eliminate the Office of Electricity, eliminate the Office of Energy Efficiency and Renewable Energy and scrap the Office of Fossil Energy, which focuses on technologies to reduce carbon dioxide emissions.

“Under the State Department’s jurisdiction, funding for the Overseas Private Investment Corporation, the Paris Climate Change Agreement and the United Nations’ Intergovernmental Panel on Climate Change are candidates for elimination.”

The expected savings from the cuts are expected to by $10.5 trillion over 10 years.

Courtesy of Freedom Outpost

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