That happens, we at times decide to take a very risky road and US politicians more than most, but now they are about to head into shallows with a cruise liner? You will state that this is no big deal, tugs will pull it into deep water and normally you would be right. Yet in this case the cargo is nitroglycerine, so as it hits the shores the ship goes badaboom, a really big badaboom and it is not a ship we are talking about, it is the US economy. So as we consider what is about to happen, lets give you an example.
Netflix at present (and over the last year has had well over 225 million subscribers, giving it an annual payday of well over $27,000,000,000 which is not too shabby, a good setting to work from. So after the 17 billion in new media it has over 10 billion and change, I reckon that 50% if not more into technology, as such they are doing fine.
Now we get into a less good place, the US economy and do not mistake one for the other. The US economy has many. Complexities, but the setting does not change, it needs to pay bills. As such we rely on Forbes giving us “The National Debt Approaches $32 Trillion, Will It Bankrupt America?” (at https://www.forbes.com/sites/mikepatton/2023/04/25/the-national-debt-approaches-32-trillion-will-it-bankrupt-america/) and this is where two groups are opposing, those in denial claim it will not be so (very wishful thinking). I myself and many others are on the opposing side of the debate. Forbes gives us “The current revenue of the federal government is approximately $4.6 trillion while spending exceeds $6.0 trillion. Thus, the current budget deficit is over $1.4 trillion. It’s clear that members of Congress are spending like drunken sailors and like the Titanic, the U.S. is on a collision course with a financial iceberg” yet this is merely one side of the shallows they are heading for. You see, that we get from another side (the New York Times) who gives us that the US is running out of money somewhere between June and September. Yet that is not the whole enchilada. These two parts should alert you to the US Bonds fiasco, I tried to warn you a few times over. You see whilst everyone is cheering on bonds, there is a downside. These pesky papers mature and even as the interest payday seems small (1.65%) over $20,000,000,000,000 that still ends up being a $330 billion invoice and the budget does not take that in. OK, it is not all due immediately, but a rough estimate gives is that in the next 4 years $2,400,000,000,000 does and that is still a massive amount. Add to this the budget deficit that has been going on for years and you see the problem the US economy is heading for. It might never have been avoided, it could have been delayed by a lot. And with the current deficits, where will the US find $600 billion annual in maturing bonds (2023-2027)
I warned of this 25 years ago when I called for a tax overhaul where companies (Google, Facebook, IBM, Apple, that loser Microsoft and several more) would pay their fair share, merely their fair share.
The point of no return was reached when Barack Obama became president of the United States. Lets be clear, this was NOT his fault, but the point where we cannot avoid what comes next was achieved. If only people had woken up a lot sooner. But there we got past a point where the problems would accelerate and now we are almost at that point. And the banks will be no help. I tried to warn you a few times over. Some of their risk and liquidity is in US bonds and when the US forfeits payment your 401K and many other things will become worth close to nothing. So if you wonder where wealth of middle class incomes is, look towards Mexico.
And will it get worse? Yes, but how remains an issue for now. Politicians will give way to wealth and rich friends first, so that they an get their slice and these people will go to Monaco, Dubai and the Bahamas. Many of them saw this coming and they already have places there, they have had them for years. So what can be done? Actually nothing, it is too late for that, all the whining and claims will fall flat and merely moves the timeline. The American children will know what true poverty feels like, they will get there at the end of their teens or early adult life. There are a few things that will happen, pushing forward bonds will be the easiest and convincing these owners to sell to appointed people or let it ride for a lot more, but that is a bill that adds a decent amount. Whomever has a billion in bonds and is offered 3.8% instead of 1.65% will consider it and I reckon that this is why we now see 20 years bonds (personal speculation). But after that the options go dark, really dark and that is what banks fear too, because the next bank run will take away a truck load of liquidity. It is like the stowaway that went for the happy shores or America, only to learn that the weather is foul and they suddenly realise that the cargo hold is filled with Nitroglycerine. Would you chance swimming, or hope for the best. Don’t forget that the shallows were YOUR saviour, not that much for a cruise-liner with combustibles.