The Sovereign Man

His real name is not Simon Black

This ex- USArmy intel guy is one of the smartest dudes I have run across in my reading. Yes, a Texan and smart enough to grow up in University Park area…he really is spot on and has been for the 8-10 years I have been reading his columns.

The average American is clueless about what Congress just did (and has been doing for decades) regarding destroying America our grand kids will live in. When the S___ hits the reciprocating oscillator, we will be gone on to our reward… So glad our grandfathers didn’t flow off the Bosch in WWI as a silly threat and Ditto for our fathers as the served to rid the earth of Hitler’s craziness..(although we are seeing a resurgence of medical crimes worth of a Nuremberg II) -but more on that later.

Here is a glimpse of “Simon Black”- notice the “every second” comment.

June 20, 2023

Well, that didn’t take long.

From the time the US government managed to sign the debt ceiling resolution, it took just thirteen days for the national debt to soar by nearly $600 billion.

At that pace, they added over $500,000 to the national debt every second.

The US national debt has now breached $32 trillion… meaning America’s debt-to-GDP ratio is now 121%. Historically, advanced nations tend to get into trouble when debt-to-GDP reaches around 90%. The US is way past that threshold — but I’ll return to that point in a moment.

First, any time there’s a discussion about the national debt, invariably some idiot says something stupid like “the debt doesn’t matter because we owe it to ourselves.”

This is one of these irrational aphorisms (like “silence is violence”) that people like to repeat over and over again until they believe it to be true. But it’s not true. The debt matters. But let’s first examine who owns it:

Foreign governments like China, Japan, and Saudi Arabia hold a combined $7.4 trillion of US debt.

The Federal Reserve owns $5.1 trillion of US debt.

Social Security owns another $2.7 trillion of US debt, which of course is money owed to American retirees. Similarly, the Military Retirement Fundholds about $1.36 trillion.

State and local governments hold about $1.55 trillion combined in US debt.

Mutual funds own another $2.84 trillion.

Banks own trillions worth of the national debt. Banks buy US government bonds with their depositors’ money, i.e., YOUR money.

JP Morgan Chase alone owns about $300 billion worth of US government debt. Silicon Valley Bank famously held about $120 billion of US government debt before they went bust.

Even the Federal Deposit Insurance Corporation, which is supposed to guarantee bank deposits up to $250,000, owns about $128 billion worth of US government debt.

Then there are countless businesses and individuals around the world who own US government debt, simply because Treasury Bonds are considered “risk free”.

Now, when people say that “we owe it to ourselves”, they mean that most of the debt is NOT owed to foreigners. And this is true. Foreigners own just under 25% of the debt.

But does that make it OK to default on the other 75%? Is it somehow acceptable to default on banks across America, which bought US Treasuries with their customers’ money? Is it OK to default on 50+ million Social Security recipients? Or military retirees?

That’s why the “we owe it to ourselves” crowd is completely delusional. They seem to think that it doesn’t matter if the government defaults on, say, the Federal Reserve, or Social Security. But doing so would cause disastrous consequences — global economic meltdown, national social crisis, etc.

So, in order to avoid a major catastrophe, the debt needs to be repaid.

But with the national debt at 121% of GDP, is repaying it even possible anymore?

Technically, yes. And it all comes down to growth.

Back in the 1980s and 1990s, the US economy grew an average of 3.3% per year after adjusting for inflation; economists call this ‘real’ GDP growth.

But real GDP growth since 2000 has been much lower, averaging just 2%. And it turns out that the 1.3% difference in growth has had an enormous impact.

To give you an example, if real US economic growth had remained at 3.3% for the past 20 years, government tax revenue (which averages ~18% of GDP) would have grown substantially.

___________ so I suggest you sign up for his news letter….