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Guest Post: Some Clear Thinking On 'The Debt'

Tyler Durden's picture


Submitted by Simon Black of Sovereign Man blog,

If you haven't heard yet, the United States of America just hit $16 trillion in debt yesterday. On a gross, nominal basis, this makes the US, by far, the greatest debtor in the history of the world.

It took the United States government over 200 years to accumulate its first trillion dollars of debt. It took only 286 days to accumulate the most recent trillion dollars of debt. 200 years vs. 286 days. This portends two key points:

  1. Anyone who thinks that inflation doesn't exist is a complete idiot;
  2. To say that the trend is unsustainable is a massive understatement.

At an average interest rate of 2.130%, Uncle Sam will shuffle $340 billion out the door just in interest payments this year... and it's a number that's only going up. To put it in context, China owns so much US debt that the INTEREST INCOME they receive from the Treasury Department is nearly enough to fund their entire military budget.

It's rather disgusting when you think about it.

Yet when you look at the raw numbers, there is no sign of improvement anywhere on the horizon. Last year, the Treasury Department brought in about $2.3 trillion in tax revenue. They spent $2.9 trillion JUST on -mandatory- programs like Social Security and Medicare, plus the very sacrosanct defense budget.

In other words, the US government was $600 billion dollars in the hole before paying a dime of interest on the debt, or paying the light bill at the White House. In fact the government's own numbers reflect a budget deficit through the end of the decade, i.e. the debt level is only going to get higher. These are their own figures.

In the 19th century, the Ottoman Empire was facing a similar debt crisis. In just 11-years, the Ottoman central government went from spending 17% of its tax revenue on interest payments, to spending over 52% of its tax revenue on interest payments. Then came default. Eleven years. The US is at 15% right now. How long will it take for the interest burden to become unbearable?

History is full of examples of superpowers bucking under the weight of their debt. This is not the first time that it's happened, and it won't be the last.

Sovereign debt is a giant confidence game. Investors buy bonds on the belief that governments can (and will) pay. When that confidence is chipped away, the cost of capital becomes debilitating. And people tend to notice a $16 trillion debt burden.

This is banana republic stuff, plain and simple... and smart, thinking people ought to be planning on capital controls, wage and price controls, pension confiscation, and selective default. Because the next trillion will be here before you know it.


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Wed, 08/29/2012 - 17:02 | 2747905 ParkAveFlasher
ParkAveFlasher's picture

Fuck it, I'm moving to Ecuador!

Wed, 08/29/2012 - 17:15 | 2747942 THX 1178
THX 1178's picture


Wed, 08/29/2012 - 17:25 | 2747972 I think I need ...
I think I need to buy a gun's picture

i'm thinking of buying 1000 shares in Yelp tomorrow,,,,,,,,,,,,,

Wed, 08/29/2012 - 21:21 | 2748483 Vampyroteuthis ...
Vampyroteuthis infernalis's picture


The US is at 15% right now. How long will it take for the interest burden to become unbearable?

Simple answer. When interest rates go up, more like skyrocket. It will be over in a few weeks at that point.


Wed, 08/29/2012 - 22:09 | 2748555 erg
erg's picture

I am naive, and always have been apparently. I continually ask myself how such a tiny coterie of twisted fucks get to make the other 7 billion dance to their absurd narrative.

The capstone is a bunch of febriled, palsied mummifications.

Wed, 08/29/2012 - 22:31 | 2748595 flacon
flacon's picture

When interest rates go up, more like skyrocket. It will be over in a few weeks at that point.


15% in 15 minutes? Bernanke said he could RAISE interest rates in 15 minutes.

Wed, 08/29/2012 - 22:40 | 2748613 55 men
55 men's picture

Ya know guys we tried that top down approach, now it is time to pay down the debt in a responsible manner.
Barack H. Obama


Wed, 08/29/2012 - 23:18 | 2748676 Michael
Michael's picture

TSA Harasses Ron Paul and His Wife in Florida

On departing the RNC in Tampa yesterday, Ron Paul, his wife and grand-daughter were subjected to harassment by the TSA at a small airport in Clearwater, Florida.

Eight TSA goons told the Paul entourage they would need to be screened before they would be allowed to leave because Mitt Romney might be nearby.

The insinuation was obvious — Paul and his family pose a threat to the GOP presidential candidate.

After a protracted examination of Ron Paul’s credentials, the agents demanded they be allowed to check the airplane for explosives.

The incident ended after Ron Paul’s wife, Carol, who has a pacemaker, refused to be screened by the TSA and an aide started taking video.

Thu, 08/30/2012 - 02:16 | 2748819 Ar-Pharazôn
Ar-Pharazôn's picture

someone tell me that it's a dream...... this cannot be real :)

Thu, 08/30/2012 - 06:38 | 2749005 strannick
strannick's picture

Smart, thinking people ought to be planning on capital controls, wage and price controls, pension confiscation, and selective default.


Wed, 08/29/2012 - 23:37 | 2748705 Michael
Michael's picture

If Gary Johnson gets in the debates, uses this bumper sticker and jumps enough in the poles, I will vote for him.

Thu, 08/30/2012 - 00:19 | 2748742 FEDbuster
FEDbuster's picture

That was a great bumper sticker, are they available for purchase?  I am torn between not voting and voting for Johnson. 

Thu, 08/30/2012 - 00:34 | 2748754 LMAOLORI
LMAOLORI's picture



"In other words Gary Johnson increased spending in New Mexico at approximately 240% the rate of inflation -- or about double and a half as fast as prices rose."

Gary Johnson's ACTUAL Fiscal Record The Johnson Deception


Thu, 08/30/2012 - 04:15 | 2748892 EasterBunny
EasterBunny's picture

The more debt the Fed owns, the cheaper Treasury issuance becomes. The Fed refunds all interest (less expenses) received, back to the Treasury....

Thu, 08/30/2012 - 04:37 | 2748906 Disenchanted
Disenchanted's picture




"The Fed refunds all interest (less expenses) received, back to the Treasury...."


Now that the Easter Bunny has proclaimed this, I now know it to be true.


Gawd bless you Easter Bunny.

Thu, 08/30/2012 - 08:25 | 2749096 FEDbuster
FEDbuster's picture

Actually, that is true.  No one knows exactly what the "expenses" are (no FED audit), but they do kick back most of the interest the Treasury pays them.  Which begs the question, why not have the FED buy up all the US Treasury Bonds, so that the $350 billion spent on interest would be rebated to the Treasury?   This would be as close as we will likely ever get to the Treasury taking back the power to print debt free fiat money, which according to Bill Still would help solve many of our fiscal problems.  The FED could call the program to buy up all outstanding US T-bonds "Final QE".  A nominal 1% coupon could be attached to the 1,000 year bonds, and the whole T-bond market would be finished.

We would still use the US military to back the US dollar, debt ceiling fights can still go on in Congress and the FED can still pretend to be an independent GSE.  All the FED has to do is directly buy every single bond issued by Treasury, no auctions, no dealers, no nothing.   Interest is paid, a small cut is taking by the privately owned FED and the rest of the interest is kicked back as it currently is on the FED's T-bond holdings.  Debt problem solved.

Fri, 08/31/2012 - 04:50 | 2751755 Disenchanted
Disenchanted's picture




Ok so lets accept the premise that the Fed refunds interest to the Treasury. What does Treasury then do with that 'refund'?

I'm betting it goes right back to the Fed(private banksters) in some form or another.

Wed, 08/29/2012 - 23:49 | 2748715 Al Gorerhythm
Al Gorerhythm's picture

I'd say that The Bernank won't have to raise interest rates. The market will do it for him.

Wed, 08/29/2012 - 23:56 | 2748722 I think I need ...
I think I need to buy a gun's picture

bernanke didn't specify "interest rates" in his contain inflation in 15 minutes,,,,i think he was refering to the gold price don't you think?

Wed, 08/29/2012 - 23:12 | 2748640 CompassionateFascist
CompassionateFascist's picture

@erg: 11 carrier battle-groups, & other assorted man-toys.

Thu, 08/30/2012 - 01:22 | 2748791 Bloodstock
Bloodstock's picture

Because they are psycopaths with the biggest guns.

Wed, 08/29/2012 - 22:22 | 2748578 AGuy
AGuy's picture

" When interest rates go up, more like skyrocket."

Not as long as the US gov't has control over money printing. Without Fed intervention Interest would have been much much higher already. I don't understand why anyone believes the Fed will just stop and let interest rates rise. Especially when the Fed knows it would be the death of the federal gov't. The Fed will print and print and print until the dollar is dead.

Since the rest the world is in trouble, it make be a while before the smelly stuff hits the US dollar.



Wed, 08/29/2012 - 22:54 | 2748635 CompassionateFascist
CompassionateFascist's picture

The "next trillion"? It's already here. 6 times over. Parked "off the books" at the govt mortgage agencies. Total real federal debt is c. 22 trillion right now.

Wed, 08/29/2012 - 17:54 | 2748038 silverserfer
silverserfer's picture

115 days.

Wed, 08/29/2012 - 17:28 | 2747979 LMAOLORI
LMAOLORI's picture



Your not the only one leaving

U.S. Firms Move Abroad to Cut Taxes Despite '04 Law, Companies Reincorporate Overseas, Saving Big Sums on Taxes

Thu, 08/30/2012 - 04:43 | 2748909 Disenchanted
Disenchanted's picture



If John Q. Public leaves the country(or his money leaves) it seems the tax man has no problems locating him.

Are US Corporations more equal than the common people?


Imagine that...

Wed, 08/29/2012 - 17:44 | 2748014 fijisailor
fijisailor's picture

I hate to dissappoint you but Ecuador uses the USD

Wed, 08/29/2012 - 22:20 | 2748574 withnmeans
withnmeans's picture

Of course this will be subject to change in the event of when TSHTF !!!!!

May very well be yuan or sand dollars, take your pick.

Wed, 08/29/2012 - 17:55 | 2748047 kito
kito's picture

make sure its ecuador, not chile...i hear the ghost of pinochet is chomping at the bit.............

and mr. black, im not sure there is one person alive that doesnt believe there is inflation.......the entire system is set up to support your statement is akin to saying: Anyone who thinks that air doesn't exist is a complete idiot.....

your point about inflation mr black is nonsensical, as are most of your posts............

Wed, 08/29/2012 - 21:12 | 2748459 fonzannoon
fonzannoon's picture

Kito here is a post I copied from another site from an obvious assholeface.  But it proves that there is still one putz left for Mr. Black to reach out to....or it's MDB in disguise....

"Voicing extremist positions about the Fed does make them any more truthful or palatable. We are still in the midst of the deflationary Bush Depression.
With the lowest interest rates in a century, there really is no debt problem. Any signs of inflation would actually help the country rise out of the Bush Depression, reduce unemployment, increase asset values, eliminate debt and bring back robust demand and growth. Only demand and growth will get us out of the Bush Depression, austerity will only plunge us back into its depths. "

Wed, 08/29/2012 - 21:48 | 2748520 SmallerGovNow2
SmallerGovNow2's picture

growth is an illusion.  don't hold your breath.  new normal is flatline.  get used to it...

Thu, 08/30/2012 - 04:49 | 2748913 Disenchanted
Disenchanted's picture



"get us out of the Bush Depression"


If anything it should be called the Woodrow Wilson(Col. House) Depression. There's been some high points and some lower points along the way since 1913 but that's when this long depression started.

Wed, 08/29/2012 - 22:55 | 2748637 Landrew
Landrew's picture

I am working in Chile now. Chile has over 6% unemployment along with 6.50 a gallon gasoline and both on the rise! Homes everwhere are for sale with ever increasing discounts.

Thu, 08/30/2012 - 08:32 | 2749108 FEDbuster
FEDbuster's picture

Thanks for the report.  Sometimes these "dream" destinations are not what they seem. 

Thu, 08/30/2012 - 02:02 | 2748810 terex
terex's picture


n inflation and leverage/deleverage deserve a bit more mind n thought that just teenage rhetoric  - at least when not fighting shhadows in the comment box

Wed, 08/29/2012 - 19:21 | 2748249 steve from virginia
steve from virginia's picture



@PAF: Fuck it, I'm moving to Ecuador!


National currency of Ecuador is the US dollar.



Wed, 08/29/2012 - 21:22 | 2748485 petolo
petolo's picture

whoa! The official currency of Ecuador is US dollar.

Wed, 08/29/2012 - 21:38 | 2748501 Slightly Insane
Slightly Insane's picture

Ecuador???  Just what do yo portend will be the advantage of that???   You can take $10k out per trip, but that's assuming that it's still worth something.  Que quiere'?  (What do you want?)  Quiero una vida grande pero esta una "illusion".  I forgot how to say good luck, so I will say va con dios (go with God).  Hasta luego.  (If I'm buthering spanish - forgive me, I'm on tape 6)

Wed, 08/29/2012 - 22:23 | 2748581 I am on to you
I am on to you's picture

Uma ajuda senhor:Boa sorte,meens good luck,acho ele presica este la,porque talvez as praias sao uma sonho mas a vida nao E!

Thu, 08/30/2012 - 00:29 | 2748749 delacroix
delacroix's picture

bueno suerte

Wed, 08/29/2012 - 21:39 | 2748504 Henry Hub
Henry Hub's picture

Canoa Ecuador has one of the most beautiful beaches I've ever seen. Really cheap to live there as well. The Coconut Hotel right one the beach was only $12 a night when I was there. Say hello to everyone at the Surf Shack (one of the many watering holes). The rest of the country is a shit hole for the most part.

Wed, 08/29/2012 - 23:17 | 2748672 CompassionateFascist
CompassionateFascist's picture

...Orcas lurk in the surf.

Thu, 08/30/2012 - 03:39 | 2748871 Kiwi Pete
Kiwi Pete's picture

I went to Equador for a week and ended up staying a month a few years back. What a lovely place - the rest of the country, away from the coast, is actually quite nice too. The cheapest hotel I stayed in came in at $1 per night in a little town off the beaten track.

Went on a really cool home-stay tour with a family in the jungle too. We took a 4 wheel drive to this big river, then a dugout canoe for a mile or so then went by horseback for a bit. They had a compound with different huts for sleeping, cooking etc and one hut for their guests - all set around a type of dirt courtyard. The dad had something like 9 daughters and 1 son. We ate with the family all around this long table. The tablecloth was one massive leaf from the jungle.

During the day the son took us gringos out exploring the jungle. He showed us all these medicinal plants, one of which was for maleria (chloroquin I think). The bark had that bitter taste you'll recognise if you've ever had to take it. One other tree was covered in fire ants. "Why are they called fire ants?" asked one particullarly dumb gringo giving it a good shake. Well he sure found out as a whole bunch of them fell out on top of him and bit like crazy. lol!

Wed, 08/29/2012 - 23:02 | 2748552 Michael
Michael's picture

The Republican Party style of rape, pillage, and plunder of the American people is similar to the Democrat Party style of rape, pillage, and plunder.

You're still getting fucked up the ass either way.

Wed, 08/29/2012 - 23:23 | 2748680 intric8
intric8's picture

Yep, they just funnel money to different people. Both will sell us out via unimaginable debt now, for a huge ass-reaming reckoning later.

Wed, 08/29/2012 - 23:27 | 2748686 CompassionateFascist
CompassionateFascist's picture

This is not entirely accurate. The ethnic group-entitlements and gubmint employee unionists who vote Democrat get back in handouts, salaries, pensions, and other bennies way more $$$ than they put in. Why White working class and independent middle class Whites vote Republicrat or bother to vote at all is the question. They are the ones getting sodomized by both the JewParties.   

Thu, 08/30/2012 - 01:35 | 2748795 Walt D.
Walt D.'s picture

Say hi to Julian Assange

Wed, 08/29/2012 - 17:03 | 2747906 prains
prains's picture


Wed, 08/29/2012 - 17:55 | 2748046 Xibalba
Xibalba's picture

Since debt is 'money' and 'deficits don't matta'....then I guess we're all SAVED!!!  God bless Obamney! And long live the USSA! 

Wed, 08/29/2012 - 19:26 | 2748267 Rasna
Rasna's picture




Wed, 08/29/2012 - 17:03 | 2747908 LawsofPhysics
LawsofPhysics's picture

What, no jubilee?  Well that's disappointing.

Wed, 08/29/2012 - 17:07 | 2747918 hmmtellmemore
hmmtellmemore's picture

I'm 100% convinced after a debt jubilee when we have a free-and-clear credit that spending will be reined in.

Wed, 08/29/2012 - 17:09 | 2747922 JLee2027
JLee2027's picture

Best way to get a debt jubilee is to declare it for yourself.

Wed, 08/29/2012 - 17:12 | 2747929 10mm
10mm's picture

+1000 JLee2027

From GoodFellas"Fuck em,Fuck em in the ear".

Thu, 08/30/2012 - 00:45 | 2748761 Yes_Questions
Yes_Questions's picture



Most personally responsible thing to do.

no sarc either.


Wed, 08/29/2012 - 17:10 | 2747925 LawsofPhysics
LawsofPhysics's picture

Resources will be a limiting factor on so many fronts in the near term, so it probably really won't matter.  Hell, just trying to irrigate land is starting wars now.

Wed, 08/29/2012 - 17:20 | 2747958 kill switch
kill switch's picture

Fucking BINGO!

Wed, 08/29/2012 - 21:12 | 2748458 Atomizer
Atomizer's picture



Higher Energy Costs = Lower GDP, Lower Incomes 

When Belief in the System Fades   (March 12, 2008) 

Not much more I can comment about this newly crafted crisis. The upcoming [Jack found my Hole] conference will reveal many scared Jackalopes. Folklore myths and central planning objectives will commingle into a rumble.



Wed, 08/29/2012 - 22:26 | 2748590 AGuy
AGuy's picture

"I'm 100% convinced after a debt jubilee when we have a free-and-clear credit that spending will be reined in."

Ha! That's funny! Free-and-Clear Credit" LOL! "Spending reined in." LAMAO!


Thu, 08/30/2012 - 03:39 | 2748872 Christophe2
Christophe2's picture

"after a debt jubilee" (from our bankster overlords) LOLz.

Wed, 08/29/2012 - 17:08 | 2747914 JLee2027
JLee2027's picture

Besides waiting forever for hyperinflation to destroy the debts, it is concievable to imagine that society could partially abandon the dollar and replace it by using Silver Eagles.

Wed, 08/29/2012 - 21:42 | 2748511 Slightly Insane
Slightly Insane's picture

However, Silver eagles would be worth about $1mm .... and there's just not enough of them to go around.

Wed, 08/29/2012 - 22:41 | 2748618 tmosley
tmosley's picture

At a million dollars each, there would be plenty to go around.  You just have to use smaller denominations.

Wed, 08/29/2012 - 17:09 | 2747920 LawsofPhysics
LawsofPhysics's picture

"the cost of capital"

But the central banks believe that there is no cost - ZIRP.

Even better, will the bank pay me to take out a loan when NIRP becomes policy across the board?


Wed, 08/29/2012 - 17:23 | 2747954 socalbeach
socalbeach's picture

Not only that his figures are overstated.  The following uses the latest numbers coming from the St Louis Fed FRED site, but they're not all current:

Take the widely quoted figure of $15.6t in US fed debt and subtract off $4.7t in intra-govt debt since it's not marketable and not real (if SS runs a monthly deficit the Treasury must issue new bonds to pay for it, and if SS runs a surplus, it's spent).  That leaves a net debt of about $10.9t.  The net interest expense is only $230b (FYOINT in FRED; almost year old figures however) which gives an average interest rate of only 2.1%.

But then we have to adjust debt levels for the monetary base since it is nearly free money for the US, and most of the interest paid on it is sent back to the Treasury.  Subtracting 90% of the $2.7t monetary base from total debt and subtracting $77b in 2011 Federal Reserve interest rebates from the interest expense gives net debt of $8.5t and net interest expense of $153b for an avg interest rate of only 1.8%.  And that net interest expense of $153b is only 5.8% of total Treasury receipts of $2.66t.

Wed, 08/29/2012 - 17:48 | 2748022 hannah
hannah's picture

"But then we have to adjust debt levels for the monetary base since it is nearly free money for the US...."

so if we only need to print ZIRP money, the usa can go on spending and printing forever. i love it when isiots like this use gov numbers to show how things arent really out of line...except, all the gov numbers dont include all our debt. it is all accounting bs and propaganda.

really doesnt matter because the bs accounting doesnt change reality. the shit will hit the fan...

Wed, 08/29/2012 - 18:46 | 2748175 socalbeach
socalbeach's picture

I never said the USA can spend and print forever, or that things aren't out of line. 

Actually things are much worse if my logic is correct since that means the Fed gov can get bigger and bigger over the short term.  It's not sustainable over the long term which means the crash will be that much larger.

Wed, 08/29/2012 - 18:32 | 2748136 deflator
deflator's picture

Take the widely quoted figure of $15.6t in US fed debt and subtract off $4.7t in intra-govt debt since it's not marketable and not real

    All of the debt is real, government debt is created to acquire real things now to be paid for later. Saying some debt isn't real is the same kind of accounting tricks that has got us into this mess of debt.

 All government debt is consuming resources nearly as fast as they can be produced. You would have to believe that resources will always be infinitely abundant to fall for the, "sterile debt" meme the .gov puts out.

Wed, 08/29/2012 - 18:58 | 2748164 socalbeach
socalbeach's picture

When SS benefits are paid and it is running a deficit, Treasuries are issued at that time to fund it.  No resources are consumed by SS beneficiaries until they're paid.  So the $4.7t isn't a real debt, it's a conditional liability that can be reneged on, like by raising the retirement age for example.

Wed, 08/29/2012 - 19:44 | 2748293 hannah
hannah's picture

"it's a conditional liability that can be reneged on, like by raising the retirement age for example...."


i am so sick of hearing this tired old excuse. what is the point of having a country of laws and self respect when the 'solution' is to tax, lie, and then negate benefits.....THIS IS THE EXACT EXAMPLE OF WHY THE SHIT WILL HIT THE FAN.

Wed, 08/29/2012 - 20:04 | 2748337 socalbeach
socalbeach's picture

Yes things are going to get bad, it's just a question of the path it takes and how best to prepare.  Based on the figure above of total gov't net interest expense being only 5.8% of revenues, I don't see an immediate issue of getting the fed gov't funded. 

As there's room for the gov't to become an even larger share of the economy, price inflation will imo be a serious problem however.

Wed, 08/29/2012 - 23:52 | 2748716 All Risk No Reward
All Risk No Reward's picture

"what is the point of having a country of laws and self respect"

Where is this nation of which you speak?

I'm interested...  because my nation is a cesspool of corruption.

Wed, 08/29/2012 - 21:43 | 2748513 Inspector Bird
Inspector Bird's picture

It becomes awfully real when that conditional liability is reneged on.

While SocSec is a Ponzi, and the debt isn't 'real' based on standard accounting measures, it becomes very real to those people whose expectations are dashed.


In a sense, your other comment is more correct - things are much worse than we realize.

Thu, 08/30/2012 - 04:58 | 2748920 Disenchanted
Disenchanted's picture





"While SocSec is a Ponzi, and the debt isn't 'real' based on standard accounting measures, it becomes very real to those people who've seen FICA taxes deducted from their income all their lives and are aware that their employers matched those amounts."

Wed, 08/29/2012 - 22:24 | 2748583 Henry Hub
Henry Hub's picture

***All of the debt is real...***

Come on let's get real. There is no way that ANY of this debt will be paid back. One trillion to the Chinese. HAHAHA! Even the Chinese know none of this will be paid back. ZERP interest rates mean no cost to the government. All this talk about austerity and debt reduction is a smoke screen created by the oligarchs to destroy the social safety net. Forget about the debt, party on (fuck the poor)!

Wed, 08/29/2012 - 18:35 | 2748145 WatchingIgnorance
WatchingIgnorance's picture

And now add on everything you have promised for the future. Adjust  everything back to the historical average for interest on government debt. Subtract the blow required to keep 400 hookers happy. Pull the left nut sack to the right until it just crosses the 25% threshold of the sack housing the right nut. Now, insert you left thumb into your ass . . .


Did anyone else notice when this started getting stupid?

Wed, 08/29/2012 - 19:04 | 2748215 socalbeach
socalbeach's picture

Yes, at precisely 18:35.

Wed, 08/29/2012 - 21:54 | 2748530 linrom
linrom's picture

excellent analysis. thanks. trust your own math

Wed, 08/29/2012 - 22:25 | 2748584 Lednbrass
Lednbrass's picture

You are entirely incorrect about interest expense- off by a mile. You are simply making things up.

454 billion last year, 323 billion so far this year but DoD pulled a 75 billion accounting trick.

SS is paid off from the same revenue streams as everything else, it is no different than any other Federal expense. 


Thu, 08/30/2012 - 01:16 | 2748773 socalbeach
socalbeach's picture

Here you go,

$230 billion as of last year, which I noted in my initial post.  Treasury Direct is counting interest accrued in the fictitious social security trust fund apparently.

Even if the true interest expense figure is $300 billion it still only represents 8.4% of $2.66 billion in revenue after subtracting off Federal Reserve (FR) interest rebates.

Treasury Direct shows an average interest rate of 2.1% as of July 2012 which matches the figure I came up with before subtracting off FR rebates, even though the periods aren't exactly the same.  Also, FYOINT is as of the end of fiscal year 2011 which doesn't include Operation Twist which will reduce interest rates even further.

Wed, 08/29/2012 - 22:26 | 2748587 Lednbrass
Lednbrass's picture

bleh, double post


Wed, 08/29/2012 - 17:09 | 2747921 Rainman
Rainman's picture

Good thing China built a bunch of ghost cities to house all the USSA immigrant debt slaves. I'm pretty sure that was the plan all along.

Wed, 08/29/2012 - 17:14 | 2747936 resurger
resurger's picture

conspiracy theories may become facts..

In addition the USSA Government will get paid on each immigrant by the Chinese to be squandered on blow & hookers


Wed, 08/29/2012 - 17:27 | 2747976 malikai
malikai's picture

To extend this further, just what would the Chinese want with a bunch of Prozac addicted, overweight, unskilled, useless eaters?

Wed, 08/29/2012 - 17:44 | 2748015 Rainman
Rainman's picture

dammit, u r right....conspiracy theory destroyed.

Wed, 08/29/2012 - 21:11 | 2748454 BooMushroom
BooMushroom's picture

Solent green, bitchez!

Thu, 08/30/2012 - 12:16 | 2749764 akak
akak's picture

Maybe the Chinese Communist Party will give all of them free housing and TV, just as you claim they do for the Tibetans (overlooking those who have been killed or displaced into urban tenement slums).

Wed, 08/29/2012 - 17:13 | 2747931 Xibalba
Xibalba's picture

I'm sure that Granny's $1200 a month in Social Security can fill that hole....#yahright.

Wed, 08/29/2012 - 17:50 | 2748028 hannah
hannah's picture

for some reason all i got out of the comment was 'filling granny's hole'....?

Wed, 08/29/2012 - 18:11 | 2748085 Almost Solvent
Almost Solvent's picture

That's what she said!

Wed, 08/29/2012 - 17:15 | 2747939 Landotfree
Landotfree's picture

Inflation is almost non-existent, sorry I disagree with the definitions in this article and subject matter discussed.   The credit market was expanding at a $4.7T rate in late 2007, by 2008-2009 it went negative.   Now the so called recovery is just the dead cat bounce, so now credit expansion is no longer negative but around $1.0-1.5T a year, not nearly enough to fund the expansion.   The credit needed to restore the system back to "normal" would be north of $5T.    

The system hit peak in 2007, you had a dead cat bounce from 2009-2012, the next leg will be starting before you know it.  Inflation is dead.  


Wed, 08/29/2012 - 17:18 | 2747950 LawsofPhysics
LawsofPhysics's picture

"Inflation is dead."

That must be why is has gotten cheaper to fill my tractors with diesel - < sarc off >

Stupid sheep.

Wed, 08/29/2012 - 17:32 | 2747964 Landotfree
Landotfree's picture

You don't even know what is inflating.  It's pure numbers.  If inflation is the expansion of "money" or what you use as "money", the system has not really expanded since 2007.  The system should be well north of $70T however the system has stalled at round $53T.   Whether your local ding-dong cost more to consume is immaterial.

The system isn't even generating enough new credit to fund the prior, let alone some type of huge inflation expansion.   This is fact, published numbers are in the Z1 report produced quarterly. 

New credit is gas for the machine (system), new gas is coming in at a trickle... ie inflation is basically dead and will be for the rest of my life, which will be the biggest collaps since the dark ages.  

My rough numbers, the system is missing about $17-20T if it were functioning "normally", peak was hit in 2007 in dollar terms, in percentage back in the 80s.   The fat lady has sung yet but she is warming up on the inflation dead theme.   Please let me know when Benny starts dropping dollar from the sky from helicopter, biggest lie there ever was.  



Wed, 08/29/2012 - 17:52 | 2748000 jarboejl
jarboejl's picture

Yup.  TCMDO expanded at an exponential rate since ~1970.  It almost went full vertical, then the last recession happened.  Even with the government levering-up, it's still sideways since 2008.  It is literally drawing a new chart, and that chart will slope negative next.  Deflation bitchez.



Wed, 08/29/2012 - 21:20 | 2748480 BooMushroom
BooMushroom's picture

Wow, you ain't kidding! That TCMDO graph is a math-book perfect example of an exponential curve, up until Lehman.

Wed, 08/29/2012 - 17:37 | 2748002 malikai
malikai's picture

Color me stupid, but I think M2 disagrees with your "no inflation" statement.

Wed, 08/29/2012 - 17:49 | 2748011 Landotfree
Landotfree's picture

M2 is nothing to the system, the US system is $53T and the worldwide global system is around $200T.  M2 is only a small fraction of the system.  Matter of fact, have everyone go to the bank and withdraw their money and you will see how little M2 is actually there.   

Look at the Z1 report.  M2 shows really not much as far as the system, only a small part of the system.

The total US system is $53T which is part of the worldwide system of around $200T.  Peak in dollar terms was in 2007, peak in percentage terms as far as expansion the 80s of the system.  Sorry no way humans can have unlimited power to expand the system.  Right now the system is expanding at around 2%, which sounds bad but compared to negative ain't so bad... dead cat bounce.   After all that work, all Benny could come up with was expansion of 2%... wow... and that is only on a quarterly bases and not counting the missing $17-20T.   

There is nothing that Benny can do, there are no helicopters.  

Wed, 08/29/2012 - 17:53 | 2748037 hannah
hannah's picture

landotfree you are a prick....people define inflation as the rise in price of the goods they need to live.period. if you want to make some arcane case that price inflation is different than monetary inflation...go for it but you are an idiot to start a discussion knowing how other people define inflation as price.

you are either stupid or a troll...

Wed, 08/29/2012 - 18:06 | 2748061 Landotfree
Landotfree's picture

I think you need to go reread the article.  The guy is trying to make a conneciton with government debt and inflation.  Matter of fact, I don't even see any mention of the price of your local ding-dongs.   To be honest those are subjective.   It is clear from the article the guy has no idea what he is talking about yet he is calling people "idiots".   You call me stupid because someone else made a comment to me that makes no sense in the context of my comment on the article.  I would say the prick is you.   

Inflation is dead and has been since 2007.  Price inflation is subject to the will of the person willing to sell or not sell, subject to his ability to perform.  Inflation is pure counting. 

Inflation is dead which will eventually lead to a negative inflation of humans on the planet, unless humans somehow obtain unlimited power to beat the equaation.  Good luck, I'm pulling for ya.



Wed, 08/29/2012 - 18:07 | 2748080 jarboejl
jarboejl's picture

Dude.  They're not going to do the research.  Not sure why you're fighting this one.

Wed, 08/29/2012 - 18:12 | 2748083 Landotfree
Landotfree's picture

True.  They'll keep on walking telling everyone that Benny is going to drop million dollar bills from helicopters.  :)

What is crazy about the dead cat bounce is how little new credit has been created.   I was expecting a little more from Benny, I was expecting truck loads of $$$.

Wed, 08/29/2012 - 18:31 | 2748134 malikai
malikai's picture

I won't call you names. I will in fact research your thesis on my own. And for the record, I do not define inflation by prices. I define inflation at the source - money creation in absense of productivity growth. And I think we all know where "productivity growth" is(isn't).

Wed, 08/29/2012 - 22:05 | 2748549 AlaricBalth
AlaricBalth's picture

“That’s a great deal to make one word mean,” Alice said in a thoughtful tone. “When I make a word do a lot of work like that,” said Humpty Dumpty, “I always pay it extra.”
—Lewis Carroll (1872)
Through the Looking Glass

Here is a good paper from the Cleveland Fed as to how the word "inflation" has evolved from a purely monetary construct to the the more generally accepted view that "inflation" is rising prices.

"Without being tied to the money supply, any price increase seems to have an equal claim to the word inflation. In- deed, today we regularly read reports of a seemingly endless variety of “infla- tions.” When the word is used as a description of the price level, an anti- inflation policy can easily be character- ized as being against any price increase, including higher wages! This is simply not the case. An anti-inflation strategy is concerned with a particular type of price increase—a rise in the general price level stemming from excessive money creation. When viewed in this light— the light provided by the word’s original meaning—a zero-inflation objective for the central bank becomes a much more sensible goal."

Wed, 08/29/2012 - 19:16 | 2748239 itstippy
itstippy's picture

The QE dollars are parked right back at the Fed in the form of $1.5T in excess resverves.  It "should" be loaned out at a ratio of 10:1 (minimum), pumping $15T into the economy.  But it just sits. 

There's no transfer mechanism to get the QE dollars into the economy.  Benny's QE is a huge disappointment to him. Cash drops from hellicopters would have worked better. 

Wed, 08/29/2012 - 20:42 | 2748392 cranky-old-geezer
cranky-old-geezer's picture



QE never has been about helping the economy recover. 

QE is about helping Wall Street recover, and yes Wall Street has recovered wonderfully since 2008.

The economy never did matter and never will matter.  As long as stocks and bonds are rising, and banks can sell worthless paper to the Fed at full original value, and the government can keep borrowing at 1%, nothing else matters, the economy can crash, unemployment can be 40%, 100 million people can be on food stamps, it doesn't matter.

Say what?  It's not sustainable?

Yes of course it's sustainable.  Fed can print unlimited amounts of currency to keep Wall Street and the government going.  Growth of Fed's balance sheet is unlimited, growth of federal debt is unlimited.

Plus we have people like "landotfree" saying all that printing isn't producing one bit of inflation.

So what's to worry about?  Sounds like there's nothing to worry about.  Go ahead, keep Wall Street and the government rolling in money, who cares about the economy?   Screw the economy. 

Wed, 08/29/2012 - 22:49 | 2748626 withnmeans
withnmeans's picture

Sorry but it is not sustainable, yes we can print, but printing to infinity will lead to disaster. 

I'm not going to bring up the past histories of other countries that have tried, but just like gold, if somebody figured out alchemy and could make gold for next to nothing, then eventually it would be worth next to nothing.

The rarity of Gold would be gone, much like the dollar "if it was printed to infinity".

Put it in your wheelbarrow!

Wed, 08/29/2012 - 22:54 | 2748634 New_Meat
New_Meat's picture


"QE is about helping Wall Street recover, and yes Wall Street has recovered wonderfully since 2008."

And that is because the whole mess was in fact BK, with entire chunks of their balance sheets (including GE Capital) vanished into hyperspace, never to return.  It is incremental theft 3.00% at a time, to restore solvency.

Does the whole structure come down before the replenishment is effective?  I'm going with the under.

- Ned

Wed, 08/29/2012 - 20:05 | 2748338 LawsofPhysics
LawsofPhysics's picture

yes indeed.  Moreover, the "money" shit is irrelevant.  You don't need money at all to get inflation, you just need to have no one willing to sell.  Finite supply lines, bitchez.  What you are paying with is fucking irrelevant if no one want to part with what you are trying to purchase.

Wed, 08/29/2012 - 18:58 | 2748194 LudwigVon
LudwigVon's picture

"landotfree you are a prick...."

You are right that "we should know how people mean," but the cause is noble, and hence need no insult applied.

"people define inflation as the rise in price of the goods they need to live.period."

Let's work on that.

"you are either stupid or a troll..."

I vote neither.

Wed, 08/29/2012 - 21:15 | 2748467 Bunga Bunga
Bunga Bunga's picture

M2 is only a subset of total money supply.

Wed, 08/29/2012 - 17:45 | 2748017 Kayman
Kayman's picture

Deflation in paper assets, inflation in necessities. Look around you.

Wed, 08/29/2012 - 21:28 | 2748491 honestann
honestann's picture

See, that's your problem... and forced into being the problem of most people... that you think "new credit is gas for the machine".

In a healthy structure and economy, savings is fuel.  And don't pretend that there is no difference between fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-note toilet-paper and savings of real, physical, valuable assets (which can then be exchanged for real, physical, valuable productive assets).

#1:  earn/produce == create physical goods/wealth
#2:  save == accumulate physical goods/wealth
#3:  operate productive physical goods

NOWHERE in an honest, health economy should the term "credit" exist.  Any new production should come from operation of productive physical goods, which were earned by productive activity.  The main reason to "save" is to accumulate sufficient goods/wealth to be sufficient to operate the kind of productive operation you choose.

The whole notion of "credit" is utterly unnecessary, and at worst should be a tiny little aspect somewhere on the far reaches of any economy.

Thu, 08/30/2012 - 00:27 | 2748746 fourchan
fourchan's picture

inflation is devaluation by dilution.


or silently stealing what you have traded your life for all these years.

Wed, 08/29/2012 - 17:32 | 2747989 ElvisDog
ElvisDog's picture

Do you have college-age kids? Do you have money taken out of your paycheck for health insurance? What is the rate of increase of those two line items the past couple of years? (my health insurance premiums went up 9.5% last year).

Wed, 08/29/2012 - 17:37 | 2747995 Landotfree
Landotfree's picture

Immaterial.   The system has been in a fluc of consuming itself for 4 years now.   The system is not expanding.  Inflation is the increase of the money supply, the money supply is calculated by Z1 report, sorry inflation is dead and within time will cause the inflation of humans on this planet to go negative.  

Go buy a house, you can get them at a 60% decrease vs. 5 years ago where I am from.   Picking individual items price is not inflation.   Inflation is the increase of the money supply.  Inflation is dead and will be for the rest of your life, unless you plan on living a really long time.  Welcome to the coming New Dark Age, cause by humans use of an equation.  

Wed, 08/29/2012 - 18:48 | 2748179 deflator
deflator's picture

 Governments are still expanding(and so is government debt) -- it is the private sector that is implode mode.

Wed, 08/29/2012 - 19:56 | 2748308 CrashisOptimistic
CrashisOptimistic's picture

Deflation is the order of the day, and decade and century upcoming.  

You never mentioned why, because I presume you don't realize economics is gobbledygook around physics.

Oil scarcity is going to kill a lot of people and it won't matter one iota whether or not you print money or expand credit or contract credit.  BTUs predate money by millions of years.  The price of a barrel of oil has not changed for 80 million years.  It is 5.6 million BTUs.  You either spend fewer BTUs to get more BTUs out of the ground, or you do not.  

As soon as you start spending more BTUs to get them out than you spent yesterday, or last year or last decade -- when that curve inflects -- it's all downhill from there for society and all of civilization.  

Money won't have any effect on this.  It's a geology and physics problem.  It doesn't involve imaginary substances like money.

Wed, 08/29/2012 - 20:11 | 2748347 LawsofPhysics
LawsofPhysics's picture

Define "money".  Better still, think about what happens when no one wants to sell.  When there is no longer any rule of law or contracts and fraud is the status quo, possession is the fucking law, bitchez.

Wed, 08/29/2012 - 21:47 | 2748517 Dr. No
Dr. No's picture

I sometimes wondered how the people could fight the money printing.  The only way I came up with would to be refuse to perform government services for money.  Basically people would have to agree to not perform government work.  SInce the governement levies taxes, we have to pay or go to jail (no choice),  but (for now at least), we have the liberty to not perform government work.  If the government could not spend their money for services, that would collapse the dollar.  They would be forced to use a new money acceptable to the service providers.

Wed, 08/29/2012 - 23:10 | 2748662 ShrNfr
ShrNfr's picture

Sadly it would not stand up to a court challenge. "Legal Tender for all Debts, Public and Private" and all you know. You take Bogus Benny Bux or you get nothing. No other alternatives allowed. Wanna work Pro Bono??

You could, of course, barter in a time bank provided you wished to engage only with those people. But the world is a tad larger these days I am afraid.

Wed, 08/29/2012 - 23:10 | 2748663 ShrNfr
ShrNfr's picture

Sadly it would not stand up to a court challenge. "Legal Tender for all Debts, Public and Private" and all you know. You take Bogus Benny Bux or you get nothing. No other alternatives allowed. Wanna work Pro Bono??

You could, of course, barter in a time bank provided you wished to engage only with those people. But the world is a tad larger these days I am afraid.

Wed, 08/29/2012 - 21:23 | 2748488 fonzannoon
fonzannoon's picture

holy shit has anyone heard of biflation? Where is the biflation guy.....

Thu, 08/30/2012 - 00:30 | 2748750 fourchan
fourchan's picture

is that where everything you own is worth less, and everything you need costs more?

Thu, 08/30/2012 - 01:03 | 2748774 LMAOLORI
Wed, 08/29/2012 - 22:45 | 2748622 malek
malek's picture

So you are in summary stating that the deflating housing bubble gives the government the ability to print $1 trillion new debt a year without any negative side effects.
(And yes, taking on new debt that will never be paid back is equal to printing money.)

How long you think that can continue?
Do you believe the government will cut the deficit when the housing bubble has been completely deflated?

Wed, 08/29/2012 - 18:05 | 2748073 css1971
css1971's picture

You do realise they have defined inflation as "the price increase of that basket of goods which doesn't change in price or which declines in price." run through a geometric filter to remove reduce the largest increases.


Wed, 08/29/2012 - 22:58 | 2748642 AGuy
AGuy's picture

You do realise they have defined inflation as...

By any chance, is the character "Sheldon" from Big Bang Theory based upon your real life? just Ask'n.


Wed, 08/29/2012 - 18:50 | 2748181 LudwigVon
LudwigVon's picture

Your right. The "system," if by which you mean the private credit creation market, has contracted significantly, and when added to growth in traditional bank liabilities we are still deflating at an aggregated 100 billion a mo?

These idiots keep calling price inflation inflation. Good job. Don't give up on semantics, you might become a liberal. I wish Tyler would sharpen it up on this point as well.

But your comment does look at a smaller time period than Black, he meant we have inflated since 1913, just as gold has been on a 78+ year bull run! And yes, price inflation played catch-up sporadically and unevenly ... to the supply of currency and credit.

Wed, 08/29/2012 - 17:15 | 2747940 prains
prains's picture



no mention of moving to cheapenzuela or wherever it is you live now, and help herd alpaca's on the orgy commune what's up

Wed, 08/29/2012 - 17:16 | 2747944 Random_Robert
Random_Robert's picture

Looks like the debt ceiling will be breached before Election day after all...


Ruh Roh Raggy.

Wed, 08/29/2012 - 17:18 | 2747951 q99x2
q99x2's picture

Let us see. The world is in the hands of conterfeiting crimminals and we are supposed to invest money. Bullshit you don't invest money at a time like this you pay bribes. Or arrest them. Game over.

Wed, 08/29/2012 - 17:18 | 2747952 Freddie
Freddie's picture

At an average interest rate of 2.130%, Uncle Sam will shuffle $340 billion out the door just in interest payments this year...

It is over.  Hope & Change was the tipping point.

Wed, 08/29/2012 - 22:59 | 2748643 Robert Paulson
Robert Paulson's picture

A single, moronic pitch by the teleprompter was not the death knell. 

The hyper-flawed underpinning monetary philosophy was.

Wed, 08/29/2012 - 17:19 | 2747953 wandstrasse
wandstrasse's picture

yes, it is a ponzi scheme which bases on a compound growth function... however:

1 - it is coerced on everybody by law

2 - it is worldwide

3 - most oil is billed in USD and oil is still crucial at the very beginning of the value chain, also worldwide


as long as 1 - 3 are true this counterfeit fiat BS has purchasing power and its issuers are TPTB.

Wed, 08/29/2012 - 17:24 | 2747970 Element
Element's picture

I'm Barry Obomba, and I approve of this message.

Wed, 08/29/2012 - 17:33 | 2747992 Brazillionaire
Brazillionaire's picture

Here is what Mr. and Mrs. Average Joe will soon find out:

If you have to have it, it's going to cost more (electricity, food, gasoline).

If you don't have to have it, it's going to cost less (latest fashion, premium cable channels, eating out).

The adjustments for many people over the next few years will be coming to realize that some things you think you have to have, you don't in fact need (liberal arts education, latest iPhone).

And that some things you think you don't need, you really do have to have (gold, silver, useful/marketable skillset).

Wed, 08/29/2012 - 17:34 | 2747996 goldfreak
goldfreak's picture

we all know it's over and yet the farce just keeps on going

Wed, 08/29/2012 - 17:39 | 2748001 Racer
Racer's picture

And they cause inflation to tax you on the 'capital gain'!

Allowances do not keep pace with the soaring inflation of course, so it is in effect a tax on the inflation they caused in the first place... and that is on top of all the other indirect and direct taxes..


oh and if you happen to die and leave it before they can tax you on the capital 'gain' there is always that other after you have died tax too... so you can't even get away with being not taxed even in your grave!

Wed, 08/29/2012 - 21:51 | 2748524 Dr. No
Dr. No's picture

Id rather be taxed on capital gain than on earned income.

Wed, 08/29/2012 - 17:48 | 2748021 cabtrom
cabtrom's picture

Is not most of the inflation being offset by technological advancements in productivity? I mean between machinery and bio engineering 1 farmer can now literally feed that shithole that is new York regardless of how much diesel costs. Now unless your only concern is the cost of a movie ticket so those assholes in hollywood can buy a new exotic car then who realy gives a shit. Let it rain dollar bills! Fact is niether the roman empire or the Weimar republic could produce food to the likes of what Iowa can. We live in the only country in the world were obiesity is a symptom of poverty. So take a couple of Phucketall and send me and email when I should give a shit Which by the way a letter used to take a fucking week to get, now it takes 30 seconds. Where IS all that money that was saved to mail a goddomn letter?? Oh yea that pos who invented the Internet. Thanks! Wheeee!

Wed, 08/29/2012 - 17:58 | 2748051 hannah
hannah's picture

to mail a letter takes a pencil, a piece of paper,an envelope and a 10cent stamp. to send an email takes a computer/phone and an internet how is technology cheaper for the average person....? granted the 'delivery' of the letter by the post office now costs the us citizen $5billion a month in bailouts so maybe technology is cheaper.

Thu, 08/30/2012 - 00:53 | 2748768 delacroix
delacroix's picture

that's a 49 cent stamp sweetie

Wed, 08/29/2012 - 18:00 | 2748054 Racer
Racer's picture

So if one farmer can feed so many compared to before why is it that the majority of the money the poor spend is on food that is inflating much faster than the 'official' rate?


Wed, 08/29/2012 - 21:45 | 2748515 BooMushroom
BooMushroom's picture

Cause they won't cook?

Thu, 08/30/2012 - 00:35 | 2748755 fourchan
fourchan's picture

thats awsome, and true lol!!!

Wed, 08/29/2012 - 18:22 | 2748113 defencev
defencev's picture

You are absolutely correct. Let me repeat what I have said before: the real crisis of capitalism is overproduction. And that is a true and objective reason for deflation. The major reason for overproduction is a technological progress plus the capitalist system of production. The major question for economists or whoever may be interested in how to redistribute the excessive goods and services. The two existing methods: just give away to needy (Marxist approach) and QE (central bankers) do not work. The first one leads to removal the stimulus for any kind of productive activity (generally known as socialism). And second approach leads to inflation of selective asset prices and mostly effect the needest part of population (as was noticed by Marc Faber) and various revolutions (like Arab spring) which are not progressive at all. It benefits big banks, corporations and speculators.

So, the topic of hyperinflation so popular among idiots like Simon Black is completely out of picture...

Wed, 08/29/2012 - 19:14 | 2748240 hannah
hannah's picture

so how about a third option...all the central bankers that illegally cross the border from mexico everyday and take the banker jobs that americans dont want......?! i worked for GS before an illegal alien central banker took my job because he would take only $100mil and i demanded $200mil and the blood of 3 virgins and all the first borne children of out heloc customers.

now i am unemployed and can only find work at walmart...

Wed, 08/29/2012 - 22:49 | 2748625 malek
malek's picture

 the real crisis of capitalism is overproduction

No, no no! The real crisis is underconsumption!!! These lazy consumers have to ratch it up a bit, especially outside the USA!

signed: Paul Krugman

Thu, 08/30/2012 - 00:37 | 2748756 fourchan
fourchan's picture

over production of fiat money at interest held onto by the banks.

Do NOT follow this link or you will be banned from the site!