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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ParkAveFlasher's picture

Fuck it, I'm moving to Ecuador!

I think I need to buy a gun's picture

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

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.


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.

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.

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


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.

Ar-Pharazôn's picture

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

strannick's picture

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


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.

FEDbuster's picture

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

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


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....

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.

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.

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.

Al Gorerhythm's picture

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

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?

CompassionateFascist's picture

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

Bloodstock's picture

Because they are psycopaths with the biggest guns.

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.



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.

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

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...

fijisailor's picture

I hate to dissappoint you but Ecuador uses the USD

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.

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............

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. "

SmallerGovNow2's picture

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

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.

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.

FEDbuster's picture

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

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

steve from virginia's picture



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


National currency of Ecuador is the US dollar.



petolo's picture

whoa! The official currency of Ecuador is US dollar.

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)

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!

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.

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!

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.

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.

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.   

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!