DBG8492@dbg8492
I see a lot of people out there - mostly influencers - who have taken to repeating Reagan's famous quip "The Debt Doesn't Matter" as if it were some mantra or wizard's spell. Less said, but just as important are things like "We owe it to ourselves," or the question "Who is going to collect it?"
While the latter two have a kernel of truth but miss the larger picture, the first one is patently false. The debt does matter. Why? Because the US dollar is backed by debt. Nearly every single dollar that exists is a share of that debt, and every bit of debt added that's not offset by a corresponding cancellation devalues every other dollar in the system.
This is no different than clipping coins or printing paper money. It's inflation.
In 1990, the US national debt was a little over $3 trillion. Today, it's over $37 trillion. That's an increase of about 1025% - most of which occurred after 2020, which is why everything costs so much more now than it did in 2019 and why, simultaneously, the quantity and quality of products and materials have eroded tremendously as producers scramble to find a way to keep their prices down.
Before 2020, it was relatively easy to keep paychecks rising at a level comparable to real inflation. And with the manipulated numbers published to track it, it was easy to conceal the discrepancy. However, there is no way in hell to hide the rise from $12 trillion in 2009 to $27 trillion in 2020. Nine years just isn't enough runway to raise everyone's pay enough to keep up with price increases.
And we don't "owe it to ourselves." We sell bonds that promise to pay the face value plus interest over a specified term, and that debt is owed to those who bought the bonds - some are individuals - most of them US citizens - while others are banks and countries around the world.
Yes, we can just create more debt to pay off the old, but you're still stuck with the problem that doing so requires paying the interest with new debt as well. But this just further devalues the currency. As for collections - no one is going to collect. But at some point, they will simply stop buying your new bonds. Then they will stop taking dollars in payment for the old ones.
When that happens, we will officially default, and the debt will be erased. This will result in the greatest deflationary spiral ever seen as trillions of dollars just disappear - not because they no longer exist on paper or in some computer, but because they're now worthless. If you have a dollar that no one wants, you don't have anything. It may as well no longer exist.
Yes, there are a lot of countries out there with economies dependent on the dollar that cannot afford for it to collapse. And they will do their best to prop it up, but in the end, they will either have to give in or be pulled down the drain with us.
Can this be stopped? Maybe - but definitely not in the current political climate.
