one piece of news that did come out

during the week that should be helping

investors to figure out this problem is

the announcement from the Social

Security Administration that it is going

to be raising the payments next year

these are the colas by 8.7 percent that


is the biggest increase in 40 years

that’s going to cost the government over

100 billion dollars so that adds over

100 billion dollars each year to the

budget deficits which adds to the

national debt how could this not be

inflationary and of course not only are

these larger deficits inflationary which

ultimately will be financed by the FED

but what do the people who receive the

100 billion dollars do with the money

when they get it they go out and spend

it so in other words prices are going up

and the government responds by printing

more money and sending it to people so

they have more money to pay those higher

prices is which means the prices go even

higher people are supposed to cut back

when prices go up but if the government

gives everybody more money to pay the

higher prices then you’re just fueling

the inflation and it’s like a dog

chasing its tail you’re never going to

catch it which is why the government’s

never going to bring inflation down and

that’s why gold needs to be going up

that’s why the dollar needs to be going

down 30-year treasury bond yields are

still a hair below four percent now

that’s the only maturity that’s still

below four percent but when inflation is

over eight percent the only reason that

30-year government bonds yield under

four percent is because the markets

still expect the FED to win its fight

against inflation once the markets

realize the FED is going to concede and

inflation is going to win then bonds are

going to fall through the floor and

Gold’s gonna go through the roof and of

course the dollar is also going to tank

along with bonds and if the Federal

Reserve tries to stop bond prices from

collapsing by printing even even more

dollars that will only make the dollar

weaker and gold stronger but again it’s

not just Social Security outlays that

are going up what about interest

payments on the national debt the

government is having to pay four percent

now to borrow money instead of a quarter

of one percent you’re talking about a

16-fold increase in the cost of

refinancing debt as it matures that has

to roll over and again what are people

who own these bonds what are they going

to do with that extra income that

they’re getting on their bonds well

they’re going to spend that too right

more money going into the economy

bidding up prices but also what about

the enormous losses now that the Federal

Reserve is suffering on its portfolio of

bonds particularly some of these

mortgage-backed Securities if the

Federal Reserve is unloading those

they’re doing it at a loss plus the

short-term interest rates that the

Federal Reserve is paying the banks are

now much higher than what is earning on

its portfolio of longer term

low-yielding U.S treasuries so the

Federal Reserve is now operating at a

loss it used to be operating at a profit

and what did it do with that profit well

it remitted it to the United States

Treasury and so that was added revenue

for the treasury which helped to reduce

the budget deficits but now instead of

sending the treasury a check the Federal

Reserve is sending the treasury a bill

the treasury has to reimburse the

Federal Reserve for these losses and

that means even bigger deficits and that

means even more inflation and in fact

not only is social security having to

spend more money because of these colas

going up but the labor force

participation rate has fallen so much

that there aren’t nearly enough people

paying into Social Security remember in

order for the government to collect

Social Security Revenue people have to

be in the labor force and working okay

the government needs young people

working and paying into the system so we

can keep this Ponzi scheme going the

problem is those young people aren’t

there working and in fact older people

are retiring earlier and so we have

smaller labor force participation rate

and so the gap between what the

government collects in Social Security

taxes and what it’s spending in benefits

is rising especially now with this new

increase is 8.7 percent increase because

wages aren’t going up anywhere near 8.7

percent that means the collections of

Social Security taxes are not Rising

nearly as much as what the government is

paying out in benefits so all of this is

adding to the inflationary spiral in

fact look what’s going on in the UK a

lot of people are worried about fiscal

Proficiency in the UK because the

government recently announced tax cuts

in the face of rising inflation you you

had a central bank that said hey we’re

going to fight inflation we’re raising

interest rates that’s a contractionary

monetary policy but then you had a newly

elected government saying hey we’re

going to have expansionary fiscal policy

we’re going to cut taxes we’re going to

increase budget deficits even as we’re

pretending we want to fight inflation

well the markets was smart enough to

realize that that was inflationary and

the British pound tank it hit an

all-time record low and in fact finally

today officially the British government

has done a complete U-turn they’ve

pivoted on the tax cuts but why were the

markets concerned well because they were

concerned about debts going up in Great

Britain well what is the British debt to

GDP it’s 85 percent now that is a big

number I mean it is a number that should

cause concern anything really above 50

percent of GDP is too big a number so

because these tax cuts threatened to

send British debt to GDP even higher

investors rightly dump the pound but

what did they do they bought dollars

they sold pounds for dollars but they

were selling pounds because Britain has

got a debt problem the irony is they

were buying dollars despite the fact

that the United States has it even

bigger debt problem our debt to GDP in

the United States is 125 but it’s

actually higher than 125 percent because

that’s just the federal debt if you add

the local which is Municipal debt and

state debt to that now you’re at a

hundred and forty percent of GDP we’re

in a much bigger fiscal mess than Great

Britain so selling pounds and buying

dollars because you’re worried that

Britain has too much debt is jumping

from the frying pan into the fire but

why are people doing that because

America’s debt doesn’t matter because

America has Reserve currency America is

the currency that you buy when you’re

worried about something it doesn’t

matter if we have a bigger problem than

the problem that you’re worried about

you still buy it well in the UK pretty

much all the debt is on a national level

so we have so many levels of debt but

all of these governments are trying to

get blood from the same turnips because

Americans are broke we have no savings

so can we possibly repay this debt of

course not repaying the debt is

impossible so what’s going to happen

we’re going to default there’s only two

possible ways we can default the honest

way and the dishonest way but either is

a disaster if you own U.S treasuries the

oddest way is just to admit that we

can’t pay and we default we destruction

the debt and we tell our creditors we’re

not going to get your money but I don’t

think politicians have the Integrity to

do that they’re going to take the

cowards way out they’re going to print

they’re going to inflate the debt away

that’s the only way out of this problem

is to monetize that debt and repudiate

it through inflation which is why it’s

crazy for anybody to believe that the

FED is going to succeed in reducing

inflation back down to two percent it

can’t succeed in fact the only hope it

has of getting out of this debt is to

inflate it away and they’re not going to

inflate it away two percent a year

they’re going to have to have a much

higher rate of inflation to have any

hope of bringing this debt down to a

manageable level in Real terms

especially when interest rates go up

because the only reason we’ve been able

to afford the debt now is because

interest rates were so low


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