WHY IS IT SO CRITICALLY IMPORTANT TO GET CONTROL OF OUR RISING AND CLIMBING $35 TRILLION DOLLAR NATIONAL DEBT???
BECAUSE IF WE DON’T do something soon to gain control of Our Rising National Debt currently at $34.85 Trillion Dollars (with $1.20 Trillion more already being OVER-spent this year alone compared to what we’ve collected in taxes (and keep in mind, this figure reflects only the first 6 months of this year!!!)—we may very well eventually lose our status—that is, The U.S. Dollar could potentially be “de-throned” as The World’s Reserve Currency with China (and its Chinese Yuan) being “crowned” The New King Currency!!
That means for example—for starters–OPEC OIL EXPORTS may very well be no longer negotiated and traded in dollars but in The Chinese Yuan—this is especially likely since China also happens to be the world’s largest BY FAR importer of oil!!!—their currency already flooding the market from their extensive purchases of petroleum.
On top of petroleum, China is also the leading exporter of many consumer products and green energy items such as Solar Panels AND EVs (Electric Vehicles)!!!
Now why is it so important to be The World’s Reserve Currency?? I mean—like what’s the big deal?? So what?? BECAUSE if you’re The World’s Reserve Currency it automatically follows Your Currency will be in Higher Demand and WORTH MORE!!!
THAT IS–Your Currency will trade and get more in return COMPARED TO OTHER CURRENCIES around the world. This fact alone (higher demand for one’s national currency) adds to the Stability of that Currency BUT HAVING A NATIONAL DEBT CLIMBNG AND GETTING OUT-OF-CONTROL all experts agree HAS THE__O-P-P-O-S-I-T-E__E-F-F-E-C-T!!!
For example, if you recall, because of Our Debt Ceiling Crisis in Congress last year, Moody’s (as of November 10, 2023) downgraded The United States from its triple-A (AAA) credit rating to a rating of Aaa—the first time such has EVER happened to US!!!
So what do we do??
Well, the obvious solution to is spend only what we take in through (tax) revenue!!!
Sounds pretty simple, doesn’t it?? But in reality, things aren’t that simple especially when it comes to a balanced budget. Remember the words PAY-GO?? That was Congress’s self-imposed (fiscal) discipline for a “New York” minute back (in 1990) in the days of President George H. W. Bush. And under the Clinton Administration, we ACTUALLY had a balanced budget!!
But sadly after that, our National Debt has skyrocketed to $34.8 Trillion. 8.4 Trillion in 4 years alone, due to Trump’s corporate tax cuts.
Honestly though, with the modern complexities of society, nuclear weapons–with the always present threat of nuclear war, disease control (Covid being the obvious example)–the billions and trillions it caused governments around the world to spend to counteract its deadly effects in order to protect its populations and from damage to its economies), space exploration, satellite systems, defense budget costs. One could go on and on. There’s simply so much to do (to spend) to adequately protect society now-a-these days–It’s not like back in the time of the American Revolution when all we had to do was provide cannon balls for Fort Ticonderoga and the USS Constitution, Lol!!
And to complicate matters, there’s a political side to take into account—representatives in Congress trying to pass legislation for their constituents including corporate and business communities in their districts, done, in part, to get re-elected.
Certainly, we have to do our best to spend only what we take In—in taxes. And as alluded above, in reality, for one reason or another taking into consideration all the things we know that need to be done plus the unexpected tragedies and emergencies that periodically seem to always come up in our evolving modern civilization, a balanced budget has proven to be difficult (with these UNFORESEEN costs and EXTRA spending).
NOW LET’S GET TO THE SOLUTIONS:
THE STRATEGY to keep Our Dollar as the World’s Reserve Currency on top of trying to achieve a yearly balanced budget, IS TO keep Our Dollar in demand and in use GLOBALLY by as much international trade as possible.
Now if Trump gets back into office, he has already indicated, he wants to levy an across-the-board trade tariff of 10 percent for ALL NATIONS and 60 percent on all Chinese goods. This 10 percent tariff would include Canada and all our other trading partners!! This would cause friction and could and more than likely WOULD cause tariffs being imposed on our corporations and businesses here exporting to other nations.
Furthermore, Experts all agree if we imposed tariffs on foreign corporations importing their goods here, these extra costs would simply be “passed on” to the consumer purchasing such foreign goods. Economists estimate this would cost the average consumer an additional $1,700 to over $2,000 per year for the average family.
Just keep in mind, imported goods being “tariffed” here would in many cases also cause similar goods being produced here to also go up where domestic corporations here would have to pay more for foreign imported “tariffed” raw materials and in many cases, domestic businesses not buying foreign products for resale to the consuming public nor having to pay more for imported raw materials needed to manufacture and assemble domestic products here would ALSO charge extra for their (purely) domestically-produced goods (simply to take advantage of the “situation”.) Again, experts predict the American family would spend $1,700 to over $2,000 more per annum.
Now there’s one other important aspect to Our Rising $34.8 Trillion Dollar National Debt and that’s our annual Debt servicing costs in the form of (semi-) annual yields we pay out on all outstanding Treasury bonds. Right now, it costs us just as much as our Annual yearly Defense Budget ($800 Billion) to cover these yields we pay to domestic and foreign investors.
The problem is that yield rates are no longer minimal as they were before The Pandemic and as a result because of the size of our debt previously at $22 Trillion before the Pandemic began and now at $34.8 Trillion and because Treasury yield rates instead being at 0.89 percent in 2020, 2.14 percent in 2019 and 2.91 percent in 2018 for the 10-year Treasury bond are now ranging from 5.365 percent (for a one month T-bill) to 4.277 percent for the 10 year Treasury and 4.475 percent for a 30 year bond, and as a result, Our Debt Servicing Costs are getting out-of-hand!!
Though Treasury yield rates are technically independent of what The Fed sets their interest rates at and which have climbed from 0.25 percent on March 17, 2022 to what it is now at 5.50 percent (due to its (The Fed’s) efforts to control Inflation brought on by the Pandemic—Treasury yield rates have climbed as well as mentioned above—This also being from astoundingly strong Wall Street market activity over the last couple of years as we (and our economy) began our (its) recovery from The Pandemic. Now why is that??
BECAUSE–The connection being for the Treasury to sell its bonds, they must offer a high enough yield rate on their bond offerings to compete with what one could make in the stock market. And because of this—the higher yields the Treasury must offer to sell their bonds and because of our growing national Debt going from a pre-Pandemic $22 Trillion with Treasury yields being paid in the 2 percent range to what our debt is presently at ($34.8 Trillion) with yields now in the 5 percent range, our debt servicing costs have mushroomed to $800 Billion per year (again–matching Our Annual Defense Budget!!!)
Now one thing we could do especially if Trump were to be elected, instead of imposing tariffs as he (Trump) wants to do which as discussed would be highly inflationary as experts estimate it would add an additional $1,700-$2,000 to the average family’s annual budget for the same goods and services—what we could do–would be to offer foreign corporations importing their goods here and/or raw materials, the option instead–of paying tariffs (again, the additional cost of which would “passed on” to the (end) consumer) would be instead to offer foreign corporations the opportunity to purchase U.S. Treasury Bonds and make a profit.
The benefits of this Plan would be quadruple 4-fold:
- Instead of foreign corporate importers having to incur extra costs in doing business, they would actually make money on their bond investment. THEREFORE, NO ADDED COSTS BEING PASSED ON TO THE CONSUMER!!!
- Plus, because no added costs are being passed on, it would be non-inflationary for The United States as prices of foreign goods would basically remain the same.
- Also, because foreign investors are now purchasing bonds, The Treasury Dept. would not have to offer higher yields to “effect” the required sales volume of Treasury Bonds to finance government operations.
- And as a result, as the Treasury “beefs up” their reserve of funds from these additional bond sales to foreign investors, they would not have to be so reliant on domestic bond purchasers and other foreign investors (such as foreign governments) and as a consequence, The Treasury would NOT have to raise yield rates and would certainly be in a better position to even LOWER THEIR YIELD RATES as they build up reserves to finance government operations and pay-out obligations THEREBY LOWERING TOTAL DEBT SERVICING COSTS!!!
Now if the Democrats win, they could employ this strategy as well. Also as discussed in my last article, the Democrats would let Trump’s corporate tax rate of 21 percent due to expire in 2025, officially lapse. The prior corporate tax rate before Trump’s tax cut was at 35 percent. To stay competitive with other corporations internationally, the “word-out” is that the Democrats would raise it only halfway to 28 percent. Plus as discussed, they would impose a minimum 20 percent tax on billionaires and raise taxes on anyone making over $400,000. And to address social security retirement and Medicare funding concerns, experts emphatically agree raising one’s social security payroll tax by 2 percent BUT otherwise leaving the average worker’s income tax payroll check deductions completely untouched, would solve our social security retirement and Medicare funding FOR THE NEXT 75 YEARS!!!
