Last week we learned that U.S. federal debt passed the $19.5 trillion, adding $1.36 trillion during this fiscal year. Just last month, it added $151.5 billion. By now we have all gone a bit tone-deaf with all the billions and trillions tossed about in the news, so let’s put this into a bit of perspective. In August, the U.S. government added $475 per man, woman and child, or $1,206 per household living in the U.S. We are talking one month’s time here! The annual clip is $5,700 per man woman and child!! This is very far from sustainable, but it’s quite a bit worse actually. According to the figures from U.S. Bureau of Labor Statistics, one in five U.S. households have no breadwinners, so only about 80% of households could contribute to repayment of government debts. This implies that the average household with working members are being burdened with $18,100 of new debt per year, courtesy of the federal government. This level of debt is unpayable and its rate of growth is even accelerating. The only way to keep this show going is by Federal Reserve monetizing government debt, a practice which inevitably leads to high inflation or hyperinflation. Unfortunately, this is the only means by which the ongoing economic imbalances can be resolved. With economic growth unlikely to improve any time soon, the resulting toxic mix is stagflation.
It may be difficult to imagine the United States of America having high levels of inflation or even hyperinflation. But just because U.S. haven’t had high inflation since the early 1980s doesn’t mean that their economic system is immune to it. Since 1960, more than two thirds of world’s market economies suffered episodes of inflation which exceeded 25% it at least one year. With the US dollar’s status as the global reserve currency steadily eroding, its immunity to inflation is eroding together with it. This spells massive trouble for the U.S. economy and for most of the rest of the world with it. The near future promises a very bumpy ride!