The $8 Trillion Annual Debt Churn

I know the big news this week continues to be about Ebola – and I’ll quickly share the latest – but I want to focus on an important economic reality that is not getting the attention it deserves.

Before I do, here is the October edition of your free Self-Reliance Institute Newsletter that you can bookmark or download so that you have a permanent copy.

As for the latest information about Ebola, while I continue to believe there will not be a major outbreak in the United States – remember, 36,000 Americans die every year from the flu with very little fanfare – the news this morning that a health care worker who treated the now deceased Dallas Ebola patient (Thomas Duncan) who came to the U.S. from Liberia is very troubling because of one major factor.

That factor is that, according to Fox News, “the worker was in full protective gear when they provided care to Duncan during his second visit to the hospital.”

Here is the full report from Fox News: “Health Care Worker at Dallas Hospital Tests Positive for Ebola.”

Obviously, if the health care worker was in “full protective gear” and still caught the disease, there are many necessary and appropriate questions that must be raised about whether the disease is more easily transmitted than the government is acknowledging.

I’ll continue to monitor reports from Dallas, but if you see something you think I should be aware of you can always email me at[email protected]

Now, let’s talk about this important economic reality that’s getting almost no attention even as the global economic situation becomes more precarious by the day.

David Stockman – yes, the David Stockman who served as Director of the Office of Management and Budget under President Ronald Reagan – has a blog that I keep an eye on.

{I know what you’re thinking. How many blogs and news sources does Rob Douglas read every day? Honestly? Dozens. As a talk radio host and columnist, my colleagues were always amazed at how much material I absorbed in a single day. Frankly, I read more in one day than most commentators do in a month.}

For years, Stockman has been very prescient about the state of our economy. He routinely debunks a lot of the mainstream media’s tripe when it comes to fiscal and economic issues.

But this gem of Stockman’s really caught my eye.

In a column titled “Uncle Sam’s $8 Trillion Annual Debt Churn: Why Washington is Petrified of Honest Interest Rates,” Stockman starts out by stating [all added emphasis is from me]:

“I know that headline sounds completely outrageous. But it is actually true. The U.S. government is borrowing about 8 trillion dollars a year, and you are about to see the hard numbers that prove this. When discussing the national debt, most people tend to only focus on the amount that it increases each 12 months. And as I wrote about recently, the U.S. national debt has increased by more than a trillion dollars in fiscal year 2014.

“But that does not count the huge amounts of U.S. Treasury securities that the federal government must redeem each year. When these debt instruments hit their maturity date, the U.S. government must pay them off. This is done by borrowing more money to pay off the previous debts. In fiscal year 2013, redemptions of U.S. Treasury securities totaled $7,546,726,000,000 and new debt totaling $8,323,949,000,000 was issued. The final numbers for fiscal year 2014 are likely to be significantly higher than that.”

Stockman then shares with us why the federal government is behaving this way.

“Well, in recent years government officials figured out that they could save a lot of money on interest payments by borrowing over shorter time frames. For example, it costs the government far more to borrow money for 10 years than it does for 1 year. So a strategy was hatched to borrow money for very short periods of time and to keep “rolling it over” again and again and again.

“This strategy has indeed saved the federal government hundreds of billions of dollars in interest payments, but it has also created a situation where the federal government must borrow about 8 trillion dollars a year just to keep up with the game.”

Then Stockman lowers the boom. He points out the danger that the mainstream media is not talking about.

“So what happens when the rest of the world decides that it does not want to loan us 8 trillion dollars a year at ultra-low interest rates?

“Well, the game will be over and we will be in a massive amount of trouble.”

After sharing eight years of data to demonstrate how the Debt Churn works (use the link above if you want to see that data), Stockman warns about what I’ve been telling audiences for years. The American way of life could literally crash overnight.

“The only way that this game can continue is if the U.S. government can continue to borrow gigantic piles of money at ridiculously low interest rates.

“And our current standard of living greatly depends on the continuation of this game.

“If something comes along and rattles this Ponzi scheme, life in America could change radically almost overnight. …

“But the big problem is that the government is giving out far more money than it is taking in, so it has to borrow the difference. As long as we can continue to borrow at super low interest rates, the status quo can continue.

“But a Ponzi scheme like this can only last for so long.”

And what happens when the Ponzi scheme collapses. Well, it’s quite possible that all hell will break loose.

“It has been said that when the checks stop coming in, chaos will begin in the streets of America.

“The looting that took place when a technical glitch caused the EBT system to go down for a short time in some areas last year and the rioting in the streets of Ferguson, Missouri this year were both small previews of what we will see in the future.”

After presenting a series of fiscal obligations the federal government is on the hook for in the coming years (use the link above if you want to see that data), obligations the government almost certainly will not be able to meet, Stockman concludes:

“The truth is that another great crisis is rapidly approaching, and we are in far worse shape financially than we were back in 2008.

“Don’t get blindsided by what is ahead.  Evidence of the coming catastrophe is all around you.”

Friends, I completely agree with Stockman. The evidence of the coming economic catastrophe is all around us if we open our eyes and are honest about what we see.

The questions as self-reliant individuals that we need to confront include: Are we ready for the potential of a coming collapse? Have we secured ourselves financially for that potential collapse?

And I want to ask you: Do you believe Stockman? Is America in economic danger?

Share your thoughts by writing me at [email protected]

Be safe, secure and free,

Rob Douglas – Former Washington DC Private Detective