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Congress Is Plenty Bipartisan When It Comes to Ignoring the National Debt

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2018 Midterms Were About...

According to President Trump, the midterm elections were about four things: “Kavanaugh, the caravan, law and order, and common sense.” The Dems would agree, though they would probably take an opposing view to most of Trump’s positions.

So the midterms were defined by moral and socio-political issues. Sometimes, what matters most in political discourse is what’s excluded from it. In today’s political environment of sanitized speech and brashly divisive slogans, the “real” issues are often too easily missed, masked, excluded, effaced.

So what’s missing from this picture? The big elephant. The overburdened economy.

What You Can’t See Can’t Hurt You

The US is slowly getting crushed under the weight of its national debt. Where was this issue during the midterms? It must have been swept under the rug yet again by parties left and right.

How important could it be anyway, when a country’s economic health drives the country? Apparently, it’s important enough to be excluded from public discussion.

After all, why should politicians discuss the national debt when most Americans don’t seem to be aware of the issue or its gravity? What you can’t see can’t hurt you, at least that’s how the logic goes.

America’s Rapid Progress

It took the US 193 years to amass its current economic might, technological superiority, and military power. It also took the US 193 years to amass its first $1 trillion in federal debt.

But it will take only ONE fiscal year to accumulate another Trillion. The US debt is currently at $21.5 trillion.

What might this look like scaled down? It would mean $65,885 per American, thanks to the federal government.

Are Americans Unwittingly “Statist”?

If you think about it, here’s how the politico-economic system works at its most raw state: we vote for our favored politicians. Some politicians tax and spend. Other politicians cut taxes but spend. No politicians tax without spending or cut taxes while cutting spending.

Come election time, rarely would politicians talk about this issue beyond mere slogans and quotable one-liners. And when it comes to practice, hardly anything changes. If you doubt this, then just look at our national debt to GDP ratio. We currently owe more on our debt than we can produce as a nation in one year.

Abolishment of the Gold Standard Paved the Way Toward Unrestrained Fiat Manipulation

The acceleration of our ballooning debt began with the closing of the gold standard in 1971. Of course, this makes perfect sense, as gold’s scarcity would function as a natural limit to the money supply, assuming that the standard is not abused.

Money could not be “created out of thin air” as gold cannot be created out of thin air. Money wouldn’t be made to disappear, as gold can’t just disappear. As a “promissory note,” the dollar’s function would merely be that of an IOU: a promise to pay gold, or silver, at a fixed rate.

With the end of the gold standard, the IOU became what we know now as money, set to a floating market rate, and open to central bank manipulation, creation, inflation.

The consequences: decades of federal liabilities, all snowballing at a rate that outpaces the national income. 30 years ago, the national debt stood at $2.6 trillion, the Treasury paying a net interest of $152 billion. Today, the debt stands at $21.5 trillion, with an interest payment of $371 billion.

  • Between 1988 and 2018, the national debt has increased by 727%
  • Interest payments between the same period have increased by 144%

Sadly, American Voters Are Largely Clueless About Matters Economic

American voters can erase the debt by electing the right politicians. But this assumes that the larger majority understands the basic principles and mechanisms behind the national debt. This also assumes that Americans might value arguments over slogans, reason over sentiment, stoicism over illusory entitlement.

If this were the case, we Americans would have a clearer sense of history with regard to dangers of debt and fiat, and how the only president who was able to successfully rid the nation of its debts was not Thomas Jefferson, not Bill Clinton, but Andrew Jackson in 1835.

Unfortunately, the fundamental principles behind the looming debt crisis, as simple as they are, fly well above the heads of most voters. And whatever substance is left, well that’s what voters take with them to the voting booths.

While America can’t seem to bring an end to this vicious cycle, this vicious cycle seems more than capable of bringing an end to America.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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