Friday, November 16, 2018

Debt blow out

I'm sort of obsessed with the national debt, which is why I started this blog.  I think if it grows just a little bit, that it might be sustainable indefinitely, and we can truly enjoy the free lunch.  If it grows too fast, however, then the laws of compound interest and exponential hyperinflation will take over and the whole thing will crash.  I think the growth should stay within 0.6% per month, which by the rule of 72 means a doubling every 10 years.  Any faster than this indicates danger.

Oct 31, 2018 ended with $15.843 trillion of Debt Held by the Public.  So I would allow a very generous $95 billion of government deficit spending for the month. 

Well guess what.  The month is only half over and the Debt Held by the Public is at $15.942 trillion.  so we have already deficit-spent $99 billion this month.  At this rate we will hit $16 trillion within a month.

So I think it is out of control.  We usually have a surplus in January, so maybe things will slow down a little.  But as of now, we are going too fast.

Wednesday, November 7, 2018

The 3-Year Hits 3%

Today (11/7/18) the yield on a 3-year Treasury bond was at 3.03%. 

When was the last time it was above 3%?  That would be 7/25/08, when it was at 3.01%.  The high for the 3-year in 2008 was 6/13/08 at 3.38%.

Next up is the 2-year bond.  It is at 2.96%. When will it hit 3%?

Monday, November 5, 2018

Map of proposed tunnel system under Los Angeles


https://www.theverge.com/2017/12/5/16737488/boring-company-los-angeles-map-tunnels
They’re not just empty tunnels; instead, a car on the surface would dodge traffic by taking a sort of elevator down, which would then move as a “sled” through the tunnels at speeds of 150 miles per hour. Bus-like “pods” would move non-car owners around the city, too.

Wednesday, October 31, 2018

Yellen says rising deficit is unsustainable

The United States is taking on too much debt right now, a problem that is will only worsen moving forward, former Federal Reserve Chair Janet Yellen said Tuesday.  "If I had a magic wand, I would raise taxes and cut retirement spending," Yellen told CNBC's Steve Liesman at the Charles Schwab Impact conference in Washington, D.C., who characterized the U.S. debt path as "unsustainable." 
https://www.cnbc.com/2018/10/30/yellen-says-rising-us-deficit-unsustainable-if-i-had-a-magic-wand-i-would-raise-taxes.html

Too much debt?  How could there be too much debt, we haven't reached infinity yet.  As for cutting Social Security, it will never happen.  She needs to stop worrying and love Big Brother's free lunch.

Monday, October 29, 2018

National Debt to hit $1 quadrillion by 2093

Read: https://www.zerohedge.com/news/2018-10-29/disaster-awaits-national-debt-will-be-6-times-size-economy
Which cites: https://reason.com/blog/2018/10/26/a-national-debt-6-times-the-size-of-the
which in turn quotes: http://www.crfb.org/papers/75-year-budget-outlook

Basically the CRFB is using the CBO's numbers but extending them from 30 years to 75 years.  Using the "Alternative Fiscal Scenario", which is actually the most realistic since it assumes the continuation of current policies (but not current laws), the CRFB projects that the national debt will be 600% of GDP by 2093.

I did my own calculation of what that actually means.  If GDP is currently $20.66 trillion (a number I got from the BEA), and it increases by an average of 3% per year, then in 2093 it will be $189.6 trillion.  6 times that is $1137 trillion (and increasing by $33 trillion per year).

So no worries, mate.  The National Debt can keep increasing, the only limit is infinity, right?  And the US government will never ever default, right?  And the promised Social Security payments will always be paid, right?  The US Government is eternal and the National Debt is sacrosanct.

If you have a problem with this analysis than you are a hater and need to go to indoctrination camp until you love Big Brother.

Saturday, October 27, 2018

The interesting history of Delaware

I think Delaware is a little strange.  It is really tiny, less than 2,000 square miles with less than 1 million residents.  It used to be a colony called New Sweden, then it was conqured by the Dutch, and then the English (lead by the Duke of York).  The Duke of York then gave it or sold it or leased it (not sure which) to William Penn, the proprietor of Pennsylvania, who desired access to the sea.  At that time it was called the "Lower Counties on the Delaware".  Delaware was then governed jointly with Pennsylvania.

On June 15, 1776, just before the Declaration of Independence was signed, Delaware declared its independence from both Great Britain and Pennsylvania. It apparently separated from Pennsylvania because it wanted to maintain is "peculiar institution".
I have a theory. - Since many of Delaware's leading citizens (eg Bedford, Dickinson) also held property and office in Pennsylvania, and many of Pennsylvania's richest (eg Morris, Willing) got rich importing slaves through Delaware (both before and after Pennsylvania started taxing slave imports, as the PA Gazette and other colonial records confirm), I suspect one reason for separation was the realization by some of the richest citizens in both colonies that the radicals who were gaining the upper hand in the Pennsylvania Assembly would eventually combine with the newly-abolitionist Quakers and other minority sects to make slavery in Pennsylvania illegal. - Which they did, before the Revolution was won. - By separating Delaware, both the "Lower Counties'" slaveowners and those Philadelphians who wished to exploit the "Peculiar Institution" could purchase nearby property where they could keep their field laborers, skilled workers, and women who provided all kinds of domestic services, despite Pennsylvania's increasingly broad abolition law. http://www.answers.com/Q/When_did_delaware_separate_from_pennsylvania
So it is clear that Pennsylvania and Delaware are twins in my chart.  And I guess Maryland is a loner.

Friday, October 26, 2018

Twin States

What states are basically twins?  Sometimes they are best friends, sometimes they hate each other. Sometimes there is a geographical similarity. Sometimes they became states together. Some of this is just my opinion.  I think the north-south connection is stronger than an east-west connection.

Twins:
Alabama and Mississippi.  (east-west connection. These are almost mirror images of each other)
Alaska and Hawaii (Both became states in 1959).
Arkansas and Missouri (Arkansas was admitted in 1836, the next state after Missouri in 1821).
Arizona and New Mexico (east-west connection.  Both became states in 1912.)
California and Nevada
Colorado and Wyoming
Connecticut and Massachusetts
Florida and Georgia
Illinois and Indiana (east-west)
Idaho and Montana
Kansas and Nebraska (Note: You could also match Kansas with Missouri and Nebraska with Iowa)
Kentucky and Tennessee
Maryland and Pennsylvania (Mason-Dixon line)
Michigan and Ohio
Minnesota and Wisconsin (east-west)
New Hampshire and Vermont (east-west)
New Jersey and New York
North Dakota and South Dakota
North Carolina and South Carolina
Oklahoma and Texas
Oregon and Washington
Virginia and West Virginia (East-west)


Loners:
Delaware (should be part of Maryland)
District of Colombia (should be part of Maryland)
Iowa
Louisiana (it is just different)
Maine (maybe New Brunswick is a twin)
Rhode Island (should be merged with Connecticut)
Utah (could be matched with Nevada, leaving California a loner)


China's Economic Collapse



 I only watched the first minute, but I think it is worth watching.

Saturday, October 20, 2018

Government borrowing

Read this article:    Federal Deficits Are Worse Than You Think

So the government publicly states that there spending is something like this:
Revenues:  $3.3 trillion
Outlays: $4.1 trillion
Deficit: $800 billion (added to the national debt).

But maybe a better way of looking at it would included the flow of funds, which would look something like this:
Tax Revenues: $3.3 trillion
Borrowed:  $9.0 trillion
Total Sources of Funds:  $12.3 trillion

Outlays (other than interest): $3.8 trillion
Interest:  $300 billion
Redemptions:  $8.2 trillion
Total Uses of Funds: $12.3 trillion

Because there is a lot of short-term debt that is redeemed, the government needs to borrow about $750 billion a month to keep afloat. 

As of October 18, the Treasury already borrowed $623 billion in just over 1/2 month and it used $566 billion of that to redeem expiring debt.  Only $57 billion was used for other spending.  Tax revenues as of that date were $147 billion.  The Treasury borrows about 77% of all the money it needs.

So another way of looking at the US Government is that it is primarily a bank with a benevolent arm.  Which leads to some other points.  1) It is a giant ponzi scheme which apparently can go on forever. 2) With that amount of cash sloshing about, it would be very easy to divert some of it to secret, off-shore programs.

And another thought.  The interest rate, while it is a cost to the debtor, is income to the creditor.  So it is to the benefit of the Federal Reserve, which is controlled by bankers, to increase the interest rate.  Interest on the national debt is free money, created by the US Government through its ponzi scheme, and given to the banksters for doing nothing, other than having the perverse ingenuity in creating such a system.

Thursday, October 11, 2018

Dow drops 1700 points in the last 6 business days

The Dow hit an all-time high of 26828 on Oct 3.  Since then, it has gone almost straight down:

date close change percent cum change cum percent
10/03/18 26828.39



10/04/18 26627.48 -200.91 -0.75% -200.91 -0.75%
10/05/18 26447.05 -180.43 -0.68% -381.34 -1.43%
10/08/18 26486.78 39.73 0.15% -341.61 -1.28%
10/09/18 26430.57 -56.21 -0.21% -397.82 -1.49%
10/10/18 25598.74 -831.83 -3.15% -1,229.65 -4.64%
10/11/18 25052.83 -545.91 -2.13% -1,775.56 -6.77%

A bear market is defined as a drop of 20%  from the prior peak so we aren't there yet, but that is where things are headed.  Assuming that this is the crash we have long been dreading, what does this mean?

Well, it seems to fit the "Ten or Eleven Year Financial Crisis Cycle" I wrote about on April 14, 2017.  At that time I predicted a crash on 9/11/18, so I am off by a month.  So, to compare:

Year date significance
1966 August the first significant postwar financial crisis
1977 July 13 blackout in NYC, which followed a financial crisis
1987 Oct 20 DJIA drops 22% and the system almost collapses
1998 Sept 23 LTCM crisis
2008 Sept 15 Global Financial Crisis; Lehman goes bankrupt
2018 Oct 11 DJIA drops 1700 points since high on Oct 3

The problem with this analysis is that there was no recession in 1966, 1977  (it happened before in 1973-1975), 1987, or 1998.

However, assuming that this is "it", and not just a "buy-the-dip" drop, we can expect a recession to hit within a few months.  NBER, the official arbiter of recessions, won't call the start until about a year after the peak.  But its not too hard to determine - the unemployment rate is the main determiner.  In every recession, it starts shooting up like a rocket.  Right now, the unemployment rate is about 3.7%, a 40-year low.  If it jumps to over 5%, then we are there.

And then we can expect the government deficit to skyrocket because of increased spending and decreased revenues.  Maybe a $2 trillion deficit within a couple of years.

Monday, October 8, 2018

September surplus

The US government usually runs a surplus in September.
In September 2018, the surplus was $116 billion ($343 B receipts vs $227 B outlays).
In September 2017, the surplus was $8 billion ($349 B receipts vs $341 B outlays).
In September 2016, the surplus was $33 billion ($358 B receipts vs $325 B outlays).
In September 2015, the surplus was $91 billion ($365 B receipts vs $275 B outlays).

Which other month does the US usually run surpluses?  Other than April (when everyone pays their taxes).

Update: January usually has surpluses as well, at least in January 2018 ($51 billion) and January 2017 ($52 billion).  "Surpluses in January are boosted by the shift of certain payments, ordinarily made on the first of the month, from January to December because January 1 is a holiday."

Friday, October 5, 2018

October 3 was the high

The Dow Jones reached 26,828.39 on 10/3/18, an all-time high.  The peak in  the S&P 500 was 2930 on 9/20/19, but it came close to this on 10/3/18 with 2925.

So this really might be it.  Of course, I thought about 1/26/18 when it hit 26,616, and before that on June 19, 2017 when it hit 21,528.  To repeat what I said then: "At some point, it will hit a peak for this business cycle, and that might be it."

Thursday, October 4, 2018

The 5-year rate is above 3%

Yesterday (10/3/18), the 5-year treasury yield rate went to 3.02%.  While it may drop below 3 again, I find this significant.  When was the last time the 5-year rate was at 3% or higher?  I think on 10/14/08, when it was at 3.01%.  (It dropped to as low as 1.26% on 12/18/08).  So almost exactly 10 years ago.

Wednesday, October 3, 2018

Debt Alert cancelled

At some point the system will start a slow-motion meltup when the debt will "float" away into infinity.  I see a red alert when the Debt Held by the Public increases by more than $100 billion for more than one month in a row. Thankfully, the debt increase has temporarily slowed down so we can relax a little and think optimistically.

For the record, the debt held by the public as of 9/28/18 (the last day of the 2018 fiscal year) is $15.771 trillion and this was actually lower than the month before.  Nothing to worry about folks, at least for the moment.  How about the government just freezes it at this level?

Social Security is now solvent until 2032

The CBO has published their data for the 2018 Long-Term projects for Social Security (https://www.cbo.gov/publication/54428).  Instead of writing a report, they just gave their data.  It shows that Social Security will not have benefit cuts until 2032, which is one year later than previously projected.  See Crisis in 2031

Calendar Year Tax Revenues Outlays with Scheduled Benefits Outlays with
Payable Benefits
2017 4.70 4.91 4.91
2018 4.54 4.95 4.95
2019 4.53 4.98 4.98
2020 4.55 5.10 5.10
2021 4.58 5.23 5.23
2022 4.60 5.33 5.33
2023 4.61 5.46 5.46
2024 4.61 5.57 5.57
2025 4.62 5.68 5.68
2026 4.66 5.78 5.78
2027 4.66 5.89 5.89
2028 4.67 6.01 6.01
2029 4.68 6.06 6.06
2030 4.68 6.13 6.13
2031 4.67 6.16 6.16
2032 4.62 6.20 4.62
2033 4.60 6.22 4.60
2034 4.57 6.25 4.57

This is really good news.  I'm not going to repeat the reasons why this would cause a major crisis, but this is really the end of the road, and its good that we have another year breathing room to try to figure out a solution.

I like to make wild inaccurate projections, so lets put a revised date on when this sucker is going down.  Sept 6, 2032 it is. You heard it here first.  Instead of mocking it, why not try to figure out if our system is sustainable indefinitely or how to fix it if it is not?

Tuesday, October 2, 2018

Tuesday, September 18, 2018

National Debt to reach $99 trillion by 2048

http://theeconomiccollapseblog.com/archives/destroying-america-it-is-being-projected-that-the-u-s-national-debt-will-hit-99-trillion-dollars-by-2048

With annual budget deficits of $6 trillion.

The author of the above article states: " Of course we will never actually see the day when our national debt reaches 99 trillion dollars.  Our government (and our entire society along with it) will collapse long before we ever get to that point.  In our endless greed, we are literally destroying America, and emergency action must be taken immediately if we are to survive."

I want to know when it will reach $1 quadrillion dollars.  And why does it have to end?  That is why I started using scientific notation to represent the debt.  Computers can represent extremely large numbers in floating point.  It is a long way until you reach infinity.

Puerto Rico is the newest tax haven

https://www.gq.com/story/how-puerto-rico-became-tax-haven-for-super-rich

A year after the tragedy of Hurricane Maria, the 51st state has become the favorite playground for extremely wealthy Americans looking to keep their money from the taxman. 

The super-rich can keep their U.S. passports but don't have to pay any income tax. 

Monday, September 17, 2018

Right Down The Line

Saturday, September 15, 2018

Why New Mexico Hates Texas