Tuesday, September 20, 2016

Have intragovernmental holdings peaked?

Source: http://treasurydirect.gov/NP/debt/current

Check this out.  Intergovernmental Holdings peaked on 6/30/2016 at $5.448 trillion.  They have never been as high since.  So this might be their all-time high.

What does this mean?  This includes the Social Security trust fund and it means that Social Security is running at a current deficit now.  The intergovernmental holdings (IH) increases with FICA taxes paid in and interest accrued on the national debt, and it decreases with benefits paid out.  So more benefits are being paid out than taxes and interest are being paid in.  So the Social Security bubble, that goes all the way back to FDR, just popped a couple of months ago.

We knew that it was a Ponzi scheme, but we expected it to last a few years longer.  Of course, it isn't going down that much, and the current receipients have nothing to worry about, but in 20 years or so (2034 is the latest estimate), the SS trust fund will be totally depleted and benefits will be cut about 20%.  Unless Congress does something, which it probably will.

I'm more concerned about the effect this will have on Debt Held By the Public (DHBTP).  The intergovernmental holdings was used to partially finance the national debt.  Now this goes into reverse.  Instead DHBTP will go up even faster than the federal deficit, to make up for the IH drawdown.  Indeed, since the peak on 6/30/16, the DHBTP has gone up $201 billion (from $13.932 T to $14.133 T).  That is getting close to $100 billion per month and economy is supposedly doing well.  Just wait until the next recession starts and the debt will skyrocket again.

Related thought.  When was the last month in which the DHBTP did not increase at least $100 billion?  That would be July 2016, when it only increased $66 billion.  Maybe September 2016 will break the pattern.  But the day is coming, and it may not be too far away, when the debt increases at least that amount every single month into infinity.

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