Unidentified Anomalous Phenomena

 Unidentified Anomalous Phenomena (UAPs) is the current term for what used to be called Unidentified Flying Objects (UFOs).  Luis Elizondo, the former director of the Advanced Aerospace Threat Identification, believes that there is "technology" (i.e. flying objects) that is interested in nuclear technology, including nuclear power and nuclear weapons, that did not come from the United States and didn't come from Russia or China either.  There is no proof that these objects came from outer space, but there is no proof that they didn't.

Luis Elizondo said he believes the report will say there are around 100 UAP cases compelling enough to warrant further scrutiny, and that we don’t know what UAPs are or where they come from. “If this turns out to be some sort of adversarial technology that did happen to technologically leapfrog us, 180 days I don’t think is going to be sufficient. I think what we can expect the report to say is something like this: There are about a hundred some-odd cases out there that are compelling enough, that they are definitely displaying some sort of capability, technology that we don’t have. Secondly, we don’t know what these things are. We have no evidence to suggest that they are from outer space, but at the same time, we have no evidence to suggest that they’re not.”

Luis Elizondo says the new report on UAPs definitely states the observed technology is not of the U.S.’s creation, and says he doesn’t believe its from China or Russia either. “As of this week… discussions at senior level leadership that this report has definitively stated once and for all that it’s not our technology…. So that really only leaves two other options, and again it’s foreign adversarial or it’s something quite different. And I think as we’re now beginning to learn as we’ve heard from the director of national intelligence and I can certainly tell you from my experience, that we’re pretty confident that it’s not Russian or Chinese technology.”

https://www.washingtonpost.com/washington-post-live/2021/06/08/ufos-national-security-with-luis-elizondo-former-director-advanced-aerospace-threat-identification-program-aatip/

He is talking about a report, but where is the report?

Maybe this is the report, but it is only 9 pages long.  

See also https://aftermath2022.blogspot.com/2022/07/new-project-bluebook.html

Update: UFO caught on camera hovering over Air Force 1 at LAX during Joe Biden's fundraising trip to Los Angeles

Airplane enthusiasts Joshua and Peter Solorzano were filming at LAX airport on Sunday December 10, hoping to catch Air Force 1. But at 10.18am while running their livestream for their popular YouTube channel LA Flights, they spotted a white sphere zooming across the screen. Three minutes later the object appeared again flitting across the top right of the camera view as it trained on the KC-10. The object appeared a third time at 11.08am directly over cameraman Joshua Solorzano. He can be heard on the livestream saying: ‘It’s directly above us. It is moving, it’s not a star. I’m telling you they’re flying in from the ocean. Very strange right now.’ Joshua said he thought it was a balloon, but Peter referred to it as a ‘UAP’ – the government’s preferred term for Unidentified Anomalous Phenomena.

Did Eisenhower sign a treaty with space aliens?

 This sounds crazy but here are some links.  It would be more believable if someone could give the exact date (either sometime in 1954 or 1955) and place (Edwards Air Force Base in California, or Holloman Air Force Base in New Mexico).

1) Majestic 12 and the Secret Government  William Cooper says a treaty was signed sometime in 1954 at Edwards. 

Later in 1954 the race of large nosed gray aliens which had been orbiting the Earth landed at Holloman Air Force base. A basic agreement was reached. This race identified themselves as originating from a planet around a red star in the Constellation of Orion which we call Betelgeuse. They stated that their planet was dying and that at some unknown future time they would'nt be able to survive there. This led to a second landing at Edwards Air Force base. The historical event had been planned in advance and details of the treaty had been agreed upon. Eisenhower arranged to be in Palm Springs on vacation. On the appointed day the President was spirited away to the base and the excuse was given to the press that he was visiting a dentist.  President Eisenhower met with the aliens and a formal treaty between the Alien Nation and the United States of America was signed. We then received our first Alien Ambassador from outer space. 

2) Post on Reddit: Did President Eisenhower Meet With Aliens at Holloman Air Force Base?

The Redditor says that Ike signed a treaty with the grays at Holloman in February 1955, citing Timothy Good as a source. 

In February 1955, approximately 300 people saw Air Force One land at Holloman AFB and taxi back out to the end of the runway. The respected author and former pentagon consultant, Timothy Good, came forward in 2012 to talk about Ike’s meetings with ETs.  Ultimately, Eisenhower Signed A Treaty with an alien race called Alien Grays.

3) The Greada Treaty  This article uses William Moore as a source, and says that Ike met with both the Nordics and Greys on February 20-21, 1954 at Edwards and signed the Greada Treaty with the Greys.  

On the night and early hours of February 20 - 21, 1954, while on a 'vacation' to Palm Springs, California, President Dwight Eisenhower went missing and allegedly was taken to Edwards Air force base, previously Muroc Airfield, for a secret meeting and signed the Greada Treaty.

4)  Phil Schneider said that Eisenhower signed the Greada Treaty in 1954 at Holloman.  There isn't a wikipedia article about Phil Schneider.  I saw a Youtube video on him speaking in 1995 where he made this claim.

5) Gerald Light wrote a letter in April 1954 describing the meeting of Eisenhower with space aliens at Muroc (Edwards).  The letter doesn't mention the words "treaty" or "ufos" or "aliens", but it does mention "Etherians".  (Are these nordics or greys?).

Anyways, this is interesting enough to write a short blog post, but since nobody can agree on when and where this supposed treaty was signed, it seems more likely to be fiction.  Click the links if interested and see if you can figure it out.

========================

Update:  Here is yet another story of the supposed treaty.  The source is Timothy Good.  Again, there is no date, just sometime in 1954 in New Mexico.  https://www.dailymail.co.uk/news/article-2100947/Eisenhower-secret-meetings-aliens-pentagon-consultant-claims.html

Former American President Dwight D. Eisenhower had three secret meetings with aliens, a former US government consultant has claimed. The 34th President of the United States met the extra terrestrials at a remote air base in New Mexico in 1954, according to lecturer and author Timothy Good.

============================

Update 2:  This just gets weirder and weirder. Laura Eisenhower, Ike's great granddaughter, claims that Ike did meet aliens at Edwards in 1954, but didn't sign a treaty.  MJ-12 signed the treaty behind his back.  See https://app.podscribe.ai/episode/89238545 (podcast date 10/20/23, so this is recent). Her source is a guy named Dan Cooper (unknown if he is related to William Cooper) who calls himself "Senior Advisor to the Earth Alliance".

 ===========================

Update 3: Even weirder.  See https://exopolitics.org/secret-space-programs-more-complex-than-previously-revealed/  and https://disclosure.fandom.com/wiki/U.S._Marine_Corps_Special_Section . There was a secret space program supposedly authorized by Truman and Eisenhower.  "Eisenhower, having realized that he can't trust MJ-12, created a new military apparatus from scratch. USMC s.s. was to act as a counterbalance to MJ-12 long after Eisenhower left office."

If you google "Randy Cramer" and "space" a lot of bizarre stuff pops up.

This would make an interesting science fiction book.

2023 Social Security Report

 The 2023 Social Security Trustees Report was released about April 1, 2023 but I didn't comment on it.  Here are the key findings. 

Under the Trustees’ intermediate assumptions, OASDI cost is projected to exceed total income in 2023, and the dollar level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2034, one year earlier than projected in last year’s report.

The open-group unfunded obligation for OASDI is $22.4 trillion in present value over the 75-year projection period through 2097 and is $2.0 trillion more than the measured level of $20.4 trillion over the 75-year projection period through 2096 in last year’s report.

The OASI Trust Fund reserves are projected to become depleted in 2033, at which time OASI income would be sufficient to pay 77 percent of OASI scheduled benefits.

The Closure Rule

The Closure Rule is a modelling assumption that revenues (that is taxes) will dramatically increase at some point in the future.  It is basically the economic equivalent of magic fairy dust.  It assumes that something will happen in the future to magically make everything alright.  It is based on wishful thinking.  

It is generally not well understood outside tight academic and DC modeling circles that these models effectively crash when trying to project future macroeconomic variables under current fiscal policy. The reason is that current fiscal policy is not sustainable and forward-looking financial markets know it, leading to the economy “unraveling” through “backward induction”. Instead, in practice, the workhorse OLG model is generally “fixed” by augmenting it with an additional assumption---namely, a future fiscal policy action that is actually contained in current law. This modelling fix (also called “closure rule”) springs into action at a future date to stabilize the amount of debt held by the public relative to GDP. It often takes one of several alternative forms: a broad-based value-added tax (VAT); a proportional wage tax (not subject to any payroll tax ceiling); a proportional income tax; a broad-based reduction in spending; or, some combination of each. Both PWBM and CBO typically have this rule kick in the year 2050 or later, potentially with some gradual introduction. As it turns out, the exact form of the broad-based closure rule---for example, whether it is a VAT or some other tax---is not that important in terms of economic effects. What is important is that a large broad-based future corrective change in fiscal policy happens in any form to stabilize the debt-GDP ratio, and that such a correction action is anticipated by financial markets. Otherwise, forward-looking financial markets would unravel much sooner---a process known as “backward induction”---to cause a sovereign debt crisis. https://budgetmodel.wharton.upenn.edu/issues/2023/10/6/when-does-federal-debt-reach-unsustainable-levels

So, at some point, taxes will magically increase in the future to stabilize the model.  The modellers typically use a date of 2050 or 2060.  I think an earlier date will be required.  The Social Security Trust fund will be depleted in 2034.  Everyone just assumes that either A) benefits will be cut and no one will complain, or B) benefits will just be paid with no pain to anyone.  I don't think either of those assumptions are correct.  I think that the benefits MUST be paid and that taxes MUST increase drastically to pay for the fix.  So I would use 2034 as the date.  The system MUST be fixed by 2034 or "backward induction", which is an explosion in the time-space continuum traveling backwards in time, will occur, causing the system to blow up.  That's what I think - we have 11 more years to fix the system, or it will blow up. 

November 2023 deficit was $317 billion

 The federal government incurred a deficit of $317 billion in November 2023, CBO estimates— $68 billion more than the deficit recorded last November. https://www.cbo.gov/system/files/2023-12/59726-MBR.pdf  The [cumulative] federal budget deficit totaled $383 billion in October and November 2023, the first two months of fiscal year 2024.

YTD defense spending was $150 bn.  Since it was $87 bn in October, November was $63 bn.

YTD net interest was $153 bn, so November was $77 bn.

The debt to the public increased from $26.330 trillion on 9/30/23 to $26.844 trillion on 11/30/23,  and increase of $514 billion.  The Treasury General Account (TGA) increased from $679 bn on 9/30/23 to $754 bn on  11/29/23, an increase of $75 billion.  

So the actual spending YTD was $439 billion (The $514 bn increase less the $75 bn increase in TGA). I would say we are still on track to exceed a $2 trillion deficit in FY 2024, which would make it the 3rd highest ever, behind 2020 and 2021.

Also note that revenues were only $275 bn in November and net interest in November was $77 bn, so net interest was 28% of revenues.

============

On 11/30/22, the total national debt was $31.371 trillion, and on 11/30/23 it was $33.879 trillion, so it increased almost exactly 8.0% from the year previous.

Maybe compounding interest isn't a problem

 Read: https://www.msn.com/en-us/money/savingandinvesting/a-bond-doom-loop-should-mean-that-yields-rise-with-more-borrowing-but-history-says-the-opposite/ar-AA1k6e4V 

A bond 'doom loop' should mean that yields rise with more borrowing — but history says the opposite Story by fdemott@insider.com (Filip De Mott)

"But just as increases in corporate defaults tend to be sparked less by looming debt maturities and more by collapses in earnings, so fiscal crises in bond markets tend to be driven less by the inevitability of compounding interest payments and more by sudden collapses in credibility, currency runs and imported inflation," he said.

Also:

https://www.ft.com/content/d5c99487-11e1-4a68-aece-5a26f65dea7f

The third reason why large deficits are not associated with high bond yields is that, contrary to intuition, most borrowing is much closer at a system level to being self-funding than is widely recognised. You don’t need to work in an investment bank’s syndicate department to see the intrinsic logic in the statement that “someone needs to buy” each bond issue. Usually this involves a private investor withdrawing deposits from their bank account. But take a moment to consider the process as a whole. Provided the proceeds from the bond sale are at some point spent in the real economy, they produce an increase in bank deposits which exactly offsets the amount the private investor drew down for the purchase. Total bank deposits — or narrow money — are left unchanged.

October 2023 deficit was $67 billion; $105 billion missing

 The Treasury just issued their monthly treasury statement for October 2023 here: 

https://www.fiscal.treasury.gov/files/reports-statements/mts/mts1023.pdf

Key points:  1. the deficit was $66.564 billion; 2. net interest was $76 billion; 3. defense spending was $87 billion; 4. education spending was $22 billion.

Overall, this is a better month than most but this is because the Treasury Department gets a lot of tax revenue in October because it is following the end of the September 2023 quarter.

But here is the puzzling thing for me.  The debt to the public at the end of September was $26.330 trillion. At the end of October it was $26.576 trillion, for an increase of $246 billion for the month.  The Treasury account checking account at the Fed at the end of September was $679 billion and at the end of October it was $753 billion for an increase of $74 billion.

So the Treasury borrowed $246 billion, of that money it used $67 billion, and it saved $74 billion.  Where did the other $105 billion go?  Maybe I can ask Catherine Austin Fitts to look into it.

Does this happen every month?  Maybe I can go back and look at September when I have time.

 =====================================

So I looked at September 2023 and there is extra money.  The treasury borrowed $286 billion in September, the deficit was $166 billion, and the Treasury General Account increased by $178 billion.  So we have the opposite problem - where did $58 billion magically appear from?

 ======================================

I was thinking that maybe it offset a change in the Social Security Trust Fund balance or something.  But if you look at the national debt as a whole, the problem is even worse.

On 9/30/23, the total national debt was $33.167 trillion.  On 10/31/23, this jumped to $33.700 trillion.  So the debt increased by $533 billion.  The monthly deficit was $67 billion and the general account increased by $74 billion.  So where did the other $392 billion go?  Accrued interest you say.  So yes there was accrued interest on 10/2 of $266 billion ($7.103 tn - $6.837 tn).  But there is still $126 billion missing.  Where did it go?

 ======================

Update:  On 10/31/2023 the total national debt was $33.7 trillion.  One year earlier on 10/31/2022, it was $31.238 trillion.  So it increased 7.9% in one year.

When will the next recession begin?

Recessions are officially called by the National Bureau of Economic Research; however, they won't tell us when a recession begins until the next recovery is well under way, so they are no help.  But there is one indicator that I think is very precise.  When the Fed cut rates, that is when the recession begins.  

In 2007, the Fed did their first rate cut on September 18, 2007 of 50 basis points, and the recession began in December 2007.  So this was a leading indicator of 3 months.

Now, the Fed will likely do the first rate cut in March 2024, so the recession will start about June 2024.  

But, you object, the Fed cutting doesn't mean a recession is coming.  I think it does, because the Fed has access to all sorts of private data that we don't, and when they cut they are reacting to the weakness that they see.  

============================

See also: https://nymag.com/intelligencer/2023/10/how-the-bond-market-is-screaming-danger-for-the-economy.html

You don’t really need to know a lot about the economy or bond market to know that there’s one signal that investors live in fear of more than just about any other. It’s called the inverted yield curve — which just means a flippening of sorts in the relationship between long-term and short-term U.S. government bonds.  The phenomenon defies easy logic, but it has consistently predicted every recession for more than a half century.

There’s an interesting phenomenon with the yield-curve inversion now, which is that it’s starting to disinvert — which is to say, go back to a normal shape. In your model, what’s the significance of that?  So the average lead time from an inversion to a recession, over the past four, is 13 months. So we’re not even at the average yet — it’s way too early to say that it’s a false signal. But more importantly, you look at the past four recessions, and before the recession begins, every single time, you see the uninversion happening or whatever the word is. The steepening occurs before the beginning of the recession. So this is exactly what you’d expect.

Yes, “the bear steepening,” as people call it when the long end of the curve rises and the inversion ends. If that is happening now, when do you expect a recession?  I expect first quarter or second quarter of next year.  [Note: This is anytime from January through June of 2024].

Why is the debt increasing more than deficit spending?

 One of the assumptions that I make in trying to predict the future debt level is that the debt will increase each year by the deficit for that year - it seems only logical.  But in fact the debt is increasing more than is needed to cover the deficit.  Let's look at the last 2 fiscal years.

In fiscal year 2022 (ending 9/30/22), the official deficit was $1.375 trillion.  However, this includes student debt relief of $379 billion that was struck down by the Supreme Court.  So the actual deficit was right at $1 trillion.  

Now compare this to the amount on the nation's credit card.  On 9/30/21 the debt to the public was $22.283 trillion.  On 9/30/22, this was $24.299 trillion, which is an increase of $2.016 trillion. What was the extra $1 trillion for?

Oh, you say, look at the balance in the checking account at the Fed.  On 9/30/21, the balance in the checking account was $215 billion.  The same account on 9/30/22 had $636 billion in it. So yes the balance did increase about $400 billion, but that doesn't explain the other $600 billion.

Now look at fiscal year 2023, which ended 9/30/23.  The official deficit was $1.69 trillion but you have to add in the student debt relief of $333 billion, to get an adjusted actual of right at $2 trillion for 2023.  The debt to the public on 9/30/23 was $26.33 trillion, which is right at $2 trillion more than 1 year earlier.  So this almost matches.  And the Treasury checking account at the Fed had $679 billion in it, which increased slightly from the previous year.  

So there is an anomaly with the FY 2022 data.

What about going forward?  As I already pointed out, in FY 2024 the Fed is on track to issue more than $3 trillion of new debt in excess of that needed to repay the existing debt, and this is $1 trillion more than is needed for the deficit.

Is this an ongoing problem, where the debt goes up $500 billion to $1 trillion more each year than the deficit?  Is so, what will this do to the debt projections?

To dramaticize this, I think a marketable debt total of $40 trillion is a significant event.  When will this occur?  According to the CBO projections, this should happen sometime in 2030. But if the debt goes up $1 trillion more than the deficit each year, I think the $40 trillion level could happen earlier, maybe 2028. 

It feels like something has change regarding the debt trajectory, and that we are facing a $2 trillion plus deficit in 2023 and $3 trillion plus in 2024 and later.  Hopefully this is not the case, but it seems like things are spiraling out of control ahead of schedule.

Treasury Financing Schedule

 I find this interesting for some reason.  First, realize that the Treasury distinguishes between "bills" which have a duration from 4 to 52 weeks and financial instruments which are longer than one year, including "notes" (which are 2,3,5,7 or 10 years), "bonds" (which are 20 or 30 year), "FRNs", floating rate notes (which are usually 2 years), and "TIPS" - Treasury Interest Protected Securities, which are usually 5 years.

Excluding the bills, these are the auction dates:

4th quarter of 2023: 11/15 ($114 bn) , 11/24 ($24bn), 11/30 ($180 bn), 12/15 ($110 bn), 12/29 ($44 bn)

1st quarter of 2024:  1/2/24 ($168 bn), 1/16/24 ($122 bn), 1/31/24 ($220 bn), 2/15/24 ($125 bn), 2/23/24 ($26 bn), 2/29/24 ($195 bn), 3/15/24 ($121 bn), 3/28/24 ($16 bn)

You could look at these schedule and project them to the end of the fiscal year and probably be correct.  They are pretty predictable.

About 2/3 of the money raised will go towards paying off maturing debt.  But this still doesn't explain what they need all of the money for.  They have already increased the balance of the Treasury checking account at the Fed, they are using a lot of money to pay off maturing notes and bonds, they will be financing deficit spending, and there still a lot more money that that they are raising that they haven't explained.  Where will it go? A) to increase the balance of the checking account even more, B) to cover deficit spending including interest, which is higher than anticipated, or C) some other reason they haven't explained.  My guess is B, that the deficit will be higher than anticipated, but we will see.

M5 as of September 30 2023

 M5 is a formula I came up with a few years ago to measure the money supply.  I think I named it so it wouldn't conflict with other measurements.  Anyways this is the current calculation:

M5 As of 9/30/2023:

M2 (as of 9/30/23) = 20,754.9

Public Debt (as of 9/30/23) = 26,330.1

Less Fed Held = -4,900.1

Total = 42,184.9

The first time I did this calculation was about 10 years ago and the number was 20,561.8.  So it has more than doubled since then.

Will there be a $3.3 trillion deficit in FY 2024?

 Read this: Marketable US Treasury Debt to Explode by $2.85 Trillion in the 10 Months from End of Debt Ceiling to March 31, 2024 | Wolf Street

So the Treasury has already replenished its bank account in Q3 2023 with $600 bn of the $1 trillion issued. They are keeping a $750 billion cash balance.  But they are still planning on selling massive amounts of new debt:

Q4 2023 $776 billion

Q1 2024 $816 billion

Q2 2024 $850 billion (my projection)

Q3 2024 $900 billion (my projection)

Total  $3,342 billion.

What do they need all that money for?  We already know the projected spending.  The primary deficit should be about $1 trillion in FY 2024.  And net interest should be about $800 billion.  So I don't understand why they need more than about $2 trillion in new debt.  

Even just looking at the first quarter, the deficit will be about $450 billion.  So why are they selling $776 billion in new debt, especially at these high rates?  What is the extra $326 billion for?

This doesn't make sense at all.  We will find out soon enough.

Update (2/6/24):  The Treasury will need only $202 billion in the April-June 2024 quarter, so I was way off in this post.

As for the other question I raised about Q4-2023, the actual deficit was $509 billion for the first quarter of FY 2024.  And it looks the like net debt to the public increased by $608 billion (from $26.330 trillion to $26.938 trillion) so there is "only" $99 billion extra, which is almost a rounding error in Washington these days.  

And if in Q3-2024 they borrow $600 billion to cover the expected deficits (not the $900 billion is mentioned above), that would mean the total borrowing in FY 2024 is about $2.4 trillion (not $3.3 trillion), and the total deficit in FY 2024 will be about $2.1 trillion, which will be the second-highest ever, after the pandemic FY 2021 (which had a $2.8 trillion deficit).

What is the value of a treasury bond?

 How would you measure the intrinsic value of a treasury bond?  So here is my idea.  Assume that 10% of all future tax revenue is dedicated to paying the principal and interest on bonds (and the other 90% is used to pay expenses).  This would assume that the budget is actually balanced and not that the country is going deeper into debt every month.  Anyways, we can project the future tax revenues (see my last projection), and I go out 30 years (2024-2053), and then figure out the present value of this number, assuming a 5% rate and a single payment per year.  The present value I come up with is $12.688 trillion.  Now compare this to the marketable debt outstanding, which is $26.58 trillion as of 10/31/23.  So this means that the actual value of a treasury bond is only 48 cents on the dollar.  The other 52 cents can be covered only by issuing new debt, and if the Treasury for some reason couldn't issue more debt, but could keep taxing people, then only 48% of it would be paid.

I don't know if this is an accurate way of valuing it, but it is an interesting idea to think about.  So the whole thing definitely is a Ponzi scheme assuming that you can issue new debt to infinity.  Question - what is the largest Ponzi scheme that has ever collapsed?  Bernie Madoff had a $20 billion scheme going and that appears to be the biggest.  Were there any bigger?

What is the value of a dollar?

 A dollar is a liability of the Federal Reserve. So I am really asking, what is the ratio of assets to liabilities on the Federal Reserve balance sheet.  The latest one we have is from June 30, 2023.  It shows assets of $8.375 trillion.  This includes $74.7 billion of deferred assets for the money it doesn't have to pay the US Treasury.  It also includes $7.916 trillion of SOMA holdings, which however have a fair market value of only $6.902 trillion.  So there is an unrealized loss of $1,013,555 (million).

So the assets really have a value of $7.360 trillion vs liabilities and equity of $8.375 trillion.  So the value of a dollar is backed only by 88 cents of assets.  That is why inflation is intrinsic.  Obviously the smart thing to do would be to take the dollar and invest it in something that is going to give you a dollar's worth of value.  Like a US Treasury bill. You can buy one in increments of $100 that matures in only 28-days and it will pay you interest and it is backed by the full faith and credit of the United States.  Everyone should (in theory) immediately do this and stop using dollars and instead start using promissory notes backed by Treasury bills.  If this happened then the Fed would (in theory) go bankrupt.  Because Treasury bills will provide you the full value of your money.  Or will they?  To be continued...  

Update: The deferred assets don't have any market value.  If you exclude them, this makes the value of a dollar only 87 cents.

====================

Update: The new quarterly report as of September 30, 2023 is available here. There are total assets of $8.195 trillion; however, this includes deferred assets of $106 billion.  The SOMA holdings are $7.695 tn, with a fair market value of $6.394 tn, for an unrealized loss of $1.302 tn.  So there are assets with a FMV of $6.787 trillion compared to liabilities and equity of $8.195 trillion.  So the value of a dollar is now only 83 cents.

So what does this mean?  Everyone is in denial but the Fed is insolvent.  If they were a commercial bank, they would be shut down.  So what is the solution?  Obviously to cut interest rates, which will increase the FMV of the holdings, and it will also help with the deferred assets.  And maybe get a bailout from the US Treasury, which could get a special equity stake, and get its investment back if the condition of the Fed increases.

However, if the Fed keeps issuing phony money, this is how hyperinflation starts. 

FY 2024 Projected Monthly Deficits

 Just for fun, I am doing a forecast of monthly deficits.  If the deficits are less than this I can be pleasantly surprised.  If they are more than this I can forecast more gloom and doom.  Let's see what happens.

	Estimate
	FY 2024
October	 100
November 250
December 100
January	 50
February 300
March	 400
April   -200
May	250
June	250
July	300
August	100
September 200
	======		
Totals	2100

I really hope the annual deficit is less than $2 trillion, but I think this is my prediction.

Were expenses in FY 2023 distorted and is the FY 2024 deficit understated?

 The U.S. federal government’s fiscal year came to a close on September 30 and the budget execution data has just been published. It received $4.4 trillion in revenue collections and had $6.1 trillion of outlays, leaving a deficit of $1.7 trillion, the equivalent of 6.3% of gross domestic product (GDP). In 2022, the deficit was $1.37 trillion. These figures, however, are distorted. In 2022, the administration included as an expense a $379 billion plan to forgive student debt, but this plan never executed, as it was struck down by the Supreme Court in June. The $333 billion reversal was recorded this year as lower spending in 2023.

Taking this into account, the deficit more than doubled to $2 trillion (7.5% of GDP), a bar only surpassed during the two years of the pandemic. The main cause was the 9% drop in revenues.   https://www.msn.com/en-us/money/markets/the-united-states-is-entering-a-tax-crisis-with-skyrocketing-deficits-and-debt/ar-AA1j679P

Is this true?  Let's look at the expenses for the Department of Education.  The actual expenses in 2022 were $639 billion, and preliminary for 2023 were -$41 billion.  If you undo the adjustment, in 2022 the expenses for Education would be $260 billion (639 - 379), and in 2023 they would be $292 billion (-41 + 333).   So it looks like they were distorted.

What do we expect Education expenses to be in FY 2024?  After a quick search, I can't find the answer.  But in FY2020 the DOE spent $204 bn, and in FY2021 it spent $260 bn.  (In FY 2019, the gross cost was $154 bn with $32 bn revenue for a net cost of $122.)

I really don't have a handle on this.  But let's for a minute assume that revenue and expenses for FY 2024 will be exactly the same as 2023 (without the student debt weirdness and with $292 bn for the DOE).  That means the revenue would be $4.4 trillion and outlays would be $6.5 trillion.  So we are facing a $2.1 trillion deficit in FY 2024.  Or maybe worse.  The net interest in FY 2023 was $659 billion, and in FY 2024 it should be $800 billion (rounded to the nearest $50 billion).  So really the base case is a $2.2 trillion deficit this fiscal year even if all spending (except interest) were frozen at current levels.  Am I reading this right? $2.2 trillion divided by 12 is $180 billion (rounded).  October is almost over.  Are we really expecting $180 billion deficits every month on average?

Ghostbusters

"How do you vanquish evil entities? For this Denver exorcist, the devil is in the details" 

See:  https://www.denverpost.com/2023/10/27/denver-exorcist-tony-bulota-spirits-devil/

And here is their website: https://www.quietus.ltd/our-motto

"There are few who would dare stand upon the precipice and stare into the Abyss, for the Abyss stares back.  Fewer still would stare and observe the shadows and what lurks there it to benefit and safe guard others. Enter the founding members of Quietus Ltd.  They chose to stand in harms way, to know the face and the ways of the darkness to better stop its uninvited encroachment. Since those first days, Quietus Ltd has become a vital resource for those who are experiencing "Worst Case Scenarios", where other attempts at resolution have failed or made the situation worse.  For this reason, some call the members of Quietus Ltd "energetic bouncers" or "Spiritual Special Forces", others refer to them as the "Metaphysical Men in Black."

GDP is now $27.6 trillion

 Current dollar GDP increased 8.5 percent at an annual rate, or $560.5 billion, in the third quarter to a level of $27.62 trillion. https://www.bea.gov/news/2023/gross-domestic-product-third-quarter-2023-advance-estimate

Debt to the public is at $26.5 trillion, so the ratio is 96.0%.

The Fed probably thinks this is too high (since most of it is inflation rather than real GDP growth), but this is really really good news from a fiscal sustainability standpoint. For example, the last CBO 10 year forecast released in May 2023 shows the GDP at the end of fiscal year 2024 (i.e. September 30, 2024) is $27,266 billion and we are already much bigger than that one year in advance.

I think the Fed should just let the animal spirits roar and let the good times roll and don't take away the punch bowl while the party is getting going (to mix a few metaphors).  If GDP continues at an 8% annual clip  and the debt increases at only an 6% clip then maybe we can grow ourselves out of this mess a little.

 ===================

Update (11/29/23):  The BEA now says that GDP in the 3rd quarter increased at an annual rate of 8.9% to $27.64 trillion.  

$5 Trillion Deficit in 2025?

 This is hypothetical but there is a decent chance (40% ?) that this could happen.

Read this: https://www.zerohedge.com/news/2023-10-23/unprecedented-fiscal-doom-loop-getting-worse

So as the economy moves into recession in 2024 (as we believe), the US could be looking at deficits as  high as 20% of GDP ($5 Trillion) if the economy slows dramatically. 

(Note: The GDP is now $26.8 trillion, so 20% of that is $5.36 trillion.)  So the reason I say 2025 instead of 2024 is that it will take a while (6-9 months) to realize that we are in a recession and for the government to take action.  The recession may start in January 2024. The stimulus will mostly occur in 2025.  2023 revenues were $4.4 trillion and expenditures were $6.1 trillion.  If revenues drop another 20% to $3.5 trillion, and there is a stimulus of $3 trillion (extended unemployment, tax credits, bailouts etc), then there is $9 trillion in spending vs $3.5 trillion in revenue and a $5.5 trillion deficit.  This is not too far-fetched.

=====================

Ok, even if there is no recession in 2024, there is another problem in 2025 or 2026, which is expiring tax cuts (which will probably be extended) and expiring expenditures (which will probably be reinstated).

Read: https://www.nationalreview.com/magazine/2023/10/16/the-mother-of-all-fiscal-cliffs/

The mother of all fiscal cliffs is coming in 2025, and we’re not ready for it. About $5 trillion in new debt that’s expected to hit in 2025. That’s five times the level of the 2009 stimulus bill responding to the worst economic crisis since the Great Depression, and it’s expected to come in a time of no wars, low unemployment, and a growing economy. A new administration will begin in January 2025, and the first year is usually a time to reward the people who helped get you elected, not to cut the deficit. Simply extending all these provisions would add about $5 trillion to the debt over the ten-year budget window, with about $3 trillion of that coming from extending the tax cuts. But it’s even worse than that. The discretionary-spending caps from the debt-limit deal also expire in 2025, and the debt limit will need to be raised again.

============================

Update (11/1) See this quote from Lawrence Leperd:

Larry says about our worsening financial picture in the U.S.:

“By the way, you know, we're gonna have to start thinking about what comes after, you know, a trillion. I mean, I think it's a quadrillion. And, uh, because, you know, at the stage, at the rate that we're going, it is becoming exponential. And that's, of course, why I believe that this monetary system is doomed. It's just— there's— it's absolutely doomed. I'm— I hate to say that, and I'm not trying to be a doomsayer or fearmonger. I just think it's basic math.”

“There appears to be zero fiscal restraint in Washington D.C. They are behaving as if there’s no consequences but the 10 year is saying ‘oh, there will be consequences, alright,’” he adds.

https://quoththeraven.substack.com/p/time-to-think-quadrillions-as-theres

Debt to the Public hits $26.5 Trillion

 On 10/17/23, Debt to the Public was $26,514,681,646,246.71 .  It seems like it was last month that it was at $26.0 trillion.  The public debt to GDP ratio is now at 98.9%.

If the doubling time is 9 years, then we can expect that on about 10/1/32 this should be at $53 trillion.

The IMF may warns that US Debt Looks Unsustainable

 Read: https://markets.businessinsider.com/news/bonds/us-debt-crisis-government-spending-unsustainable-defaults-interest-rates-imf-2023-10

"The US's $33 trillion debt pile is reflecting "unsustainable" fiscal policy, the IMF said."

The source quoted in the story is a link to an interview at:

https://www.imf.org/en/News/Articles/2023/10/10/tr101023-transcript-of-october-2023-world-economic-outlook-press-briefing

See also    https://www.imf.org/en/News/Articles/2023/10/11/introductory-remarks-to-the-fiscal-monitor-press-conference-vitor-gaspar

Deficit of $166 Billion in September

 The government incurred a deficit of $166 billion in September 2023, CBO estimates, $264 billion less than the deficit recorded in September 2022. The federal budget deficit was $1.7 trillion [actually $1.690 trillion] in fiscal year 2023, the Congressional Budget Office estimates—$0.3 trillion more than the shortfall recorded during fiscal year 2022. Revenues fell by an estimated $455 billion (or 9 percent). Revenues were smaller than in fiscal year 2022, particularly for nonwitheld income taxes and remittances to the Treasury from the Federal Reserve. Outlays declined by an estimated $141 billion (or 2 percent).

Monthly net interest was $67 billion.  Monthly defense spending was $82 billion (774 - 692).

  Monthly Budget Review: September 2023 (cbo.gov)

How does this stand up against my diagnostic questions?

1. Monthly deficit less than 0.6% of the debt to the public.  (If this is true, then the doubling time is 10 years or more).  The debt held by the public was $26.044 trillion on Sept 1, and 0.6% of this is $156 billion, so FAIL.

2. Debt to the Public less than 101% of GDP.  The Debt to the Public is $26.34 trillion but the GDP is $26.8 trillion.  PASS.

3. Net interest is less than defense spending.  PASS.

4. Net interest is less than the primary deficit (which is the deficit excluding interest). PASS.

5. Net interest is less than 25% of tax revenues.  Tax revenues were $469 billion in September. PASS.

6. Net interest is less than $85 billion for the month. ($85 billion is $1 trillion / 12, rounded up).  PASS.

7. The Debt to GDP ratio is increased less than 2% from the previous year.  The current debt to the public/GDP ratio (as of 10/1/23) is 98.3%.  It was at 92.9% just about six months earlier.  FAIL.

That is more passes than fails. So September was a good month.  But watch this space - the day is coming, not too long from now when these will all be fails.

 =============================

Update:  The final numbers show a deficit of $171 billion in September 2023, and a deficit for the year of $1.695 trillion.  This also says that net interest for September was only $29 billion, which seems way too low.

See also https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0923.pdf

================

The national debt on 9/30/23 was $33.167 trillion.  One year earlier on 9/30/22 is was $30.929 trillion.  So it increased 7.2% in one year.

The Great Taking

 Read this blogpost: https://www.theburningplatform.com/2023/10/11/demolition-by-derivatives-when-will-the-banksters-trigger-that-quadrillion-dollar-market-implosion/

which recommend this online book, which I haven't read: https://thegreattaking.com/

Introduction:

What is this book about? It is about the taking of collateral, all of it, the end game of this globally synchronous debt accumulation super cycle. This is being executed by long-planned, intelligent design, the audacity and scope of which is difficult for the mind to encompass. Included are all financial assets,

all money on deposit at banks, all stocks and bonds, and hence, all underlying property of all public corporations, including all inventories, plant and equipment, land, mineral deposits, inventions and intellectual property. Privately owned personal and real property financed with any amount of debt will be similarly taken, as will the assets of privately owned businesses, which have been financed with debt. If even partially successful, this will be the greatest conquest and subjugation in world history.

Who is the author? David Rogers Webb.  I don't know. I have never heard of him before, and can't find out anything about him except that he is the author of this book.  Although he appears in an SEC filing.  He may be legitimate but I am not vouching for him or for his book.  But it looks interesting.

Read also: https://redpillreports.com/learn/who-owns-america-cede-dtcc/

See also: https://ellenbrown.com/

Diagnostic

 Here is a checklist of the situation with the government debt.

1. Monthly deficit less than 0.6% of the debt to the public.  (If this is true, then the doubling time is 10 years or more).  For August because there was a surplus, PASS.

2. Debt to the Public less than 101% of GDP.  The Debt to the Public is $26 trillion but the GDP is $26.8 trillion.  PASS.

3. Net interest is less than defense spending.  For August, net interest was $72 billion, but defense spending was $62 billion.  FAIL.

4. Net interest is less than the primary deficit (which is the deficit excluding interest).  For August, because there was a surplus. FAIL.

5. Net interest is less than 25% of tax revenues.  For August, FAIL.

6. Net interest is less than $85 billion for the month. ($85 billion is $1 trillion / 12, rounded up).  PASS.

7. The Debt to GDP ratio is increased less than 2% from the previous year.  The current debt to the public/GDP ratio (as of 9/1/23) is 96.9%.  It was at 92.9% just a few months earlier.  FAIL.

If these are all fails then the situation is completely out of control.  So things aren't that bad, yet.

16 year cycle

 Are we on a loop, repeating events from 16 years ago?  Of course not exactly, but I think things are uncannily close.

Here are the interest rates from 9/28/2007 and 9/28/2023:

Date		6 Mo	1 Yr	3 Yr	10 Yr	30 Yr
=========	=====   ====	====	=====	=====
09/28/2007	 4.09	4.05	4.03	4.59	4.83
09/28/2023	 5.53	5.46	4.83	4.59	4.71

Source: https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202309

The 10 years rates are exactly the same.

Other maybe parallels:

President:    George W Bush vs Joe Biden

War:    Iraq vs Ukraine

Housing Market:  The housing market peaked sometime in 2006. The credit markets froze in the summer of 2007, and a housing crash began in August 2007.  vs Now: The housing market peaked about May 2022.  

Interest Rates:  The Fed rose rates to 5.25% in July 2006 where they stayed until Sept 2007 when they dropped to 4.75. And now the Fed rose rates to 5.25% in July 2023.  

Update: 10-year and 30-year Treasury yields rise to their highest levels since 2007

Business Cycle:  The Great Recession began in December 2007 and lasted until June 2009.

Stock Market Peak:  Oct 9, 2007:  DJIA peaks at 14,164.  Jan 4, 2022: DJIA hits all time high of 36,800. Aug 1, 2023: DJIA hits 2023 peak of 35,679.

Update: Treasury 10-Year Yield Breaches 5% for First Time Since 2007

New Football Alignment

 For background see:  https://aftermath2022.blogspot.com/2012/08/football-follies.html

In the "Good Ole Days" (pre-1996), football teams in the western US looked like:

The Big 8 consisted of CU, Nebraska, Iowa State, Missouri, Kansas, Kansas State, Oklahoma and Oklahoma State.
The Southwest Conference (SWC) consisted of Arkansas, Baylor, Rice, Texas, Texas A&M, SMU, TCU, Texas Tech and Houston.
The Western Athletic Conference (WAC) consisted of BYU, New Mexico, Utah, Wyoming, Colorado State, UTEP, San Diego State, Hawaii, Air Force and Fresno State. 

The Pacific 10 (PAC-10) consisted of Arizona, Arizona State, UC-Berkeley, UCLA, Oregon, Oregon State, USC, Stanford, Washington and Washington State.

Many, many changes have occurred since then, but I just want to see how things will look after 2025.

1. The Big 8 became the Big 12 and will have 16 members:  Baylor, Iowa State, Kansas, Kansas State, Oklahoma State, Texas Tech, TCU, West Virginia, BYU, UCF, Cincinnati, Houston, Colorado, Utah, Arizona State, and Arizona.  Oklahoma and Texas will be joining Southeastern Conference (SEC).  Nebraska is part of the Big 10. Missouri is part of the SEC.

2. The SWC has disappeared.  Baylor, Houston, TCU, and Texas Tech are part of the Big 12. Arkansas joined the SEC. Texas A&M is in the SEC. Rice and SMU are in the AAC.

3. The WAC was succeeded by the Mountain West Conference (MWC) which will have the following 12 members: Air Force Academy, Boise State, Calif State-Fresno, CSU, UN-Reno, UNLV, New Mexico, SDSU, SJSU, Utah State, Wyoming, Hawaii.   In addition, Oregon State and Washington State will probably join, giving this 14.  Changes from the old WAC are: BYU went to the Big 12, Utah went to the Big 12, and UTEP is in Conference USA.

4. The PAC-12 of course is imploding, with Arizona, and Arizona State joining the Big 12, UC Berkeley (renamed to Cal) and Stanford joining the ACC; UCLA, USC, Oregon and Washington joining the Big 10, and Oregon State and Washington State probably joining the MWC. 

So which of the 40 or so of the teams originally listed are not part of the new Big 12 or MWC?

To the SEC: Oklahoma, Texas, Missouri, Arkansas, Texas A&M.  To the Big 10: Nebraska.  Also UCLA, USC, Oregon, Washington.  To the AAC: Rice and SMU.  To Conference USA: UTEP. To the ACC: Cal and Stanford.

I think that is correct, there are 5 additional conferences that teams went to.  The only thing that seems weird to me is that SMU should be in the Big 12, why are they in the AAC?  The Big 12 passed on them, even though the headquarter of the Big 12 is in the DFW area and so is SMU.  Also, why did the Big 12 accept UCF?

Anyways, this is very confusing, but kind of interesting.

Update: After I just posted this, I found out that SMU will be moving from the AAC to the ACC, along with Cal and Stanford.

Update 2: What are the best conferences in College Football?  I think these are the rankings:

1. SEC. 2. Big 10, 3. Big 12,  4. ACC, 5. MWC, 6. AAC. The worst are Sun Belt, Conference USA and Mid-American.

Who are the winners on the original list (they went to a better conference)?  Oklahoma, Texas, Texas A&M, Missouri, Arkansas, Nebraska, UCLA, USC, Oregon, Washington.  Who are the losers (they went to a worse conference)? Rice and UTEP.  Everyone else stayed pretty much the same.

Massive hidden losses at megabanks

 The megabanks (which is what I call the too-big-to-fail banks) bought trillions of low-interest Treasury securities in 2020 and 2021. Then the Fed started raising the interest rates from 0% in March 2022 to 5.25% in June 2023.  See "The Perfect Storm Hits Big Banks".  The banks have at least $500 billion in unrealized losses.  But, no problem you say, they can just keep them until maturity.  But they also have deposit flight, which may require them to sell securities to raise capital.  So the banking crisis which started with Silicon Valley Bank and Signature Bank is not over.  But the megabanks are too big to fail, so I think the Fed will be forced to step in and purchase some of these securities at face value, thus covering the losses.

Update:  Bank of America has unrealized losses on its hold-to-maturity bond portfolio of at least $100 billion and possibly as much as $135 billion. https://www.msn.com/en-us/money/topstocks/jpmorgan-bond-losses-hit-40-billion-bank-of-america-s-should-be-more/ar-AA1iaRAk

Update 2:

Moody's estimated last month that US financial institutions had racked up $650 billion worth of paper losses on their portfolios by September 30 — up 15% from June 30. The ratings agency's data still doesn't account for a hellish October where the longer-term collapse in bond prices spiraled into one of the worst routs in market history. These "losses" are not the same as debt, however, which describes actual borrowings that need to be repaid.  Bank of America is the big lender worst affected by the crash in bond prices, having disclosed a potential $130 billion hole in its balance sheet last month. The other "Big Four" banks — Citigroup, JPMorgan Chase, and Wells Fargo — have also racked up unrealized losses in the tens of billions, according to their second- and third-quarter earnings reports.

 https://uk.style.yahoo.com/bond-market-crash-leaves-big-211843623.html

National Debt hits $33 Trillion

 On 9/15/2023, the National Debt officially hit $33,044,858,730,468.04.  This was just 3 months after it hit $32 trillion.  It bears reminding that it was only $23 trillion on 12/31/2019, and it has increased $10 trillion since then.

When was it $16.5 trillion?  On 2/13/2013, so the doubling time is just over 10 years.  So in 2033, it will be $66 trillion, if it increases at the same rate.   Before, I said that it would hit $64 trillion on 2034, but it will obviously be faster than that.

When was the last time the debt didn't increase by at least $2 trillion in a calendar year? That would be 2018, when the debt increased to $21 trillion, and that was the only milestone that year.

So, we can expect this to hit $34 trillion in about 6 months, say by March 1, 2024.

Update:  Read this - https://brucewilds.blogspot.com/2023/09/national-debt-now-more-than-33-trillion.html

Surplus of $90 Billion in August 2023

See: https://www.cbo.gov/system/files/2023-09/59474-MBR.pdf

The year-to-date deficit is $1.523 trillion.  

The only thing I really care about is net interest and defense spending.  Net Interest FYTD is $644 billion and last month was $572 billion, so that is $72 billion for the month, which is probably the highest it has ever been.  Defense spending FYTD is $692 billion and last month was $630 billion, so it was $62 billion for the month. So interest won again.  

Will defense ever spend more in a month than net interest?  It's not that I am trying to encourage defense spending, but the point is that interest is crowding out defense spending.  I previously thought  that wouldn't happen until 2029.  Now it looks like starting next fiscal year, which starts in October, that spending on interest will permanently exceed spending on defense.

There is usually a deficit in September, so the total 2023 deficit should be close to the prediction of $1.685 trillion.  We will know in about a month.

Update (9/20/23):  Here is another metric we should be watching: net interest as a percent of tax revenue. For August '23 the tax revenue was $284 billion.  So the net interest as a percent is 25.3%.  This is a huge problem, but lets see where it is for FY2022 as a whole - the numbers should be out in about a month.

 ===================

As of 8/31/23 the national debt was $32.914 trillion.  As of 8/31/22 it was $30.936 trillion.  It increased 6.4% in one year.

Debt to the Public hits $26 trillion

 On 8/31/23, Debt to the Public was $26,044,050,577,584.54.  It seems like it was just a couple of months ago that it was at $25.5 trillion.  The public debt to GDP ratio is now at 96.9%, so no worries.

When did it hit $13 trillion? On 12/30/2014, just under 9 years ago.  So in 9 years from now, in 2032, it should be at $52 trillion.

All Else Is Not Equal

 Read: https://www.zerohedge.com/markets/deficit-surge-will-lead-lower-rates-not-higher

If all else were equal, then more debt would require higher interest rates. Many “bond bears” suggest that rates must rise as deficits increase and more debt is issued. The theory is that at some point, buyers will require a higher yield to buy more debt from the U.S. Such is perfectly logical in a normally functioning bond market where the only players are the individual and institutional bond market players.  In other words, as long as “all else is equal,” rates should rise in such an environment.

However, All Else Is Not Equal.  What will happen is the Fed will kill the economy by continually raising rates, this will cause a recession and then the Fed will engage in a massive QE bond-buying program of $4 trillion or more to lower the rates.  The Fed has the power to raise rates and lower rates as it has demonstrated and they don't want to kill the golden goose / magical money tree.  So they will lower rates.  And it will end in a frozen wasteland of an enormous amount of unproductive government debt at close to zero interest rates, just like Japan. Given the current push by Central Banks globally to suppress interest rates to keep nascent economic growth going, an eventual zero-yield on U.S. debt is not unrealistic.

Deficit of $222 Billion in July 2023

 The deficit in July 2023 was $222 billion, CBO estimates—$11 billion larger than the amount recorded in July 2022. The federal budget deficit was $1.6 trillion [actually $1.617 trillion] in the first 10 months of fiscal year 2023, the Congressional Budget Office estimates—more than twice the shortfall recorded during the same period last year. Revenues were 10 percent lower and outlays were 10 percent higher from October through July than they were during the same period in fiscal year 2022.  https://www.cbo.gov/publication/59377/html

Why were the outlays higher?  Mostly because of these 5 categories:  1) Social Security benefits rose by $111 billion (or 11 percent); 2) Medicare outlays increased by $104 billion (or 18 percent) ; 3) Medicaid outlays increased by $29 billion (or 6 percent); 4)  Net outlays for interest on the public debt rose by $146 billion (or 34 percent), mainly because interest rates are significantly higher than they were in the first 10 months of fiscal year 2022; 5) Outlays of the Department of Education increased by $91 billion (or 57 percent), primarily because in July the Administration recorded the costs ($71 billion) it estimated for modifying outstanding student loans.

What was the net interest for the month? It is $572 billion FYTD, and last month this was at $505 billion, so the interest for the month was $67 billion.  Defense spending FTYD is $630 billion and last month this was at $576 billion.  So it was only $54 billion for the month. (This doesn't seem right, usually military spending is about $65 billion per month, so maybe there is a mistake somewhere.)  But if this is a sporting event, team Interest won July over Defense.  Time for Defense to spend more.

 ===============

On 7/31/2023, the total national debt was $32.61 trillion.  One year earlier, on 7/31/22, it was $30.6 trillion.  So it increased 6.5% in one year.

Interest on Reserves

 The Federal Reserve pays interest on reserve balances.  It started doing this in October 2008 as part of the reforms after the Great Recession.  However, I think this is very problematic.  The total reserves as of 8/2/23 are $3.19 trillion.  The rate paid is about 5.25%, or about $175 billion per year.

This money actually fuels inflation.  When the Fed raises rates, this amount goes up.  The banks love it because it is free money - it is effectively a subsidy from the Fed.  They don't have to make risky loans to earn it.  And the bizarre thing is that the Fed doesn't treat the amount paid as an expense.  Instead it is capitalized.  The total is called a "deferred asset" because of the fiction that this reduces what the Fed owes the US treasury in the future..  The total as of 8/2/23 is $85 billion.  This total is going to keep going up.  This is still a very small part (about 1%) of the Fed balance sheet, which is $8.2 trillion.  It is "magic money" that just falls out of the sky, that one party sees as free money and the other party doesn't treat as an expense.

Here is an article on the topic: https://www.cato.org/cato-journal/spring/summer-2019/interest-reserves-history-rationale-complications-risks#complications-and-risks  One must question the wisdom of making IOER a permanent part of the Fed’s toolkit, given the resulting complications and risks.

New Deficit Projection

 

Here is my latest deficit projection.  The long term forecasts from the CBO use percentages of GDP, so I included more columns showing receipts and expenditures as a percent of GDP.  Also, I rounded numbers to the nearest $50 billion (anything smaller is a rounding error).  This shows the 150% mark exceeded in 2039, which is 4 years sooner than last years forecast, so this is a significant deterioration.  The good news is that the GDP projections are higher (because of inflation).  The bad news is that expenditures separate from interest are much higher (also because of inflation).  And of course the interest amounts paid are much higher.

What do I think will happen in 2039?  Well we can't know the year exactly, but at some point the entire dollar based system will veer off into hyperinflation, and it will have to be replaced with something else.  So I don't see how our system can continue past 2039.  And that is a relatively optimistic forecast.  It is showing that interest rates in 2039 will only be 4.5% and they are already higher than that.  So I expect the next forecast to be even earlier than 2039.  Another thing is that Social Security will run out of money in 2034, and I expect it to remain fully funded, so this will add to the primary deficit, and that is not accounted for here.

Don't question the ability of the US to pay its debts

Two months after the U.S. neared its first-ever debt default, President Joe Biden has created a team to assess ways to avert future standoffs over the country's debt ceiling, according to a media report Thursday.

The working group, consisting of administration officials and without any Republican members, will be led by White House Counsel Stuart Delery and National Economic Council Director Lael Brainard, Bloomberg reported, citing a White House statement.

“Now that the latest debt ceiling crisis is behind us, it is necessary to explore all legal and policy options to prevent Congress from ever again holding hostage the full faith and credit of the United States,” the statement said.

https://seekingalpha.com/news/3989480-biden-said-to-form-team-to-avert-future-debt-limit-standoffs

Because the debt limit should be infinity, right?

GDP is now $26.8 Trillion

 Current‑dollar GDP increased 4.7 percent at an annual rate, or $305.2 billion, in the second quarter to a level of $26.84 trillion.  https://www.bea.gov/news/2023/gross-domestic-product-second-quarter-2023-advance-estimate

The Debt Held by the Public is $25.7 trillion as of 7/31/2023.  Thus, the debt to GDP ratio is currently 95.8%.  So nothing to worry about.  The last time I calculated this, only 3 months ago, the ratio was 92.9%.

I think as long as this ratio stays below 101% (100% plus a margin for error) then we can continue business as usual.  Once it gets to 101% then the interest as a percent of GDP will be greater than the interest rate and it will start compounding more rapidly.  This should occur sometime in 2025, probably.

Update (October 24): 

The BEA made another estimate of 2nd Quarter 2023 GDP: 

Current dollar GDP increased 3.8 percent at an annual rate, or $249.4 billion, in the second quarter to a level of $27.06 trillion.

So they said that GDP didn't increase as much as they thought before, but the current level is higher.  This is because they also adjusted the 1st quarter higher. Anyways, this is good news.

The debt to the public is now at $26.5 trillion so the ratio is now only 97.9%, which is still less than 100%.