“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.”
– Thomas Jefferson
Our country is in a real difficulty. It is rarely talked about in the Press, but it is there, nonetheless. Bank of America projects that the United States will have a debt of $34 trillion by year-end. This is the largest debt in our history.
Bank of America also projects that we will rack up $1 trillion more in debt every 100 days. According to our Treasury Dept., we spent $429 billion on interest payments alone in the last year. To put that number in perspective, that is 240% of what the government spent on transportation, commerce and housing combined.
The U.S. Bureau of Economic Analysis (BEA) states that the income, Gross Domestic Product (GDP), of the United States was 27.96 trillion at the end of 2023. This means that our debt is $6.04 trillion more than our economy produces, and that is just not sustainable.
In fact, America sold $22 trillion in debt last year while the Fed raised interest rates to combat inflation. In doing so, our Federal Reserve Bank also raised borrowing costs, which have skyrocketed for credit card debt, over 22% now, and HELOCs and corporate borrowings while a yield of over 5% on our 10-year Treasury, in my opinion, is clearly in sight.
According to Fed data, America’s national debt rose 86% over the last decade, while our GDP grew by 63%. This is just not sustainable.
Looking forward, our Treasury Department projects America’s borrowing, in May alone, to be $385 billion. We are walking into a sinkhole where either expenditures must be cut or taxes raised, and both of these options have serious consequences, in my opinion. We are in the trial now, with no tribulations yet in sight.
Bloomberg now pegs their U.S. Treasury Index at 4.81% while their Investment Grade Corporate Index now yields 5.71% and their High-Yield Index now stands at 8.27% and their Municipal Bond Index has risen to 3.70%.
You can see the quagmire as it will not only be our Federal Government paying higher interest costs but also our people and our corporations and our states and our municipalities.
No doubt that the Fed is battling inflation, but also no doubt that they are raising interest rates, borrowing costs, on anything and everything in sight.
“We must make our choice between economy and liberty or confusion and servitude…If we run into such debts, we must be taxed in our meat and drink, in our necessities and comforts, in our labor and in our amusements…if we can prevent the government from wasting the labor of the people, under the pretense of caring for them, they will be happy.”
– Thomas Jefferson
There are a number of people at the Fed that get my commentary. Today, I take a moment to ask them to consider the collateral damage they are causing in keeping our interest payments at such high levels. I ask politely, but I think that inflation is only one part of the circumstances that govern our economy. I believe they need a wider view!
To offset the high cost of money, at present, I suggest investing in some closed-end funds and some REITs where the dividends are paid monthly and where the yields are higher than 10%. I follow about 70 of these securities, and you can get a hold of me if you want some help here.
Remember, that if you re-invest the money each month that you get compounded interest so that the dividends, at the end of the year, are actually higher than the stated yield because the compound interest consistently adds to your principal value, regardless of the liquidating value.
Original Source: Author
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Read the full article here
