The in-your-face charts that explains the inescapable debt trap is below. $1 trillion is being added to Treasury debt level every 100 days.
This chart from the CBO is likely too optimistic on GDP.
Prediction markets are pricing in 2.2 cuts at the moment. Depending on which month the cuts are made – that would take interest expense towards $1.3 trillion by year end.
The reason for this interest expense leverage is that the US Treasury has focused on it’s financing via the short term Treasury bill market. Bill rates are currently 5.4%.
The Federal Reserve now faces a serious threat to it’s inflation mandate versus financing the soaring out of control deficits and debt. By Dec. 2024 should rates remain stable or unchanged interest expense pile-ons to $1.6 trillion. Interest as percent of tax receipts goes to 50% in that scenario.
The punters on Wall Street have already bet on a series of rate decreases. It feels like many market participants are getting comfortable.
“There are massive leveraged players in this market. Multimanager funds are 20x leveraged. It doesn’t require a great imagination to envision them blowing up on some exogenous shock, they nearly did in 2008 and 2020.” – One River Asset Management
— zerohedge (@zerohedge) April 8, 2024
Gold and oil have taken off, perhaps also signaling loosening and war ahead.
The scamdemic and the uni-party economy have allowed the top 1% to clean up in a windfall. Happy days are here again.
Typically this forces the Fed’s hand. But in which way? If the Fed fails to accommodate by maintaining the loosening and following through on the anticipated cuts, the markets will react with a tizzy fit.
But pick your poison: High inflation or possibly even a crack up boom will entail once the rate cut trifectas materializes. That would spike the long term Treasury market and banks already are underwater on longer term debt holdings.
Meanwhile the commercial real estate is already stressed.
Currently, there is roughly $6 TRILLION of Commercial Real Estate (CRE) debt in the US. Banks hold a whopping $3 trillion, or 50%, of this outstanding debt. This year, ~$929 billion, or one sixth of this debt is set to be refinanced, according to Goldman Sachs.
Bank lending is cratering.
The collapse of Silicon Valley Bank (SVB) marked the exact top in lending growth.
Both small and large banks saw lending growth peak at ~15% and ~10% respectively in early-2023.
Since then, lending growth has moved in a straight line lower and it is about to turn negative for… pic.twitter.com/nepqqLo5C7
— The Kobeissi Letter (@KobeissiLetter) April 2, 2024
The average American is now paying nearly 40% MORE for groceries than what they were paying in 2019.
Change In Price Since 2019, by Food Item: 1. Cocoa: +345% 2. Orange Juice: +260% 3. Olive Oil: +219% 4. Sugar: +120% 5. Fruit Snacks: +77% 6. Cooking Oil: +54% 7. Chocolate Bars: +52% 8. Apple sauce: +51% 9. Beef: +51% 10. Mayonnaise: +50% 11. Loaf of Bread: +42% 12. Eggs: +40% 13. Milk: +40% 14. Cereal: +38% 15. Butter: +24%
Americans finance the so called strong economy with credit card debt. The extra savings from the Scamdemic largesse is long gone.
Good. Nothing else will get them off of their Netflix and iPhones in order to govern themselves.