The United States government is in deep, in fact, very deep, financial trouble.
In just one year, the federal deficit – the difference between what the government takes in as revenues and what it spends – has doubled from $1 trillion to $2 trillion.
Yet President Biden and his Uniparty friends want to spend $74 billion more to address “national emergencies,” the kind that occur 5,000 miles away.
Meanwhile, the national debt is steadily climbing to $34 trillion. So significant is this amount that the government is expected to pay nearly $750 billion this year to service the debt. This outlay is about the same as the entire Pentagon budget, which is more than the military budgets of the next ten countries after the U.S.
Government forecasters are so wrong in their estimates that one may be better off just picking numbers from the sky. In February, the Congressional Budget Office forecasted an amount that would need to be allocated to pay interest this year. That estimate is off by a whopping $70 billion today just seven months later. For calibration, $70 billion is more than six times the annual budget for the Centers for Disease Control.
For all the gloating that the White House engages in about the strength of the Biden economy – daily briefings from Press Secretary Karine Jean-Pierre are a trip to fantasyland – federal tax receipts actually fell this year. Please explain this to us, KJP: the administration has raised taxes, the economy is growing, and unemployment is at an all-time low, so how can tax collections go down?
Over on the monetary policy side, the Federal Reserve Chairman is unmoved. Jerome Powell says that inflation is too high and the interest rates are not high enough, arguing that the only way to bring both down to acceptable levels is to slow the economy.
But wouldn’t a slower economy add to deficit spending and increase inflation right back up as the Left rushes to shore up federal assistance to Americans? Remember the $4 trillion in cash injection during COVID-19 and the years after, which put us in this inflationary mess in the first place? Also, wouldn’t a slower economy increase unemployment, leading to even lower tax collections?
The conundrum we describe above has a name in Economics: Stagflation. According to Investopedia, stagflation is an economic cycle characterized by slow growth and a high unemployment rate accompanied by inflation. Economic policymakers find this combination particularly difficult to handle, as attempting to correct one of the factors can exacerbate another: the Whack-a-Mole effect.
The Biden administration does not want to admit that we are already in a stagflationary period. That is, KJP keeps insisting every day that the unemployment rate is low, not high; and why the economy is growing, not slowing. But if we were to believe KJP (we rarely do), why is America in such a fiscal and monetary mess?
And then, there’s Wall Street. Because the dollar is the world’s reserve currency and the default currency for over 90% of international settlements, even when an American entity is not a party to the trade, the dollar’s value is rising steadily with the Fed funds rate so high. On Friday, the 10-year Treasury yield crossed 5% for the first time since 2007. As investors move money to safe Treasurys, stock market indices will fall. The Japanese yen may breach the historically and emotionally significant 150 level and stay there. The last time the yen was this weak was in 1990.
A super-strong dollar is bad for America when the underlying American economy is struggling. Exports are a significant engine of American economic activity, but American companies will lose out to German, Japanese, and Chinese competitors because when priced in dollars, American products become too expensive.
Oil, traded in dollars, becomes prohibitively expensive for many countries that may otherwise have bought American products. These countries must now save their valuable foreign exchange to purchase energy products to keep their economies alive, benefiting OPEC+ oil producers. As Israel prepares to launch a ground offensive, oil prices could breach the $100 mark and stay there, creating a double-whammy situation for the world. The base price of oil goes up because of lower supply in war-torn regions, to be paid for in dollars that are increasing in value.
The mighty military-industrial machine is the only safe American sector exempt from all the stagflationary pressures above. More war means more production of super-inflated products and services, not subject to competitive bidding. More production means well-paying jobs in diverse Congressional districts.
The cost is the long-term impact on America’s health. But the average Uniparty politician quips, “Long-term? Who cares?”
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TIPP Takes
Geopolitics And Geoeconomics
1. Threat To Blockade Strait Of Hormuz – Infographics – tippinsights
Concerns are growing that Iran could close the Strait of Hormuz if the U.S. directly aids Israel in the war with Hamas or tightens Iran sanctions. About a fifth of the world’s oil passes the Strait daily.
2. U.S. Moves Carrier Group To Middle East – Infographics – tippinsights
The Pentagon is sending the aircraft carrier USS Eisenhower and its strike group to the Middle East in an effort to deter others from escalating the Israel-Hamas conflict.
3. U.S. Rejects Calls For Ceasefire In Gaza, Says Would Benefit Hamas – AFP
A ceasefire would “give Hamas the ability to rest, refit, and get ready to continue launching terrorist attacks against Israel,” State Department spokesman Matthew Miller told reporters.
Miller said that the United States was separately working to ensure a flow of humanitarian relief into Gaza, with a U.S. envoy on the ground working “intensively” on aid.
European Union foreign policy chief Josep Borrell said earlier that he expected the bloc’s leaders to back a call for a pause in fighting to let in aid.
4. U.S. Ready For Escalation On Three Fronts, Says Blinken – Middle East Eye
The U.S. is preparing to wage war on three fronts, expecting that Israel’s attack on Gaza will escalate into a regional conflict, Secretary of State Antony Blinken has said.
In an interview with NBC, Blinken said U.S. military forces in the Middle East were ready for a possible conflict between Israel and Hezbollah in southern Lebanon and northern Israel and for attacks on U.S. forces in the Middle East by Iran-backed groups.
5. White House Accuses Iran Of ‘Actively Facilitating’ Attacks On US Bases In Mideast – Reuters
The White House said Iran was, in some cases, “actively facilitating” rocket and drone attacks by Iranian-backed proxy groups on U.S. military bases in Iraq and Syria.
White House spokesman John Kirby said there had been an uptick in such attacks over the last week, especially over the last few days, but the U.S. would not allow its interests in the region to “go unchallenged.”
6. Former President Obama Warns Against Downplaying Palestinian Suffering – Middle East Eye
Former President Obama has weighed in on Israel’s war on Gaza. In a statement he supported Israel’s “right to defend itself” while warning Israel and the U.S. against ignoring the plight of Palestinians.
“But even as we support Israel, we should also be clear that how Israel prosecutes this fight against Hamas matters,” Obama said in the statement published on Medium.
7. Russia Says U.S. Will Not Be At The Centre Of ‘New World Order’ – Al Jazeera
Russia has criticized the United States president’s assertion that Washington must be the driving force in a new “world order,” saying such an “American-centric” vision is outdated.
Kremlin spokesperson Dmitry Peskov told reporters that while he agrees with the need for a “new world order,” he does not believe the U.S. should be at the helm. Any new system should be “free from the concentration of all mechanisms of world governance in the hands of one state,” he said.
8. Putin Found ‘Lying On Floor’ After Allegedly Suffering Cardiac Arrest, Reports Claim – WION
According to a Telegram Channel allegedly run by a Kremlin insider, Putin was “lying on the floor and rolling his eyes.”
In the past, the same channel had made similar updates on the health of the Russian leader, several of which were proven wrong. The alleged incident in the latest update took place on Oct 22.
9. Saudi Crown Prince Talks Ukraine Crisis With President Zelenskyy – Al Arabiya
Saudi Arabia’s Crown Prince Mohammed bin Salman held a phone call with Ukraine’s President Volodymyr Zelenskyy to discuss bilateral relations and the ongoing Ukrainian-Russian crisis.
10. China’s Top Diplomat Wang Yi To Visit U.S., Will Discuss A Range Of Issues, Says Washington – WION
The long-anticipated and rare visit comes amid soaring tensions in the Middle East, among other issues related to trade, the Ukraine war, Taiwan, and Beijing’s actions at the sea near the Philippines.
Wang will be the highest-ranking Chinese official in the U.S. capital in nearly five years.
Wang will visit Washington from October 26 to 28 and meet with his American counterpart Secretary of State Antony Blinken and President Joe Biden’s national security advisor Jake Sullivan.
11. The Australian City Key To Us Plan To Counter China – BBC
Home to several key military bases that could prove crucial in any clash with China, Darwin is at the heart of deepening ties between Canberra and Washington.
While the U.S. has historically focused on Guam, Hawaii, or Okinawa, it is also pouring money into Australia.
12. IMF Projects Japan’s GDP To Fall To World’s 4th In 2023 After Germany – Kyodo News
Japan’s nominal GDP in 2023 is expected to slip from third to fourth in the world on a U.S. dollar basis, to be overtaken by Germany on the back of the yen’s depreciation, recent IMF projections showed.
The IMF’s projections for the period through 2028 say that India, which has surpassed China to become the world’s most populous nation with more than 1.4 billion people, is likely to have a larger GDP than Japan in 2026.
13. Oil Edges Down As Israel Holds Back On Gaza Ground Invasion – UPI
Oil edged lower early Monday as worries over a widening war in the Middle East paused as Israel holds back on an invasion of Gaza even as it continues its war on Hamas.
West Texas Intermediate crude for December delivery was last seen down $0.23 to $87.85 per barrel, while December Brent crude, the global benchmark, was down $0.12 to $92.04.
14. U.S. Officially Concludes Gabon Gov’t Ousted In Coup – UPI
The United States has concluded that a military coup d’etat has taken place in Gabon, the State Department said, as it suspended most U.S. assistance to the African nation.
The declaration, announced by the U.S. government late Monday, comes nearly two months after the Gabon government of President Ali Bongo Ondimba was ousted by the military on Aug. 30.
14. Iceland’s PM Strikes Over Gender Pay Gap – BBC
Thousands of women in Iceland, including Prime Minister Katrín Jakobsdóttir, refuse to work on Tuesday.
The “kvennafrí,” or women’s day off, has been called in protest at the gender pay gap and gender-based violence.
Ms. Jakobsdóttir said her government is looking into how female-dominated professions are valued compared to fields traditionally dominated by men.
15. Humans Have ‘Lost Control,’ No Amount Of Emission Cut Will Slow Down Melting Of Antarctica Ice Shelves: Study – WION
A study published in the journal Nature Climate Change found that no matter the degree of warming this century, West Antarctica’s Ice Sheet melting will speed up as warmer water in the Amundsen Sea erodes ice shelves bordering the ocean.
As per estimates, even under the best-case scenario, if humanity successfully limits warming to 1.5 degrees Celsius (2.7 Fahrenheit) above pre-industrial levels, ice would still melt three times faster this century than last century.
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Republished with permission from TIPP Insights
