What's Percolating Now May Cause The Next Storm

How about a discussion of what's percolating now that may cause the next "storm." Sound good?

We've just finished a kind of "prep course" for the potential "storm" we referenced a few weeks back. We called our course a "mini" stability project - a kind of younger brother to the grand Stability Project that previously dominated our posts for over a year.

Both of these efforts were intended to help us keep our focus on our work despite the various and sundry distractions and potential disasters that have visited some or most of us, with another potential shot coming up this fall.

Again, recall that we hedged our bets a bit here. What we anticipate may not arrive at the designated time. It could turn out that the powers-that-be manage to kick the can down the road yet again. "Yet again" because this can-kicking has arguable been going on for at least two decades.

While we listed specific items that may occur, we didn't spend much time on the impetus behind these. So in the interests of full disclosure, let's spend a bit of time on this. We do so not simply to become better informed about the causes of potential and - at least at some point - the negative consequences, but also because these consequences have already impacted our lives to at least some degree.

Typically we don't get into this sort of detail. Usually, it's more shop-talk we reserve for our professional practice. But to the extent we can help foster at least a superficial level of understanding, we'll do our best to try to lay out some of the major goings-on that will fire up the next storm. Oh, and it's likely some or all of these will not be a revelation to most of us.

There's the matter of our debt, starting with the Federal government. We won't drag you through the numbers as they've piled up, especially since the so-called Great Recession of 2007-2009. Frankly the numbers are numbing. Without going back too far, a few quick for instances: Under Reagan's 8 years in office the National Debt almost tripled, starting at $908 Billion, increasing to just north of $2.6 Trillion. It was a dramatic rate of increase compared to the past. (Whether you liked Reagan's tenure or not, the fact is the national debt really did take off.) Years later, n the midst of the Great Recession, in 2008, it was around $10 Trillion. Now it's over $32 Trillion.

That's just the Federal Debt. States have run up debts in varying degrees. Individuals are - it is reported - incurring increasing dollops of debt again, after the respite caused by those government Covid checks that were distributed in multiple rounds.

All of this debt requires interest payments. While interest rates have been held artificially low as the debt really exploded in recent years (hmmm...), interest rates have finally begun what is likely a long-term ascent. The interest owed will begin to rise exponentially. 

For the Federal debt - the Big Kanuna - it's going to be paid either through taxes or with some generous (ahem) assistance, via money "printing" by the U.S. central bank - the Federal Reserve. None of this will pay down the debt; it will continue to increase as the government continues to spend money it doesn't have. 

For years, people have predicted this would lead to some sort of catastrophe, at the very least a steady increase in inflation. The catastrophe remains in the wings. As for inflation, well, we all know what's up with that.

There's so much more to this story, both as to detail, the potential future consequences, and, not least, the moral implications of piling up massive piles of debt that are never intended to be paid. 

If interested, you can find abundant resources on the internet that could deepen your understanding of what's going on. Here, though, we'll stick with how this has already impacted us, starting with our businesses. We'll get into that more next time. 

For now, we simply note that just because the federal debt is out of control, we need to keep a lid on our personal debt. Same goes for businesses that use debt as a means to finance their money-making activity.

If we want to be good stewards, as we're called to be, debt cannot be allowed to get out of control. 

If you haven't figured it out, the federal government really does set a bad example for the rest of us.

More next time...