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The $34 trillion mountain of national debt is a 'boiling frog' situation for the US economy, JPMorgan warns
(www.businessinsider.com)
this post was submitted on 08 Jan 2024
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United States | News & Politics
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Right, as far as public spending goes there isn't really a problem. They can print to an infinite amount because the debt is in their own currency, and as long as you print the currency, you can print however much you want. There's never going to be a default because the fed can just create more credit. The government can always pay its debt by simply printing the money.
The problem for the US economy lies with private debt that is leading to a default. Creditors are tightening their lending which is leading VC funded businesses to crash. Meanwhile, individuals become increasingly unable to service their debts, we're seeing them being forced to forfeit their property. Private banks that are holding debt also end up with bad debt as a result. This sort of dynamic is precisely what we saw leading up to the 2008 crisis. We're now seeing similar things happening, but on a much bigger scale.
The Fed raised their rates in order to tighten credit, cool the economy, and cause layoffs. And they had to have known that people would start defaulting on their debts. I think that’s the main driver here.
My understanding is that the government knows these banks are insolvent from underwater bonds, and quantitative easing is how they’re trying to keep that swept under the rug. It’s some hat trick around the bonds’ values.
The bonds are underwater as a direct result of the Fed raising rates, and they knew, or should have known, that this would happen.
I think this is the QE hat trick currently in play to rescue banks: https://longviewfa.com/how-the-banking-failures-unfolded/