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March 31, 2018 | America’s Two-Party System Is Done

Is an American author of books and articles on economic and financial subjects. He is the founder and president of Agora Publishing, and author of the daily financial column, Diary of a Rogue Economist.

GUALFIN, ARGENTINA – The most remarkable thing about the latest federal budget is that no one seems to find it remarkable.

As far as we know, no member of Congress read it. And the president – who is supposed to be the nation’s chief executive officer – has only the dimmest idea of what is in it.

And yet, it establishes three astonishing new things.



Boondoggles for Everybody

First, governments typically promise peace and prosperity. But this budget practically guarantees war and poverty. The military will be given more money to meddle in other people’s affairs.

And the deficits – $1 trillion a year and going up, the largest ever without an emergency – almost certainly will cause a financial crisis and leave Americans poorer.

Second, the checks and balances of the two-party system have been almost eliminated. There is only one party now: the Deep State Elite.

Yes, the Democrats and Republicans still fight – or pretend to fight – amongst themselves. One side wants a wall. The other wants more aid to unwed crossdressers.

But the latest budget shows that they have essentially joined forces against the American people. Boondoggles to the left. Boondoggles to the right. They’re all on the same team now… Boondoggles for everybody.



Horse Trading

Back in the old days, there was only so much blood Congress could squeeze out of taxpayers. The predators on the Left and on the Right had to fight over it. “Horse trading,” they called it, not bothering to mention that they were trading someone else’s horses.

No more. Now, the trading has come to an end. There appears to be an unlimited number of horses.

No need to make deals and trade-offs. No need for smoke-filled rooms. No need for give; it’s all take now.

Joe Withrow from the research department, highlighted yesterday some of the nags that should have been taken out and shot. That’s why we have a president with a pistol in his belt.

When Congress fails to do its duty, the ultimate check is that the president is supposed to use his veto to force Congress to come to its senses.

Each member of Congress represents a specific place or group of people – each with its own dreams of avarice. The president is supposed to represent the entire nation and use his veto when the sum of congressional greed threatens the financial health of the republic.

But now, the checks and balances are gone…

Money for this, money for that. War here, war there. What the heck, deficits don’t matter.



Shameful Bankruptcy

But that brings up the third big thing no one seems to care about: the finances of the richest country on earth have become a dangerous sh*thole fantasy.

With the end of the two-party system, no fear of deficits, and no way to curb spending, we are now looking ahead to national bankruptcy – and not an honest one.

The feds can legally counterfeit money to pay their bills. So they’re going broke in a shameful, underhanded way.

As more and more baby boomers retire, the costs of Social Security and Obamacare (which the Republicans didn’t repeal) keep going up, rising faster than tax receipts.

Meanwhile, Republicans and Democrats keep spending more and more money on their fake wars, intended chiefly to shift wealth and power to the military/industrial/Deep State cronies.

Between more money to domestic boondoggles and more money to foreign boondoggles, there is no room to ever balance the budget, let alone pay down the accumulated debt.

What’s more, as the feds need to borrow more money, they will inevitably force up interest rates. This will weigh heavily on their outstanding debt – now $21 trillion.

As Dan Denning showed yesterday, the quarterly interest payments on the national debt are now more than half a trillion dollars.

The yield on a 10-year note is still less than 3%. But each additional 100 basis points (1%) adds another $200 billion or so to the annual interest charge, which has to be borrowed in order to be paid.

From there, all it would take is a few more basis points and it would top $1 trillion.

As the feds drive up interest rates, they also hog the available credit.

Honest borrowers – who make real things and provide real services – get “crowded out” of the debt market. This, of course, reduces growth and output… and federal tax revenues.

Punky Economy

Let’s see… Tax revenues go down. Spending goes up. The economy goes punky. Already, U.S. debt is headed for $40 trillion (or perhaps much more) by 2028.

What will give?

Let us squint and try to peer into the future… (realizing that we are no better at it than anyone else):

The stock market will crash. Then, the Fed will panic. So will the White House and Congress. Almost immediately, new spending programs – shovel ready – will appear.

Deficits will soar to $2 trillion. The Fed will cover them with more fake money.

Consumer prices will rise. Asset prices, in real terms, will fall.

The insiders will front-run the feds – anticipating which industries and assets will benefit or get whacked. (Big steel gets a subsidy… Amazon takes a beating.)

The Deep State will gain power and money; the public will suffer.

Has anyone been to Venezuela lately?




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March 31st, 2018

Posted In: Bill Bonner's Diary

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