Bad news. Impossible to ignore. Reality is setting in. So while hiding in the bedroom with the lights out, the dreaded sound of a knock on the door is heard. The sheriff has come to serve you with papers. The U.S. government is suing you for $250,000. That’s each and every taxpayer’s share of the U.S. government debt. Problem; with the U.S. debt ceiling being reached shortly, reality has arrived. The U.S is bankrupt. So, the government needs each taxpayer to “pay up.”
Its pretty certain that almost 99% of taxpayers don’t have that $250K just sitting around. And certainly there isn’t any way to pay off $32 trillion (U.S. national debt) quickly and easily. But suing the citizens probably won’t be popular (or even work) and, ironically, each citizen is also a debt holder the government owes money to. Roughly 22% of the debt is owed to another arm of the government which includes Medicare; specialized trust funds, such as those for highways and bank deposit insurance; and civil service and military retirement programs. But the biggest chunk of those “intragovernmental holdings” belongs to Social Security. Suing yourself sure seems silly, right?
One of those arms of the government, the FDIC (Federal Deposit Insurance Corp.), has been front and center the past couple months. Oh, and probably will be in months ahead as well. With the collapse of two huge banks (Silicon Valley Bank and First Republic) the FDIC, which guarantees bank deposits (up to $250K…….and now maybe more), is running out of reserves. With only around $120 billion of reserves to insure roughly $10 trillion of insured deposits it looks like the FDIC is one (or two) more bank failures away from bankruptcy too. Uh oh!
So it looks like the only way to avoid a U.S. default, make the banking system safe and NOT suing its citizens is to raise the debt ceiling and “print” more money. Well, all this has caught the eye of countries around the globe. Every week it seems more and more countries are joining the BRICS move to “de-dollarize. The BRICS, which stands for Brazil, Russia, India, China and South Africa, formed years ago to develop a new alternative currency to the dollar. But in the last year or so there are at least 19 new “members” wishing to join. U.S. friends and foes such as Saudi Arabia, Malaysia, Iran and even France. They have “noticed” the possibility of “issues” within the U.S. financial system and are moving away from the dollar. As you know, the dollar is backed by “the full faith and credit” of the U.S. Reality has recently sunk in that “full faith” is now gone and “credit” is iffy. De-dollarization plus reality equals……..oh boy, watch out.
To paraphrase a line from the old comedy team of Laurel & Hardy, “Well government, here’s another fine mess you’ve gotten us into.” It may be that reality has finally caught up with the U.S. But what can be done? Since stake holding and equity are such a big deal now, maybe the U.S. declares bankruptcy and swaps all its $32 trillion debt for a new CBDC (equity). Swapping debt for equity is common in bankruptcies. Oh, idea! Back the new CBDC with the S&P 500 index……..it only goes up after all.
If not that, don’t answer the knock at the door. It’s the sheriff.
