Category: Annus Horribilis

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Decade Horribilis: The 2030s

George Noga

The next decade will be the perfect storm for America
GEORGE NOGA
JUN 11, 2023

On January 1, 2022 I distributed a post entitled Annus Horribilis in which I wrote that the coming year would contain a phantasmagoria of horrors. My predictions included:

  • Russia invades Ukraine; China and Russia form an entente
  • Iran races toward nuclear weapons and North Korea resumes missile testing
  • The US has double-digit inflation, uncontrolled spending and huge deficits
  • Biden is non compos mentis; his administration, chosen solely on identity, would open the borders, cripple US energy production and promote lawlessness.
Russia and China form an entente

The only major prediction I muffed was that China did not invade Taiwan. Read this post for yourself on our website: www.mllg.us. My 1/1/22 post was the only time in 15 years of blogging I made any such predictions. That I was prescient is not attributable to any special insight or clairvoyance; the predicates were in plain view and many of the dots already were connected. And so it is again for the next decade.

The 2030s will be a perfect storm for America

I derive no pleasure whatsoever from these predictions and hope, against hope, that somehow I am wrong. But again, all the predicates are hiding in plain sight and all the dots are starting to connect – just as they did for 2022.

  • The debt (spending) crisis reaches critical mass and goes thermonuclear. Government no longer can borrow money because it is incandescently obvious to all there will be no repayment. Initially, the Fed will print money, but it will lead to runaway inflation and $100 trillion banknotes. The ensuing Great Debt Crisis will be on a par with the Great Depression and last for a (lost) generation.
  • Social Security and Medicare go bust. This is a no-brainer; even the trustees for these programs warn the funds will run out in the early 2030s. The government will use general revenues to prop up current benefit payments while making significant reductions – mostly applicable to future beneficiaries.
  • Geopolitical risks abound. China, which will have taken Taiwan long before 2030, will be the undisputed hegemon in the Asia-Pacific theater and will replace the US for global leadership. While the US is mired in the throes of its Great Debt Crisis, North Korea may invade South Korea and a nuclear-armed Iran will become the hegemon in the Middle East and threaten Israel. Nuclear proliferation will spread to Japan, South Korea, Saudi Arabia and others.
  • Because of the Great Debt Crisis, the ability to defend the homeland and our allies is severely compromised. America’s greatest strength is a strong economy and ours will be in critical condition. We will be lucky to avoid a major war.
  • The US dollar no longer will be the world’s reserve currency. This greatly exacerbates the Great Debt Crisis and forces Americans to pay more (much more) for most of the products they buy – especially energy.

America in the 2030s

Imagine a world with the USA mired in the 20-year Great Debt Crisis with the loss of social cohesion, breakdown of law and order, bankrupt Social Security and Medicare, the Yuan as the world’s reserve currency and facing multiple geopolitical threats with a greatly depleted defense. What if China, Russia, North Korea and Iran formed a compact and threatened us simultaneously in several different places?

Americans chose to worship false gods

How did America get to such a desperate place? We refused, and continue to refuse, to control our spending; we kicked the can down the road until there is no road left. But, most damning of all, we ignored The Gods of the Copybook Headings¹, i.e. the collective wisdom humans acquired since they first came down from the trees.

We chose instead to listen to the false gods of wokeness, climate madness, identity politics and lawlessness. They (politicians) promised us it would be different this time; they promised us the moon was Stilton. They promised us the real problem was white supremacy. They promised us we could spend without restraint, worship on the altar of climate madness and wokeness and let criminals go free.

Throughout the ages, whenever men have worshipped false gods, inevitably the Gods of the Copybook Headings, with terror and slaughter, return!

1        Poem: The Gods of the Copybook Headings by Rudyard Kipling, October 1919.

© 2023 George Noga
More Liberty – Less Government, Post Office Box 916381
Longwood, FL 32791-6381, Email: mllg@cfl.rr.com

MLLG

Annus Horribilis Third Quarter Update Interest on the National Debt Set to Explode

George Noga

Within a year, interest on the national debt will consume 20% of tax revenue.

Annus Horribilis Third Quarter Update

Interest on the National Debt Set to Explode

By: George Noga – October 2, 2022

This post updates our forecast for this year, which we have dubbed an annus horribilis. Please read our prior posts of 1/1/22, 4/3/22, 5/15/22 and 7/10/22 in this series; they are easily available on our website: www.mllg.us. We also provide a truly horrifying update in our continuing coverage of America’s spending crisis.

On New Year’s Day we wrote this would be a year of geopolitical, economic, political and investment horrors; unfortunately, we were right. Looking ahead, we see stagflation, i.e. inflation combined with stagnation. Inflation cannot be brought under control until the federal funds rate exceeds the inflation rate. Today, inflation is 8.3% while the federal funds rate is 3.00% to 3.25%. You can do the math. Markets may not bottom out until well into 2023. However, if we are in the opening stage of the spending crisis, markets may not hit bottom for years. The worst is yet to come.

To the extent our present inflation is caused by excess spending (fiscal policy), it can be ended only via fiscal policy, i.e. revenue and spending brought into long-term balance. Simply jacking up interest rates to create a recession will not be enough.

Spending Crisis: High Interest Rates Devastate the Federal Budget

A long dormant, but intractable and devastating peril has reared its ugly head; interest on the national debt is poised to skyrocket. Interest on the debt for the 12 months ended May 31, 2022, was $670 billion. There are $3.7 trillion of Treasury bills and $2.4 trillion of Treasury notes maturing within one year. Interest rates on the new debt will be 3% higher, equal to $200 billion more in interest as these bills and notes are replaced. Our interest cost will be $870 billion (20% of revenue) within a year; this is more than we spend on defense ($746 billion) or Medicare ($700 billion).

In 2024 interest on the debt will hit $1 trillion – on its way to the moon.

Credit card companies frequently offer low, or even zero, “teaser” interest rates, after which the rates skyrocket. America has benefited from teaser rates for many years. But now the teaser rates have ended, and rates are surging higher and higher. This is akin to taking out a negative amortization adjustable-rate mortgage on the US economy.

We are experiencing a perfect fiscal storm. The stock market decline will reduce capital gains tax collections by $400 billion. As additional debt matures in coming years, higher interest rates will cost about $200 billion per year more – each year. The recession will further reduce tax revenue and create a huge deficit that balloons the debt. In 2024 interest on the debt will reach $1 trillion – on its way to the moon.

Who will be the last person in America to buy a US Treasury bond?

America is trapped in a vicious circle. Higher interest rates increase the cost of borrowing. Interest expense skyrockets, leading to more borrowing, leading to more interest – until the music stops. The US has been on an unsustainable fiscal path for a long time; we have sowed the wind and now we are about to reap the whirlwind.

The US is on a clear path for interest to consume 25% to 30% of all federal revenue within a few years. What will it take for people to quit buying US Treasury debt? Who will be the last person in America to buy a US Treasury bond?

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Watch for our uber-special Colombus Day posting next Sunday.

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Annus Horribilis at the Midway Mark

George Noga

The gates are down and the lights are flashing but there is no train coming.

Annus Horribilis at the Midway Mark

By: George Noga – July 10, 2022

I published a special posting on January 1, 2022, (read it at www.mllg.us) warning that this year would bring unprecedented geopolitical, economic, political and financial horrors. Never before in 15 years and 600 posts did I make any such forecasts. Rarely in human affairs have predictions come true so quickly, accurately and completely.

Geopolitical Horrors

I predicted that if Putin intended to invade Ukraine, it would be in 2022; Putin invaded in February. I wrote Putin and Xi would form an entente; they issued a statement stating, “their friendship has no limits“. I said Iran would race toward a nuclear weapon and threaten its neighbors; they have enriched uranium to weapons grade and threaten Saudi Arabia. I predicted North Korea would act up; they have resumed test firing ICBMs, threatening Japan and even the USA, and testing nuclear weapons. I wrote if Xi intended to invade Taiwan, it would be this year. I now assess this as less likely due to the unexpectedly robust global opposition to Putin’s Ukraine invasion.

Economic Horrors

I forecasted inflation would exceed 10%. The Producer Price Index is up 11% and other indices are up 8.6%. The real rate of inflation is 15% if computed on the same basis as the last time the US had high inflation. I predicted the Fed would surge interest rates leading to a recession. The Fed is now increasing rates three-quarters of a point at a time just as I predicted. They are doing too little too late. The economy shrank by 1.5% in the first quarter. Throughout US history when this has occurred, there is a 94% chance of a recession. The United States likely is already mired in a recession.

Per Barack Obama “elections have consequences“. Indeed they do!

On the economic front, the worst is yet to come. I expect inflation to remain stubbornly high and intractable. The Fed will be forced to raise rates much more than they now contemplate. There will be a prolonged period of stagflation, i.e. inflation combined with stagnation. Ultimately, getting control over inflation will result in a severe recession. The recession, in turn, will lead to out-of-control spending and deficits in a futile attempt by Biden and the Democrats to salvage their tattered political prospects.

Political Horrors

In January I predicted a Biden horror show. The ineptitude of his Administration has exceeded my worst fears. They have hit rock bottom (and are still digging) on every issue: inflation, immigration, energy, supply chain, pandemic, crime and foreign affairs. Identity politics has resulted in widespread incompetence. The following were selected based solely on identity: Harris, Austin, Yellen, Buttigieg, Raimondo, Becerra, Granholm, Cardona, Mayorkas and a slew of lesser lights. Sadly, the gates are down; the lights are flashing; the whistle is blowing, but there is no train coming.

Financial and Investment Horrors

I wrote that in December 2021 I moved my investments into a highly defensive posture with over 70% in cash, cash equivalents and ultra-short duration bonds. I also doubled my holdings of gold, commodities and TIPs. Thus far, the NASDAQ is down over 30% and the S&P 500 over 20%. Commodities are up 30%, but gold is up only slightly due to the strength of the dollar and higher interest rates. The markets are not likely to hit bottom until 2023 or even 2024, but the worst is yet to come. In the immortal words of Barack Hussein Obama “elections have consequences“. Indeed they do!

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Next on July 10th: Soaking the rich and fat cat corporations.
More Liberty Less Government – mllg@cfl.rr.com – www.mllg.us