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Summary
In this deep dive, George Gammon unravels a more severe narrative about the US debt crisis than typically presented by experts and mainstream media. Through a comprehensive exploration, Gammon highlights the complex dynamics behind the government’s escalating debt, emphasizing a crucial imbalance between revenue collection and expenditure. While traditional discourse underscores the explosive growth in national debt and the role of foreign and domestic buyers in sustaining US government spending, Gammon points out the paradoxical lack of a debt crisis, contending that the real issue lies in unrestrained government spending and its societal impacts. As he dissects these multifaceted issues, Gammon also presents the potential consequences of these economic distortions, urging a reconsideration of current fiscal trajectories to prevent the further erosion of US economic stability.
Highlights
US debt discussions often miss underlying complexities, ignorantly suggesting it's purely a looming crisis. 🤔
There's an alarming dissonance between the government's tax collection and spending habits, leading to escalating borrowing. 💰
The process involves Uncle Sam relying heavily on others, including foreign investors, to buy US treasuries. 🌐
A sustained deficit makes the debt appear as a persistent uphill battle, yet it continues to surprise with stable demand and interest rates. 📈
Gammon identifies not a debt crisis but a governmental spending spree causing deep economic distortions. 🚨
Gammon stresses that off-balance sheet liabilities and unfunded commitments pose additional unrecognized threats. 📉
Overall, the relentless spending without addressing systemic economic issues results in an unfolding socio-economic crisis. 📉
Key Takeaways
The US government’s debt crisis is more severe than what mainstream narratives suggest. 🕵️
A significant gap exists between what the government collects in taxes and what it spends. 🏦
Continuous borrowing and the selling of US treasuries sustain government spending. 💸
Foreign demand, notably from international banks and corporations, props up US debt. 🌍
The perception of a debt crisis is contradicted by stable treasury demand and currency behavior. 📊
Excessive government spending, not the debt itself, fuels economic distortions in society. 🔄
Inflation and wealth gaps widen due to these spending habits. 📈
A shift toward a more sustainable fiscal policy is imperative to avoid further economic decline. 🔄
Overview
George Gammon approaches the US debt conversation with a contrarian lens, suggesting that the widely-feared crisis may not be what it seems. According to Gammon, the exponential growth of government debt, peaking at $35 trillion, is not solely reflective of a debt predicament but rather highlights unbalanced fiscal policies that perpetuate overspending. He argues that the real crisis lies in the government’s inability to effectively manage its finances and address spending issues, which creates significant economic inequality and societal challenges.
Throughout his exploration, Gammon details how the current monetary system incentivizes foreign and domestic institutions alike to continue purchasing US treasuries. This helps offset government deficits but simultaneously leads to economic distortions. He highlights how systemic issues in global trade and monetary policies contribute to persistent demand for US debt instruments, despite underlying economic instability. These dynamics shelter the US from an immediate debt crisis but exacerbate domestic socio-economic disparities.
In a sobering conclusion, Gammon warns of the dangerous trajectory the US is on, attributing societal issues like inflation, wealth gaps, and public unrest to government policies. While the narrative surrounding a US debt crisis is largely overplayed, Gammon casts light on a more profound issue of governmental mismanagement that could lead to a deteriorating economic landscape similar to historical financial crises faced by countries like Argentina. He calls for urgent fiscal reforms to realign economic stability.
The US Debt Crisis Is Far Worse Than You Think Transcription
00:00 - 00:30 everybody is talking about the US debt crisis meantime the federal debt load snowballing in recent months reasonable to assume the next president is is quite possibly going a t a debt crisis but unfortunately it's a lot worse than you think I'm going to reveal what the experts and the mainstream media aren't telling you about the US debt crisis in three simple fast Steps step number one let's go over the pro
00:30 - 01:00 at least the problem as they describe it so we've got the government right here and your Drunk insolvent Uncle Sam and he is spending money like the drunken sailor he is that's for sure so the government is spending all of these currency units these dollars into the real economy we have the Average Joe's here and then we'll just call it business XYZ this represents the private sector well the government has to get this money
01:00 - 01:30 from somewhere so they're going to get it one of two ways number one they're going to go ahead and extract money from the private sector through taxation so let's say that we have 8 going into the economy well they're going to pull three of those dollars out in order to continue to spend in the future but you say wait a minute George if they're spending $8 and only extracting three in tax
01:30 - 02:00 I am no mathematician but I know that dog don't hunt so what they also have to do is they have to sell debt they have to sell treasuries they have to borrow money so they'll go into the private sector and they'll say please please guys would you please buy our debt and then some individuals or entities in the private sector say yeah that's a decent deal I know t- bills are paying about 4.75% so we'll go ahead and do it so
02:00 - 02:30 your Drunk insolvent Uncle Sam issues those treasuries that goes onto the balance sheet of the private sector and then those currency units those dollars go into the coffers of your drunk insolvent Uncle Sam so he can go ahead and resend it and redistribute it back into the economy because he wants to buy votes and this is how he does it but we have to notice that now he's only collecting five and spending eight so he still has a problem so he has to go to other Buy ERS insert the foreign buyers
02:30 - 03:00 of us treasuries it's not your average Joe no no no no no it is his Saudi Arabian cousin the average Mo hammed so the Aver so the average Mo Hamed says yeah that's a pretty good deal I'll go ahead and buy this US Government debt because it's yielding right around four five% so those treasuries go go on to his balance
03:00 - 03:30 sheet and then he gives the United States the extra $3 now they have the $8 they need to continue to spend like the drunken Sailors they are and especially over the last 15 years this problem of overspending has gotten completely and totally out of control which is why a lot of people are labeling it a crisis you don't believe me editor let's go ahead and throw some charts look at the
03:30 - 04:00 debt from 2009 2010 or so to today's date it's gone from roughly 9 trillion to 35 trillion an increase of over $25 trillion so let that sink in for a moment from the time that we started the United States call it in the late 1700s
04:00 - 04:30 all the way to 2009 or 2010 that entire let's say 200 plus year span we racked up 9 trillion in debt and just in the last 15 years we tacked on another 25 trillion and I can assure you the debt isn't going to go down anytime soon in my view it's going to continue to grow at a much more rapid Pace in other
04:30 - 05:00 words it's going to go exponential but how did we get to this point how does the debt continue to climb and climb and climb and climb climb and then just go straight up because of the deficits so this is what I'm talking about it's the Delta between what is collected in taxes and what is actually spent that means additional treasuries make up the balance so right now the debt is about $35 trillion like we said so what this
05:00 - 05:30 means is the government has spent $35 trillion more than it has collected so there's $35 trillion worth of treasuries that are on the balance sheets of entities inside and outside of the United States all right well if we look at a chart of these deficits we see how the deficit as a percentage of GDP continues to get more more and more and
05:30 - 06:00 more extreme to the point where we are today we have never seen deficits like this outside of the GFC and World War II and if you listen to the mainstream media this is happening at a time when the economy is running on all eight cylinders so what happens if we do go into a recession what happens if we do have a hard Landing well I can assure you the government's going to spend a
06:00 - 06:30 lot more money they're not going to spend less money and therefore the deficits will continue to explode and by definition the debt itself will continue to explode so the amount of treasuries your drunk insolvent Uncle Sam is dumping onto the market is also going to explode and as you can see I skipped ahead a little bit we're just talking about the supply of treasuries but let's not forget about
06:30 - 07:00 the unfunded liabilities the off-balance sheet liabilities the government has that will be coming due over the next let's say 10 or 15 years things like Medicare things like Social Security so if you've got roughly 200 trillion in off balance sheet debt or liabilities that will have to be paid for that just means not mowing money more money more
07:00 - 07:30 money more money more money more money but more treasuries more treasuries more treasuries and mo debt Mo debt Mo debt and this brings us to what most people consider the end game where the government is issuing so many treasuries there's just no more buyers and therefore the interest rates go completely parabolic and the only option we have is for the Federal Reserve to come in and
07:30 - 08:00 buy those treasuries basically directly from the government your Drunk insolvent Uncle Sam and to create more currency units in the process and this just leads to inflation and a crash of the United States dollar that is the basic argument and to be clear this isn't necessarily my view now it is true I think that it's actually
08:00 - 08:30 a lot worse but as always the devil is in the details and it requires a much more thorough analysis this although I agree with a lot of it in my view is incomplete and therefore loses accuracy you see the key and this is what we're going to talk about in the next step is right here it's the average MO hammed in other words what's happening
08:30 - 09:00 outside of the United States in terms of demand for your Drunk insolvent Uncle Sam's treasuries in other words demand for his debt step number two now let's zoom out and see what the incentives are in the global monetary system so we start with this guy from Step number one he's got these Tre treasuries he looks at what we
09:00 - 09:30 went over and says yeah no thanks I'm going to go ahead and buy gold and this probably makes a lot of sense but we have to realize that the average Mo hammed doesn't have any liabilities and he's a very small player really in the global monetary system it's really all about the banks and the multinational corporations now these are banks that operate outside of the purview of the FED they're in the euro dollar system these are the banks that operate in the
09:30 - 10:00 Shadows but regardless of whether it's a bank or this multinational corporation what they're trying to do is eliminate as much risk as possible because at the end of the day it's risk reward it's not just reward so the major risks that they could take on the asset side of the balance sheet going to be interest rate risk credit risk FX and FX is just the difference between let's say the Japanese Yen and the dollar so let's assume that this multinational
10:00 - 10:30 corporation has to buy oil as an input to make their widgets okay well that's going to be denominated in dollars so if they go out and buy a Yen denominated asset all of a sudden they're taking on FX risk because if that Yen goes down in value relative to the dollar then the burden to buy that oil increases Also let's look at credit risk because if they were to not only buy let's say something denominated in Japanese Yen but let's assume that it
10:30 - 11:00 wasn't a Government Bond let's assume it was something like a clo a collateralized loan obligation and you guys know what Clos are by watching The Big Short movie This is the scene where they've got the Jenga Tower and they've got the different tranches but they take out the puzzle piece at the bottom and the whole thing comes crashing down so that crashing down is a visual representation of credit risk to put it mildly and when you go
11:00 - 11:30 out and buy something like a treasury whether we like it or not the government go ahead and create the currency units the treasury is denominated in therefore you don't have the credit risk so if the objective is to eliminate as much risk as possible which it is then it's going to make sense for this Corporation to buy treasuries because they can cross that one off the list and they can cross this one off the list and they don't really have that interest
11:30 - 12:00 rate risk like the banks have so on that note let's go ahead and go over to the banksters themselves and they don't really have to buy oil but they do have dollar liabilities in the form of deposits and dollars that they're borrowing okay well if they are borrowing dollars then they don't want to buy a Japanese Yen asset they don't want to buy a Japanese clo for the exact same
12:00 - 12:30 reasons XYZ Corp didn't want to buy them so if they buy a treasury they do have a problem you see they've got interest rate risk so if their dollar funding cost so in other words the dollars they're borrowing if the interest rate goes up on that let's say to 5% but this treasury is only yielding 3% that dog don't hunt it's called negative
12:30 - 13:00 cash flow and pretty soon that turns into negative equity and pretty soon that turns into you going bust but what's interesting about the dollar being the world Reserve currency is not just that it's used more than any other currency but also it has a lot of derivatives markets that are incredibly liquid and these derivatives markets we'll just use interest rate swaps as an example allows this bank to completely
13:00 - 13:30 hedge their interest rate risk so when you're looking at this through the lens of these huge players and not just the global monetary system but the treasury market you can see how if they have Dollar liabilities which they've got a lot of them the only asset that they can own are us treasuries it's it's literally like the bitcoiners say it's
13:30 - 14:00 the Tina trade there is no other alternative now I know a lot of you right about now are kind of making this point that I highlighted in number two you're saying you are missing the elephant in the room obviously the dollar is going to crash so if the dollar is going down in value then why on Earth would they want to hold on to a dollar asset when that's just decreasing their overall purchasing
14:00 - 14:30 power okay good point let's go ahead and think that one through we have to understand that the bank makes money just based on this spread and if they have Dollar deposits and the value of the currency is going down the value of their liabilities are going down at the exact same rate as the liability of their assets so to a certain degree they don't care
14:30 - 15:00 if the dollar is going down they don't care if the inflation rate goes up to let's say 10% in the United States and the purchasing power of goods and services in the United States relative to the asset they own has gone down because they are just pocketing a spread more importantly a spread they control let me show you what I'm referring to say they borrow $10 billion at 1% they buy 10 billion with a Tre treas is 4% they pocket a 3% spread
15:00 - 15:30 that would be $300 million suppose that during the course of the year the inflation rate as measured by the CPI let's just say that's legitimate for a moment goes up to 10% well now of a sudden this 300 million doesn't buy them as much stuff in the United States so what do they do well actually as a group they would all have this problem so they would go to their depositors and say Hey look it's fine if you want to deposit money here
15:30 - 16:00 but we ain't paying you the 1% we're only going to pay you 70 basis points so now the spread goes from 3% to 3.3 and the money they pocket goes from 300 million to 330 million which would compensate them for the inflation rate in the United States assuming they wanted to buy goods and services denominated in dollars and again that's a big assumption we'll go ahead and save
16:00 - 16:30 that for another video so the main takeaway is you have to realize that a lot of this demand for treasuries comes from entities that don't care about the inflation rate in the United States that is totally irrelevant to them and that is not a part of their decision-making process now I know a lot of you right about now are probably really pissed off off I mean you are going over to the
16:30 - 17:00 comment section and you were saying George unsubscribed FYI I want you to know that because you're just not addressing what's really really really the elephant in the room and this of course is the currency of Kings why on Earth would this Bank not take that dollar or fiat currency deposit that we know is being devalued and we know the United States government is debasing it at all times so why would
17:00 - 17:30 you not take this depreciating Fiat and buy a hard asset like gold that you know is going to maintain its purchasing power okay let's go ahead and think that one through so you take this1 billion that you're paying 1% on oh by the way and you're buying gold that doesn't yield anything but also what you have to understand is the very next day the very
17:30 - 18:00 next hour the very next minute the person that deposited the $1 billion can take that1 billion and move it to another bank so your dollar funding goes byebye well if your dollar funding goes bye-bye then you have to sell that asset that's on your balance sheet but what if that asset is volatile H editor goad throw up a chart of gold and this is just a daily chart
18:00 - 18:30 just today so assume you would have taken your 10 billion and bought at the highs and then I don't know an hour or so later all of a sudden that depositor wants to take their money elsewhere what are you going to do because now that $10 billion worth of gold is now worth let's just say 9.5 so you've got a 9.5 billion asset you have to sell and cover a $10 billion
18:30 - 19:00 liability that means you have to Fork up 500 million out of pocket that blows a whole in your balance sheet and that risks you going bust so once again if we make the assumption that the overall objective is to look at the risk as well as the reward and to minimize the risk as much as possible holding a hard asset like gold or Bitcoin or Commodities on your balance sheet sheet if you have
19:00 - 19:30 very very very shortterm or possibly short-term dollar liabilities is completely impossible oh but wait there is more we haven't talked about this guy right in the middle the global dealer guy and he is loaded he is Stanky Rich my friends you can tell by this gold necklace that he has with the dollar sign probably in Diamond just like Mr T and he is not smoking one of these cheap vape pens I can assure you of that oh no
19:30 - 20:00 he has got the good stuff the Cubans my friend and this is because he makes millions billions in fact dollars every single year just dealing back and forth with these Banks and these corporations so if he sees storm clouds on the horizon let's just say that he assumes there's going to be a recession or a global economic slowdown he knows that the the banks will have to have
20:00 - 20:30 more treasuries not just as assets on their balance sheet but in order to transact with one another because if risk goes up the demand for collateral goes up and there is no other collateral in the global monetary system than treasuries that's just the bottom line so what he does is he go and loads up on all of these treasuries borrowing dollars because he knows that if we go into a global economic slowdown he's
20:30 - 21:00 going to be able to lend these treasuries to the banks that need those treasuries as collateral to borrow from other Banks we call it rehypothecation and this guy is going to pocket the Arbitrage all day long so this creates even more demand for treasuries outside of the United States assuming we're going into an economic slowdown which I imag imagine is most
21:00 - 21:30 people's base case who are watching this video right now whoa timeout I know a lot of you right about now are kind of scratching your head and saying George I don't really get it because at the beginning of the video you're talking about how the US debt crisis is far worse than the experts and the mainstream media is leading us to believe it now you're talking about all this demand for treasuries I'm not following you don't worry we're going to get into how this debt is way worse than you think right now in Step number
21:30 - 22:00 three step number three the real crisis is there is no debt crisis let me explain what I'm referring to if we go back to step number one remember guys how I talked about the debt going from 910 trillion up to 35 trillion an increase of 25 trillion just over the last 15 years but during that time what has the done relative to other currencies the
22:00 - 22:30 dxy it's gone up what has the 10-year treasury yield done it's gone down which means that the price of the 10-year treasury is higher today with 35 trillion in debt than it was in 2009 with say 10 10 trillion in debt now
22:30 - 23:00 I could go into a hundred other examples as to why there is no debt crisis but that would be a completely separate video so let's assume for a moment that I am correct that because of what we went over in Step number two the way the monetary system is set up there's going to continue to be this demand for Treasury that will
23:00 - 23:30 allow your Drunk insolvent Uncle Sam to continue to spend and spend and spend and spend even more to buy your vote you see this is the problem the treasury market is not the problem so when I'm talking about this I'm talking about government spending and this is why on Twitter and social media all the time I always say that
23:30 - 24:00 there is no debt crisis there's a government spending crisis now I know a lot of you write about now are saying well George I don't get it because if the government can spend and spend and spend and spend well then what's the problem you have to understand that every single dollar the government spends is a misallocation of resources it's what the austrians call malinvestment the way I say it it is it's just creating economic
24:00 - 24:30 distortions and if you want examples of those economic distortions just look at the difference between 2019 in the United States and 20124 I just went back to Tucson where I spent a lot of time in 2017 and I was horrified by what I saw Tucson has literally turned into a zombie
24:30 - 25:00 apocalypse of drug addicted homeless people to the point where I don't even as a 6'4 guy that weighs 200 lbs I don't even feel safe getting gas at half the gas stations that I would pull over to because to pay you would have to go through this group of 10 homeless people that are quite literally doing drugs right there with the heroin needles sticking out of their
25:00 - 25:30 arms just walking around like some crazy Will Smith sci-fi movie this dystopian end of the world scenario we're seeing it play out right in front of our own eyes and then oh by the way I go down to the local Walmart to buy a $2 pair of fingernail clippers but of course in order to do so I had to get the gal to come over and actually open up the cage because the $2 fingernail
25:30 - 26:00 clippers were locked up Walmart had to do this because if they didn't then all of these people would come in off the streets and just steal them see that wasn't the 2019 United States of America unfortunately that is the 2024 so what changed well it was the government intervening into the economy creating these economic distortions mostly
26:00 - 26:30 through their spending but let's not forget locking you in a cage for 2 years saying that you were quote unquote unessential in completely destroying Global Supply chains with combined with everything else they were doing made the inflation rate Spike up to 9% and that's what they would admit to and therefore the purchasing power of the average Joe go down substantially while the person ing power of the global dealer guy because he owns
26:30 - 27:00 assets goes up tremendously so what we have is this massive wealth Gap that only gets wider and wider and wider as the government's spending continues to grow and grow and grow so if we are to assume and I don't think it's even an assumption I think it's an absolute statement of fact that the reason the United States looks the
27:00 - 27:30 way it does right now with the drug problem the Homeless Problem the wealth Gap the crime problem just to mention a few is because the government creating these economic distortions that have been facilitated by the fact that there's people outside or entities outside the United States that are willing to buy the debt therefore no debt crisis you see where I'm going with this is right now the United States for the
27:30 - 28:00 middle class the poor and I would even argue for a lot in the upper middle class it is an absolute economic depression I mean this is the 1930s I'm not telling you guys anything you don't already know but with the people that do own assets well their purchasing Powers increase massively it's the Roaring 20s or the 1990s so yes it is true that you have GDP slightly going up but that's because it's an average of what's
28:00 - 28:30 happening with the poor in middle class the average Joe and Jane and with global dealer guy but you see this points to One Direction and that's in the direction of a third world country and it's ironic because most of you know that I live in Columbia in fact that's where I'm speaking to you from right now but I can assure you if I go down to the local drugstore in this third world country I don't have to ask a gal to
28:30 - 29:00 unlock the cage just to get the fingernail clippers everything is out in the open why because they don't have to worry about people stealing everything in the entire store because we didn't have the same level of economic distortions that they had in the United States so you see where I'm going with this is the solution for this crisis is
29:00 - 29:30 actually a debt crisis just like Argentina if we actually had the scenario play out that I talked about in Step number one in my view that would be the best case scenario because that's the only thing that will constrain your Drunk insolvent Uncle Sam from taking what was a great country the United States and turning it into quite literal a hole country
29:30 - 30:00 for more content that'll help you build wealth and thrive in a world of out of control central banks and big governments check out this playlist right here I will see you on the next video