US Debt to GDP Continues to Grow as M2 Money is Burning a Hole in the World's Pocket

The Treasury Asks for More

An article by CNBC covers the most recent request by the treasury for support, estimating a needed 2.999 trillion USD in additional support. It stated the following:

"The increase in privately-held net marketable borrowing is primarily driven by the impact of the COVID-19 outbreak, including expenditures from new legislation to assist individuals and businesses, changes to tax receipts including the deferral of individual and business taxes from April – June until July, and an increase in the assumed end-of-June Treasury cash balance," the department said in a statement.

This may be confusing to some so lets break down the wording used by the treasury:

The increase...outbreak: The rising debt is NOT due to corona virus but instead the government lockdowns making businesses unable to operate under their own purview. Instead, governments across the world have stepped in and decided what is best for each individual citizen and is using police force and legislation to enforce their rules.

Including expenditure...june until july:They have added several pieces of legislation to help fund the mess they have made. They are increasing spending while simultaneously decreasing taxes. For a country already trillions in debt, this seems unwise especially since it's in an effort to force a "v-shaped" recovery which will never come.

And an increase...treasury balance: The treasury has been all but consumed by the fed since it is not the duty of the fed to manage and distribute all the funds for relief to businesses and individuals as well as front the bill for the treasury's market manipulation and overnight buybacks.

The article coninues, updating the reader on the state of the US debt saying, "Just since March 1, the national debt has grown by $1.5 trillion to $24.9 trillion, a 6.4% increase."

Japan has already hit %238 of their GDP in debt obligations since 2018, meaning they have more than twice the debt than they produce in gross value each year. They have been over %200 of GDP since 2010 with no sight of slowing down.

For anyone who believes the US is different I will remind you that we run on the exact same economic blueprint as them, as do all major economies of the modern era. We too have a central bank, quantitative easing, negative real interest rates, and a can-do attitude about printing the dollar into oblivion just like the Yen.

The us currently sits at just %106 of GDP, and if Japan is any measure of our future, we have plenty of room to grow. For the federal reserve, the way we will fix the economy is consumer expenditure which directly conflicts with savers. With interest rates at 0 and money printing as widespread as it is, we are working our way towards a %-20 real interest rate. For those unfamiliar the real interest rate is just the money fund rate set by the fed minue the inflation rate of the dollar. Currently the US is printing 10s of trillions in fresh currency, driving inflation up in the background, to fend off the deflationary trend. This is where the %-20 interest rate number arises from, as the fed prints out larger and larger amounts, which are equal to large percentages of the overall pre-existing supply, the inflation rate will eventually catch up and spiral the dollar into hyperinflation.

This is going to be the first time a currency was being used so globally to facilitate almost all transactions between businesses across the world while it enters hyperinflation. The Chinese, Saudi, and several large EU states own trillions combined in dollar denominated treasury notes and government bonds. When the dollar collapses these will become the first global peg to snap as we will see a fire-sale of the two, setting the stage for a second round of global financial panic in 2020.

M1 vs M2 Money Supply

The "money supply" of a nation, or nation state like the EU, is calculated in terms of what is held by who. M1 refers to money held as bank deposits, redeemable checks, and cash. These are very liquid and can be redeemed, or in the case of cash, used in the very immediate future. M2 includes all of M1 plus deposits which have mature within 3 months and treasury deposits which h mature within 2 years.

Essentially it can be thought of as M1 is the people's "money supply" and M2 is the people's plus the banks' supply. As you can see in the graphs below, the EU and US money supplies have reached a point of exponential increases.

This is where the inflation is coming from. Central banks are printing away the debt their governments have borrowed into existence with no intent of ever paying it back. This has been the end game for all fiat currencies in the past and it is no different now. The global economy, therefore the global population, is going to suffer from a depression on the scale we have never seen. The increased complexity of financial markets and off-the-balance-sheet trading banks have taken part in through derivatives has skyrocketed the level of fragility the system operates on. This is a house of cards and the wind has begun to blow.