Originally published at: https://peakprosperity.com/is-this-trumps-secret-plan/
After just three weeks I am confident that very few people realize the true extent of the revolution that’s underway in the US.
There will be whole new opportunities as a result, and a slew of new risks. If I’m right in my assessment, our job won’t be one of skating to where the puck is going to be, but performing on-the-fly quantum calculations to try and guess where it’s going to transpose itself on the ice.
It all begins with money.
As I have carefully and repeatedly chronicled over the years, our system of money has a math problem. One that stems from its built-in flaw, which is that every dollar is loaned into existence.
Skipping some wonky complexity and cutting to the chase, because the principle component of that loan is conjured into existence, but the interest component isn’t, we have a situation where there’s always more debt than money in the system.
Peeking at the latest data from the US Federal Reserve, we see the truth:
As you can plainly see, the amount of money in the system, as measured by M2, is both a far lower value than total debt and is growing much more slowly over time.
The green line representing total debt is now over $100 trillion in the US. All of that has to be paid back at some point in the future. But, as you can also see, total debt never really goes down, it only ever grows larger and larger.
Of course, growing debts aren’t necessarily a problem if one’s income is growing too. At the national level the ‘income’ is measured as Gross Domestic Product, or GDP. If we add that into our chart, we get this:
Uh oh! GDP is growing at roughly the same rate as M2, or the money supply, but debt is compounding at a far higher clip.
That’s the math problem.
I’m very sorry to say this, but the predicament is far worse than that. So far we’ve only been discussing the debt. The US also has massive unfunded liabilities in the form of Social Security and Medicare. When those are added to the pile, and depending on who is doing the piling up, you get numbers between $150 trillion and $250 trillion of debt and unfunded liabilities.
Ray Dalio’s firm, Bridgewater Associates, added it all up in 2018 and came up with this chart:
The way to interpret that chart is to note that it has a distinct before-and-after kink which marks the Great Financial Crisis, or GFC.
Before the GFC the overall levels were bad enough standing at around 700% of GDP, a lofty level of indebtedness about which history offers no guidance. No major country has ever dug itself out of such a mountain of IOU’s.
But after the GFC, the line kinks up sharply and now stands at an even more improbable 1,100% of GDP.
The conclusion that virtually every honest financier comes to is that there’s no possible way to pay all of that back. Which means there’s only one question left to resolve.
Who’s going to eat the losses?
As of 6 months ago I was 100% certain of the answer; little people. The banksters and politicos had an unblemished record of foisting their losses off on ‘the public.’ Decade after decade they got away with the most grotesque of spectacles which can be summarized as:
Heads the banksters win, tails the public loses.
They privatized the gains from the good years and slipped the bill for their bad decisions to the public during the inevitable panics that their own awful behaviors caused.
But those robberies, as magnificent as they were, involving many trillions paid out by the Treasury during GFC and later Covid, were merely anthills compared to the Everest of IOU’s in the chart above.
What, pray tell, will happen when – not if but when – that mountain collapses? Dark days, my friends, very dark days.
How did We Get Here?
Now that the astonishing truths about the depth of the corruption and waste is being revealed by the DOGE activities, it’s clear that our national finances were being administrated by raccoons, dunces, and thieves.
Outside of a very tiny handful of thoughtful leaders possessing commonsense, such as Ron Paul the OG of reason and now Thomas Massie, nobody said or did anything about the exceedingly obvious math problem I presented above.
Nobody had a plan for the nation, but it seems far too many of them had a plan for personal enrichment.
The public purse was treated like a bottomless piggy bank by DC insiders and its ecosystem of revolving doors that led to an Okefenokee-sized swampy territory of NGOs, consultants, think tanks, and bland-named LLCs.
Trillions and trillions of dollars were misspent and wasted, with the debt being left on the books for taxpayers to cover.
And cover it we did in the form of inflation (the hidden tax) and eventually either in having to pay back all the debt or with the ruination of the dollar itself.
For all the years of my life, nobody in power has dared to do anything about it, preferring instead to kick the can down the road for one more term, one more administration, one more quarter. Anything but having the fireworks kick off now, which is never the right time for an incumbent.
Conclusion
So, my current thinking goes like this; certainly, it must be true that other smart people in the halls of power can grok the simple arguments presented above. They must know even better than we do that the fiscal situation is a trainwreck that is coming and cannot be avoided.
But it was all destined to implode for one reason or another, and not because we’ll finally reach a mathematical limit but because a critical mass of attentive insiders will begin to shuffle toward the exits.
At first it will be relatively calm, with some side-eye action, but eventually, other people start to notice, and then the shuffle turns into running which becomes a stampede and that’s when the panic sets in. The exit doors will prove to be far too small to accommodate everyone, as is always the case. The losses will be legendary.
Unless…
This is brand new. Something that has never happened before in my lifetime. For the very first time, we have a president who has made it clear that he’s interested in doing the right things and he’s instructed all of his staff to follow along.
Has the Department of Education spent more per pupil and yet somehow helped the US get to the 40th spot out of 40 countries? Then close it down. Don’t reform it, don’t argue with stakeholders about reforms, don’t fight the entrenched bureaucracy – just shut it down.
Was USAID running a vast sea of schemes and scams and corrupt party dealings on the taxpayer dime? Shut it down. That’s the right thing to do.
Were entrenched bureaucrats violating your directives and sending money to posh hotels in NYC instead of helping the people of Western NC recover from Hurricane Helene? Fire them, right now, today, on the spot.
Ditto for releasing the long-overdue assassination files for JFK, RFK, and MLK. Clearly, the right thing is to release them and that’s exactly what Trump ordered.
So, let me ask you this. Assuming I’m right and Trump wants to do the right thing, and given the fact that the only question remaining over our precarious fiscal disorder is “who’s going to eat the losses?” what do you think the ‘right answer’ is?
You’re Trump, and you direct your new Treasury Secretary Scott Bessent to ‘do the right thing’ – what do you suppose that might be?
So big, our most important job is to calculate where the puck is going to reappear on the ice.
That’s what I’m going to be exploring in part II for subscribers. I’d be interested to hear your response to this. There’s no right answer, and it’s a thorny problem for sure. But I’m convinced we’re going to find out soon, and it’s connected to the recent moves of gold from Europe to the US, and to the haggard appearance of Jay Powell the Federal Reserve Chairman at recent hearings. Big things are afoot.
