Tag: debt

The Entire Financial System Is Chained to Government Debt

The Bank for International Settlements is warning that near-record public debt and the growing role of hedge funds and other nonbank financial institutions have created what it calls a “fiscal-financial stability nexus.” That is sanitized bureaucratic language for a system in which governments, banks, pension funds, insurers, hedge funds, and central banks are all chained to the same mountain of sovereign debt. If government bonds begin to fail, the losses will not remain confined to some account at the Treasury. They will spread through the institutions holding the public’s savings and eventually force central banks to choose between the currency and the financial system.

Government debt is treated as the foundation of modern finance. Banks use sovereign bonds as collateral, pension funds hold them to match future obligations, insurers depend on them for income, and hedge funds trade them using enormous leverage through repurchase markets. Regulators assign government debt privileged treatment because they have declared it “risk-free,” but no investment is free of risk. The label exists because government needs financial institutions to purchase its bonds, and admitting that sovereign debt can become unstable would expose the fraud supporting the entire system.

The BIS estimates that the probability of a financial-stress event comparable to the Global Financial Crisis occurring within three months is roughly ten times higher when public debt relative to GDP is elevated. The probability rises from approximately 0.3% under lower-debt conditions to 3.8% when government debt is high. The risk increases further when nonbank financial institutions hold a larger share of the market because many depend on leverage and short-term funding that can disappear the moment bond prices move against them.

This is how a routine selloff can become a systemic event. Government bonds decline, yields rise, and leveraged funds suffer losses. Lenders demand additional collateral, forcing those funds to sell more securities into a falling market. Liquidity disappears, borrowing costs surge, and the losses spread to banks and other institutions connected through funding markets. Government then complains that the market is “dysfunctional” because investors are no longer purchasing its debt at politically convenient prices.

The central bank is forced to intervene because allowing the bond market to clear naturally could bring down the financial system. It purchases government securities, supplies emergency liquidity, and claims that the operation is temporary and has nothing to do with financing the state. Yet every rescue teaches the market that excessive leverage will be protected and teaches politicians that reckless borrowing carries no immediate consequence. This creates the next crisis by encouraging the exact behavior that caused the first one.

The BIS openly admits that repeated central-bank interventions can weaken market discipline over government spending. This is the vicious circle they cannot escape. Governments borrow excessively, bond markets become unstable, central banks suppress the instability, and politicians interpret the rescue as permission to borrow even more. The debt increases until each attempt to restore honest interest rates threatens the banks, pensions, and funds that were encouraged to hold it.

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Will WAR Bankrupt the West?

War and sovereign debt are merging into a vicious spiral that will determine which nations survive the coming monetary crisis. Governments entered the conflicts in Ukraine and Iran, along with the escalating confrontation between the United States and China, already buried beneath debt accumulated through decades of fiscal incompetence. Now they are increasing military spending, subsidizing domestic industries, restructuring supply chains, and borrowing even more money to prepare for conflicts their own foreign policies helped create.

The United States, China, France, the United Kingdom, and Japan already carry gross government debt exceeding an entire year of economic output. Russia has drained much of its National Wealth Fund to finance the war in Ukraine while Western governments froze approximately $300 billion in Russian sovereign assets. Gulf states are being forced to expand defense spending amid the conflict with Iran, and Europe has committed itself to raising NATO-related expenditures toward 5% of GDP by 2035. Trump wants to increase annual US defense spending by $500 billion to reach $1.5 trillion, but Washington is already borrowing simply to pay interest on the debt it accumulated before this latest round of wars began.

These people speak about military spending as if the money materializes from thin air without consequences. Government does not possess wealth of its own. Every missile, drone, weapons package, foreign aid program, and military deployment must be financed through taxation, borrowing, or inflation. Taxation drains the productive economy, borrowing competes for private capital, and inflation silently confiscates purchasing power from everyone. Politicians choose debt because it conceals the cost until after the election, allowing them to play emperor today while leaving future generations with the bill.

The yield on the 10-year US Treasury has nearly tripled over five years to 4.3%, which means Washington is financing a vastly larger debt at far higher interest rates. This is elementary mathematics that the political class refuses to confront. A government may survive $10 trillion in debt when rates are near zero, but the same fiscal structure becomes impossible when the debt multiplies and borrowing costs normalize. Every additional dollar devoted to interest is a dollar that cannot maintain infrastructure, reduce taxes, or support genuine economic development. Government then borrows more to cover the interest, increasing the debt that created the problem in the first place.

The attempt to separate national economies from geopolitical rivals will impose another enormous cost. Europe abandoned cheap Russian energy and then wondered why its industries became uncompetitive. The West wants to reduce dependence on Chinese manufacturing and rare earths, but rebuilding those supply chains will require subsidies, tariffs, controls, and years of expensive investment. Iran’s position around the Strait of Hormuz demonstrates how quickly a regional conflict can threaten a route that previously carried roughly one-fifth of the world’s daily oil supply. Every attempt to create economic security through political coercion raises prices, reduces efficiency, and demands still more government borrowing.

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Cloward, Piven, And Zinn Told Us They Wanted To Bankrupt America

remember when the National Debt Clock first went up. I don’t remember the exact day, and honestly, I thought it went up during Reagan’s second term, but I was wrong. I looked it up, and it went up on February 20, 1989, exactly a month after Reagan left office.

I’m certain my confusion came from the fact that, while Reagan was in office, all the Democrats could talk about was the national debt. And it was a big deal. In retrospect, the growth under Reagan was unprecedented, rising about 184% during his eight years, more than double that of Nixon and Ford combined (as a percent), four times that of Carter in one term, not to mention five times Clinton, and more than double Bush and Obama combined.

Now, of course, we all know why the debt ballooned so much under Reagan. Tax cuts and the military, especially Star Wars! That’s what the Democrats tell us.

Well, all of that, but really the most important thing was: Democrats. What did Democrats have to do with anything? Pretty much everything. Democrats, led by the liar/streetfighter/Speaker of the House, Tip O’Neill, never saw a government program outside of Defense that they wanted to cut.

Well, technically, to be fair, there was something else they didn’t spend money on…the border wall they promised Reagan in 1986 in exchange for his granting amnesty to 2.7 million illegal aliens. The illegals got amnesty, but Reagan never got the promised wall.

And so it goes.

That first clock clocked in at $2.7 trillion. Boy, does that feel like a long time ago! And it was. Back then, a trillion dollars actually meant something. Today’s Debt Clock just recently crossed the $40 trillion mark.

At some point, these numbers stop feeling real. We hear things like, if the government spent $1 million a second, it would take it over a year to spend $40 trillion, and other things we can’t quite wrap our heads around.

An easier way to think about it is this: In 1989, the $2.7 trillion National Debt worked out to about $11,500 per American. Today, at $40 trillion, that number has jumped to about $116,000 per person.

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US plans $725 million payment towards its large UN debt

The Trump administration has informed Congress of its intention to pay $725 million to the United Nations, a congressional notification seen by Reuters showed, a move aid experts said was a welcome step towards paying billions in dues owed.

The administration has criticized the global body for not living up to its potential and slashed funding to many U.N. agencies. When asked about the planned payment, a U.S. official said any payments will be contingent on continued reforms of the organization and added that the U.S. has not transferred any funds as of Friday.

The allocation of funds – mentioned in an August 4 State Department notification letter to Congress that has not been previously reported – comes ahead of an expected speech by U.S. President Donald Trump to the U.N. General Assembly in New York next month. 

‘It keeps the ship afloat a little longer’

U.N. Secretary-General Antonio Guterres said this year that the U.N. faced “imminent financial collapse” due to unpaid contributions from member states, and the global body has brought in large budget cuts.

“Over the past six months, the United States has achieved historic reforms across the U.N. – reforms long considered impossible – including the first real budget cut in U.N. history, resulting in nearly one billion in cuts,” a State Department official, responding to Reuters questions about the payment, said in an email.

In April, Devex, a development news agency, reported that the U.S. had set specific conditions for the release of funds, such as more cost-cutting and moves to counter China’s influence.More: U.S. debt set to hit $40 trillion months earlier than expected

The Trump administration has carried out an unprecedented shrinking of its federal government, saying it was bloated and has significantly cut back on domestic and foreign grants in an effort that it says was to put money into causes that aligned with U.S. taxpayer interests.

The $725 million would be less than 20% of the more than $4 billion that the U.N. said in May that the United States owed — though Washington has said that total figure is much lower and that it has made some payments.

Eugene Chen, a former U.N. official, said such a transfer would help pay U.N. salaries for a period, but might not cover them all. “It keeps the ship afloat a little longer,” he said. 

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$40tn debt: U.S. unhinged empire is a threat to world peace

The United States hit a dubious milestone this week, announcing that its national debt had exceeded $40 trillion. No other nation comes close to this level of absolute financial indebtedness.

This is not simply a matter of out-of-control financial bankruptcy. It is an ominous sign of an unhinged empire that is desperately trying to salvage its historic failure by scorched-earth tactics of endless war.

The world is being held hostage by a pathological system that is no longer tolerable for the sake of humanity, development and peace.

Perhaps of more significance than the total figure – astronomical though that is – is the accelerating pace of U.S. debt growth. Since 2016, the arrears have doubled, up from $20tn. Over the next decade, the U.S. national debt is predicted to climb to $64tn.

In the year 2000, the American account stood at a “mere” $6tn. The last quarter of a century has seen the arrears pile up from endless wars, reckless military spending, and massive tax cuts for the corporate elite. The debt has become irreversible under prevailing policies.

Servicing interest on the arrears now runs at $1tn a year and is one of the largest federal budget expenditures. This means that the United States is caught in a debt spiral from which it cannot extricate itself. It is digging a deeper and deeper hole.

There are profound implications for the United States as a society. As Robert Reich, a former Labour Secretary, noted, the servicing of runaway debt means less money for “schools, healthcare, roads and bridges and social safety nets.” The grim conclusion is that social inequality in the U.S. – already at record levels – will become even more destructive. That speaks of social immiseration and collapse.

There are also far-reaching detrimental impacts on the U.S. and global economy. Even mainstream commentators warn of a historic fiscal crisis pending for the United States from soaring interest rates and hyperinflation. That, in turn, will be transmitted to the rest of the world, especially those countries with large holdings of American debt.

But the exceptional U.S. financial mess is not just a matter of economics. It is an urgent issue of global peace and security.

There are several causes of mounting American debt. However, the main driver, by far, is that nation’s relentless warmongering and militarism, as economist Jeffrey Sachs and other commentators have long contended. It is systemic and chronic.

This year saw the United States celebrate its 250th anniversary since its founding as a modern state. For most of its history, about 95 per cent of the 250 years, the United States has been at war, either through conquest or subterfuge, according to its own Congressional records and eminent historians like David Vine.

No other modern nation comes close to this bellicose conduct, and that is a reason why no other nation comes close to the level of financial debt of the U.S.

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I’m Sorry, The Feds Wasted HOW MANY TRILLIONS in Improper Payments?

Instead of drawing out the big mystery over how much of your money Washington wastes on improper payments, I’ll just tell you right up front: In the 20 years between 2003 and 2023, the Government Accountability Office (GAO) estimates the total money blown on payments made in error, or in the wrong amount, or with no documentation (!!!) is $2.7 TRILLION.

That’s a two followed by a seven followed by 11 zeroes. That’s almost double what we spent last year on Medicare/Medicaid combined, or on Social Security. It’s triple last year’s defense budget. It’s almost triple the unconscionable amount we spent last year just servicing Washington’s outstanding debt.

It is almost exactly the same amount Washington collected last year in personal income taxes. And if that doesn’t make your blood boil, you must be reading this inside a walk-in freezer, chewing on a mouthful of Lopressor.

The incomprehensible numbers come from a Cicero Institute report earlier this year titled “Rebuilding Public Trust by Ensuring Accountability in Government Spending.”

Dream on, right?

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Washington is driving America toward a debt crisis we can’t ignore any longer

A democracy cannot exist as a permanent form of government. Those words are widely attributed to Alexander Tytler, the Scottish judge and historian who lived from 1747 to 1813. There is, however, some debate over the attribution. Historians and researchers have questioned whether Tytler actually wrote the passage in the form in which it is commonly quoted, whether he expressed a similar idea that was later expanded and attributed to him, or whether the passage originated elsewhere. The exact authorship may be debatable. The warning itself is not.

Here is the prophetic quote:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”

This is no idle warning. Look at the United States today and the pattern is hard to miss. This is exactly what is happening today.

Our founders were statesmen who sacrificed much to create a system focused on the common good. They had businesses, farms, and families, and they risked everything to build a limited government unlike any the world had seen. Today we are governed largely by professional politicians, many of whom have never signed the front of a paycheck or run a business. Their careers are spent in government, and they are focused on re-election, promising voters increasingly more, but not paying for these programs.

The late Senator Tom Coburn of Oklahoma, a practicing physician, saw this coming. In his book “The Debt Bomb”, written 15 years ago, he warned of the fiscal path we were on. The problems he described are here.

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More than 400 Canadians filing for bankruptcy every day as rates hit financial-crisis levels

More than 400 Canadians are filing for bankruptcy every day as bankruptcy rates climb to their highest level since the 2008-09 financial crisis.

Nancy Snedden, president of BDO Debt Solutions and host of Your Money on VOCM, says the current pace works out to roughly 17 Canadians filing for bankruptcy every hour.

That’s approximately 408 Canadians every day.

More than 37,000 Canadians filed for bankruptcy during the second quarter of 2026, according to Snedden, representing a 6.9% increase compared with the same period last year.

The increase comes as Canadian households face growing pressure from everyday expenses and debt payments.

A recent Equifax Canada report found more Canadians are struggling to make ends meet and keep up with their monthly bills and debt obligations.

The latest figures also come amid a broader increase in insolvencies. Federal Office of the Superintendent of Bankruptcy data released earlier this month showed June recorded the second-highest number of consumer insolvencies for that month on record and marked the sixth consecutive year of increasing June insolvencies.

Canadian households have spent years dealing with elevated living costs and higher borrowing costs, putting additional pressure on people carrying mortgages, credit-card balances and other debts.

Snedden encouraged Canadians facing financial trouble to seek help and investigate available debt-relief options before their situation worsens.

At the current pace cited by BDO, more than 12,000 Canadians would be filing for bankruptcy every month.

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“Doom Loop” Engaged: US Debt Hits $40 Trillion As Treasury Enters The Endgame

The largely expected news came just hours after Treasury Secretary Scott Bessent unexpectedly announced the Treasury’s latest attempt to rein-in long-term borrowing costs from multi-year highs, the most important component of the growth in debt. The Treasury stunned the market when it said, just two weeks after the latest Refunding Announcement where it should have made this change, that it was ramping up the support for longer-dated securities by “increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities (the 10-year to 20-year sector and the 20-year to 30-year sector).”

The announcement that sent yields plunging, if only for the time being. 

Remarkably, it was less than 5 years ago that US debt hit $30 trillion back in January 2022, illustrating the rapid growth in federal borrowing needs. And there’s no end in sight. 

As Bloomberg notes, “Republicans have long opposed revenue-raising tax increases,” while Democrats are best known for spending like drunken sailors to maximize socialist central planning, and both parties are loathe to sign on to politically toxic cuts to healthcare and retirement benefits for seniors. Many observers anticipate Congress and the administration of the day will only act if forced by a financial-market disruption.

That won’t stop them from talking about it all the time, though, as both parties at least pretend to understand that the US is on a catastrophic collision course should debt growth continue at this pace, and if the AI bet – which is now an all-in for virtually everyone – fails to dramatically boost productivity. Bessent, for one, said a key reason he got involved in politics was to help tackle deficits running at a pace unprecedented for times outside of major wars, pandemics or depressed job markets. So far he has failed catastrophically, and worse, he is doing precisely the kind of activist issuance “Twisting” for which he bashed his predecessor, Janet Yellen.

Economists, the Congressional Budget Office and Wall Street all see little or no progress in coming years for the deficit-to-gross domestic product ratio.

“Optically, I’m sure crossing thresholds like $40 trillion will focus attention on the issue in the near term,” said Matthew Luzzetti, chief US economist at Deutsche Bank AG. “But it does not represent a magical threshold for debt dynamics, and projections have anticipated this outcome for some time.”

More important, Luzzetti said, is the climb in US Treasury yields, which is steadily increasing the cost of servicing the record debt load. Last Thursday, the department’s latest 30-year bond auction resulted in the costliest such sale in a quarter century. A 10-year auction a day earlier drew the highest financing cost at that tenor since 2007, and only today’s announcement which sent yields tumbling prevent today’s 20Y Treasury auction from pricing at the highest yield on record. 

As buyers demand higher yields, that in turn drives up the Treasury’s borrowing needs. With two months left to go in the fiscal year, the government’s tally for interest costs so far for 2026 is $1.37 trillion – a 20% increase on the same period a year before. That in turn adds to the debt, potentially fueling further investor calls for higher rates, in a pattern known as a “doom loop.”

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With debt near $40 trillion, GOP bills would tie debt hikes to spending cuts

As the U.S. nears a mid-2027 debt-limit deadline with debt approaching $40 trillion, two Republican bills would bar Congress from raising the ceiling without matching any increased spending with spending cuts elsewhere.

The Dollar-for-Dollar Deficit Reduction Act, introduced separately by U.S. Senate Republican Whip John Barrasso of Wyoming and Rep. Greg Steube, R-Fla., would require any increase or suspension of the debt limit to be matched by equal or greater spending cuts over the current year and the following 10 years. It would be enforced through a congressional point of order. The National Taxpayers Union supports the measure.

“Congress cannot keep raising the credit limit on the American people without cutting up the credit card,” Steube said in announcing the bill. “If Congress wants to raise the credit limit, Congress must cut spending by the same amount.”

The national debt stands at $39.9 trillion, according to the Treasury Department, closing in on the $41.1 trillion ceiling that Congress raised by $5 trillion in last year’s One Big Beautiful Bill Act, a tax-and-spending law.

Fitch Ratings projected that the government will hit that ceiling around mid-2027, with several months more before it exhausts the extraordinary measures that stave off default.

The Bipartisan Policy Center, which tracks the deadline, is trending toward the earlier end of that window. Shai Akabas, the group’s vice president of economic policy, told The Center Square that weaker-than-expected tariff revenue and higher deficits are pulling the date forward, leaving “another six to nine months” of extraordinary measures once the ceiling is hit “before the government could no longer pay all of its bills in full and on time.”

The bills would bar accounting methods that let past deficit deals count savings that never materialized. Net interest savings could not count toward the required cuts, and lawmakers could not shift spending outside the 10-year window to meet the target. The Congressional Budget Office would have to score any debt-limit bill and post the estimate publicly for 24 hours before a vote. Waiving the point of order would take 60 Senate votes.

All three major credit-rating agencies have downgraded U.S. debt – Standard & Poor’s in 2011, Fitch in 2023 and Moody’s in 2025 – each pointing to the nation’s rising debt and Washington’s failure to address it. S&P and Fitch specifically cited debt-ceiling standoffs. S&P warned more than a decade ago that “the statutory debt ceiling and the threat of default have become political bargaining chips.”

Neither bill has drawn a Democratic cosponsor. The mechanism draws its force from the debt ceiling itself: because the point of order applies only to debt-limit legislation, the pressure to accept the required cuts builds against the deadline for avoiding a default. House Budget Committee Democrats did not respond to a request for comment Friday afternoon.

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