This past week brought yet another round of distractions. On Tuesday, we witnessed the much-anticipated State of the Union Address, prompting a flurry of opinions and observations. In this piece, we will share our insights.
President Trump, ever the showman, must have eagerly awaited the buildup to his primetime address. Yet, it was surely disheartening to gaze upon the 116th Congress and confront a gathering of political misfits that could only be described as one of the least inspiring in recent memory.
Nevertheless, the show must go on, despite the letdowns. Life is filled with disappointments: from missed opportunities to wasted hours on trivial pursuits, even including events like Super Bowl Sunday. Duds and letdowns are part and parcel of our experience.
Words, too, can sometimes be a source of disappointment—whether they are uttered when they shouldn’t be or left unspoken when they should be.
In this vein, distractions arise from both the spoken and the unspoken. Within any speech, significant omissions can be telling.
Take, for example, the astonishing absence of any mention of the burgeoning $1 trillion budget deficit during the 82-minute State of the Union Address. At no point did the President address the looming threat of the $22 trillion national debt or the staggering $122 trillion in unfunded liabilities, including critical programs like Social Security and Medicare.
What’s going on?
No One Cares
The true State of the Union—the state that President Trump chose to ignore—resembles a landscape teetering on the edge of catastrophe due to half a century of unchecked debt accumulation. Day in and day out, the federal government spends more than it brings in. Now, that debt has escalated to an unmanageable level, making it virtually impossible to rectify.
This is the authentic State of the Union, a tale of America’s decline that is being willfully overlooked by the President and Congress. It is a narrative too disheartening to voice. Thus, the omission from Tuesday’s address renders it nothing more than an elaborate diversion.
So, what is the current situation? Several alarming figures have been previously addressed. The ongoing trend is detailed below.
To commence, the temporary suspension of the debt ceiling will be reinstated on March 2. At this moment, it seems that no one is paying attention. By March 2nd, interest will likely still be lacking—in fact, only Treasury Secretary Steven Mnuchin will be focused on it, as he prepares to implement “extraordinary measures” to maintain operations in Washington.
In Treasury Secretary parlance, extraordinary measures refer to the suspension of contributions to federal employee retirement and disability funds. From our understanding, these maneuvers may prolong the Treasury’s funds until the middle or late summer.
After that, the federal government may find itself unable to cover its expenses, including interest on Treasury notes, leading to missed payments. The full creditworthiness of the U.S. government could fall into disarray, meaning we could witness a government default on its obligations.
Of course, this could never occur in a land hailed as the beacon of freedom, right?
The Big Government Show Must Go On
For those unaware, Mnuchin is an avid film enthusiast who has financed and produced various cinematic works through his entertainment ventures. Titles like *American Sniper*, *Mad Max*, and *Black Mass* are among the contributions he’s made.
Like the President, Mnuchin also understands bankruptcy well. He was the co-chairman of Relativity Media before departing just months before the company’s July 2015 bankruptcy filing.
This resulted in an $80 million loss for Mnuchin and other investors. Yet, the company emerged from bankruptcy unburdened by previous debts, only to file again a few years later—and it has since reopened its doors.
We believe the odds of the U.S. Treasury boldly defaulting on its debt are slim to none. An eleventh-hour agreement to raise the debt ceiling will inevitably materialize, but this will not resolve the underlying debt crisis or negate existing obligations.
The public continues to favor an expanding federal government financed solely through growing credit issuance, subscribing to the illusion that they can receive something for nothing—that the wealthy can somehow come to the rescue.
However, this notion is fundamentally flawed. The wealthiest individuals do not possess the $122 trillion needed to sustain this illusion. Yet, the grand government charade will persist, leading us to what is inevitably on the horizon…
As financial markets falter and the economy teeters on the brink of collapse, the public will implore for decisive action. The President and Congress will respond with reckless assurance, offering quantitative easing for the populace using money conjured from thin air. Debts will be settled, and currency may ultimately vanish.
After that, chaos will ensue.
Sincerely,
MN Gordon
for Economic Prism
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