Understanding the US Debt Crisis: Misallocation and Spending Issues

The U.S. debt crisis is exacerbated by unchecked government spending and economic distortions, leading to a widening wealth gap.

### Understanding the US Debt Crisis: A Deep Dive into Spending and Economic Distortions
* 💰 The US federal debt has **surged dramatically**, increasing from approximately **$9 trillion in 2009** to around **$35 trillion today**, highlighting a **severe spending crisis**.
* 💸 The government, likened to a "**drunk, insolvent Uncle Sam**," spends significantly more than it collects in taxes, leading to a reliance on **selling treasuries to cover the deficit**.
* 🌍 Foreign buyers, including entities like Saudi Arabia, are increasingly purchasing US treasuries, which allows the government to continue its **overspending habits**.
* 📈 The deficit, which has reached **unprecedented levels**, is expected to worsen, particularly if a recession occurs, leading to even more **treasury issuance**.
* 💵 Despite the alarming debt figures, demand for treasuries remains strong due to the **global monetary system's structure**, which encourages banks and corporations to **hold these assets**.
* ⚖ However, this reliance on treasuries creates economic distortions, as government spending **misallocates resources** and exacerbates issues like **homelessness and crime**.
* 🏙 The wealth gap continues to widen, with **asset owners thriving** while the middle and lower classes suffer, revealing a **troubling economic landscape** reminiscent of a **third-world country**.
* 🔍 Ultimately, the real crisis lies in **government spending** rather than the debt itself, necessitating a **reevaluation of fiscal policies** to restore economic balance and prosperity.

Everybody is talking about the US debt crisis. Meantime, the federal debt load is snowballing in recent months. Reasonable to assume the next president is quite possibly going to face 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 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 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, 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, 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 buyers, insert the foreign buyers of U.S. treasuries. It's not your average Joe, no, no, no, no, no. It is his Saudi Arabian cousin, the average Mohammed. So the average Mohammed says, Yeah, that's a pretty good deal. I'll go ahead and buy this U.S. government debt because it's yielding right around four, five percent. So those treasuries go on to his balance 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 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, 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 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 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 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 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 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 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 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 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 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 Mohammed. In other words, what's happening 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 treasuries. He looks at what we 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 Mohammed 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 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 are 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 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 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

out and buy something like a treasury. Whether we like it or not, the government goes ahead and creates 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 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 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 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 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 literally like the bitcoiners say, it's

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 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 is going down at the exact same rate as the liability of their assets. So, to a certain degree, they don't care 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 worth of Treasuries at 4%. They pocket a 3% spread. 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 all 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, 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 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. I mean, you are going over to the 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

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 this 1 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 next hour, the very next minute, the person that deposited the $1 billion can take that 1 billion and move it to another bank. So, your dollar funding goes bye-bye. 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, go throw up a chart of gold, and this is just a daily chart, 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 liability. That means you have to fork up 500 million out of pocket. That blows a hole 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 if you have very, very, very short-term 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.

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 banks will have to have 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 goes and loads up on all of these treasuries, borrowing dollars, because he knows that if we go into a global economic slowdown, he's 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 imagine is most 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 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 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 trillion in debt. Now, 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 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 there is no debt crisis; there's a government spending crisis. Now, I know a lot of you right 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 distortions. And if you want examples of those economic distortions, just look at the difference between 2019 in the United States and 2024. 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 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 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 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.

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, 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 purchasing power of the global dealer guy, because he owns 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 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, right? Right now, the United States, for the 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 happening with the poor and 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 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. The solution for this crisis is 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 literally a hole country. 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.

The US Debt Crisis Is Far Worse Than You Think

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George Gammon

The US federal debt is rapidly increasing, leading to concerns about a potential debt crisis for the next president.

The government's spending exceeds its tax revenue, forcing it to borrow money and sell treasuries to the private sector and foreign buyers.

This cycle of overspending has intensified over the past 15 years, contributing to the current crisis situation.

national debt has increased from $9 trillion in 2009 to $35 trillion today, with the last 15 years accounting for an additional $25 trillion.

This rapid growth is driven by government deficits, with spending consistently exceeding tax collections.

The situation is expected to worsen, with a potential recession leading to even more government spending and an explosion of treasuries and debt.

Treasury Demand on the Global Monetary System

The Federal Reserve's potential intervention in buying treasuries from the government could lead to inflation and a crash of the U.

treasuries is minimal compared to the influence of banks and multinational corporations in the global monetary system.

These entities aim to eliminate risk through various strategies, but they face challenges such as interest rate risk, credit risk, and foreign exchange risk.

The Role of Treasuries in Risk Management

Corporations buy treasuries to eliminate credit and interest rate risk, as they are denominated in government-created currency units.

Banks, with dollar liabilities, also turn to treasuries but face interest rate risk, which can lead to negative cash flow and potential bankruptcy.

The dollar's status as the world reserve currency and its liquid derivatives markets allow banks to hedge their interest rate risk, making US treasuries the only viable asset for managing dollar liabilities.

The Profit Strategy of Banks with Treasuries

Banks borrow money at a low interest rate and invest in Treasuries at a higher rate, pocketing the spread.

When inflation rises, they lower the interest paid to depositors, increasing their profit margin.

The demand for Treasuries often comes from entities indifferent to the U.

inflation rate, and banks face the challenge of volatile asset values when depositors withdraw their funds.

The Impact of Gold and Treasuries on Financial Stability

A $10 billion gold asset losing value to $9.

5 billion creates a $500 million shortfall, risking bankruptcy for those with dollar liabilities.

A global dealer, profiting from transactions with banks and corporations, anticipates economic slowdowns and loads up on treasuries to lend them to banks in need of collateral.

This rehypothecation strategy increases demand for treasuries and creates a financial cycle, raising questions about the severity of the US debt crisis.

The Impact of Government Spending and Debt

debt has increased by $25 trillion in 15 years, but the Treasury yield has decreased, indicating higher prices for Treasuries.

The speaker argues that there is no debt crisis, but rather a government spending crisis, leading to misallocation of resources and economic distortions.

These distortions are evident in the drastic changes observed in cities like Tucson, with increased homelessness and crime, attributed to government intervention in the economy.

The Impact of Government Spending on Wealth Inequality

Government actions, including lockdowns and supply chain disruptions, have led to a significant increase in inflation and a widening wealth gap.

While the average person's purchasing power has decreased, those who own assets have seen their wealth grow.

The economic distortions caused by government spending are driving the U.

towards a crisis, with the middle and lower classes experiencing an economic depression similar to the 1930s.