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We're frogs in a warming pot of water… The point when great powers decline… Have you heard of the "Presidential Bypass"? It's a legal loophole the rich use to keep their money. And though you might not know it, you can use the same exact loophole to slash your taxes. Legendary investor Robert Kiyosaki gives the details here.
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Dear reader, |
Your correspondent entertains a theory: |
We Americans are frogs. We are frogs wallowing blissfully in a pot of gradually warming water. |
We boil gradually away, unaware… comfortable… arrogant… and ignorant. |
That is, we the American people have grown so accustomed to the warmth enshrouding us — and for so long — we are incapable of detecting the ratcheting heat. |
We will never jump the pot. We are simply too comfortable inside it. |
We are fattened by too much bread, entertained by too many circuses. The Romans labeled it panem et circenses. |
Just yesterday we Americans received an overfill of both in the form of the Super Bowl… as |
the water warms and warms. |
I refer specifically and unequivocally to the warming water of the American fiscal setting. |
The nation is spending itself into hot water. |
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Where's Hitler? |
The United States national debt runs to $38.6 trillion, approximately. The nation's debt-to-GDP ratio comes in at 124%... the highest since 1949. |
In 1949 the United States was still shoveling its way up from the World War II spending bonanza. |
What is today's justification? Where is Herr Hitler and his conquesting Nazis? Where is Mr. Tojo and his buccaneering Japanese? |
What budget-breaking Manhattan Project is the United States government funding? |
To my knowledge there is no worldwide war and no updated Manhattan Project. Yet the nation's debt-to-GDP ratio registers at 124%. |
That is, the United States churns out 24% more debt than domestic product, grossly measured. |
As I have argued before: Credible evidence indicates that a debt-to-GDP ratio exceeding 90% is a poor economic omen. |
That is, the pot water has long been warming. Yet the blissfully acclimating frog has not registered the increase. |
And — and — additional evidence indicates that nations with debt-to-GDP ratios exceeding 130% are substantially prone to political violence. |
The United States' debt-to-GDP ratio will likely attain 130% within the following decade. |
Of course… steep recession or financial crisis would likely accelerate the timeline… and raise the water temperature. |
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Bipartisan Heat Generation |
Mr. David Stockman is a former government store-minder who watched Washington's pennies under Ronnie Reagan. |
Or at least he attempted to watch Washington's pennies under Ronnie Reagan. |
As David explains, both Republicans and Democrats are rotating the oven dial clockwise… from the lower heat settings… to the higher settings. |
Thus it is a bipartisan heat generation: |
The discretionary spending level in the House GOP-approved bills for FY 2026 is $1.673 trillion. That is actually $5 billion higher than the alleged runaway spending contained in the Biden-signed appropriations for FY 2024!.. |
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The House GOP's appropriation for all domestic spending agencies in FY 2026 amounted to $764 billion, which was 98.6% of Biden's ultra-bloated 2024 level ($775 billion). |
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That's right. In aggregate terms the House GOP embraced the sky-high Biden domestic spending levels virtually hook, line and sinker. |
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More: |
Even if you had granted a 2% increases per year for inflation, the FY 2026 appropriations for domestic agencies would have amounted to $664 billion in order to keep the Obama priorities in tact and hold the FY 2017 levels harmless for inflation. |
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So what the screaming hypocrites of the House GOP appropriations committee have actually done is to fully fund an inflation allowance for Obama's priorities and then jacked-up the domestic appropriations by another $100 billion, to boot! |
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Hence your pot of increasingly warming water. Or in David's telling, the "nation's fiscal doomsday machine." |
The Boiling Point? |
Yet what is the one factor that may raise the water temperature to unendurable and fatal settings? Here is the answer: |
Interest payments on the nation's debt. |
That is correct — interest payments on the debt. |
In 2024 the United States government ladled out more money to service its debt than to defend the Republic. |
It repeated the arrangement in 2025, as it will in 2026… and likely will for the duration. |
Mr. Niall Ferguson is a historian by training. His studies reveal that when a great power's debt service costs more than its defense costs… the frog begins to croak: |
What I call Ferguson's Law states that any great power that spends more on debt service than on defense risks ceasing to be a great power… |
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The crucial threshold is the point where debt service exceeds defense spending, after which the centripetal forces of the aggregate debt burden tend to pull apart the geopolitical grip of a great power, leaving it vulnerable to military challenge… |
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The fact that the U.S. is currently projected to spend a rising share of its GDP on interest payments and a falling share on defense means that American power is much more fiscally constrained than most people realize. |
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By 2049, according to the CBO's latest long-term budget projection, net interest payments on the federal debt will have risen to 4.9% of GDP. If defense spending maintains its recent share of discretionary spending, it will amount to half that share of GDP. |
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There you have the formula for civilizational decline. |
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Gradually, Then Suddenly |
Perhaps too you have the formula for boiling water. The frog in its pot will be well and truly cooked. |
The United States government spends and spends, debt runs riot, the economy runs to faulty settings, the debt-to-GDP ratio ticks remorselessly higher… |
And the American citizen wallows away in increasingly warming water. |
He mistakes it for comfort. I hazard he will learn otherwise one day. |
Alas… he will likely learn too late. |
Brian Maher |
for Freedom Financial News |
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