“Fools rush in where angels fear to tread” – Johnny Mercer

I wonder when the faceless will say, “enough”? When those who calculate in millions and billions and even understand trillions will say, “No more–no more, unless I get better terms.” 

One of my early lessons in business was to not depend too heavily on a handful of customers. The fewer customers, the more likelihood that they own you.

The United States, of course, has more than a few customers. It sells its debt—a debt approaching $30 Trillion to a lot of buyers. But, foreign ownership of US debt is approximately $7 Trillion, China holds about $1 Trillion. Overall China owes foreign purchasers about $300 billion.  

We have all been buyers. I can remember buying war stamps. Once you bought enough you got a war bond. There was never a suggestion that it wouldn’t be fully redeemed. My Mom was buying the stamps for me and I am certain that it never occurred to her that Dad, and the millions of soldiers he joined, would not win WWII.  It was the Swiss bankers who were making the risk calculations.

Today’s news is filled with financial numbers we can’t really understand. It is said that the White House and various Congressional leaders are negotiating over the size of a package of programs that will cost north of $5 Trillion dollars. They too don’t understand the consequences of continuing to add to our future obligations. But, stop here, reflect, and if you think they understand the global magnitude of the probable debt offerings, please let me know.

A legislative sequence has begun but legislators don’t like to spend their August in Washington—understandable. They work on a political calendar but when the real one combines high temperatures and humidity they want to go home—tense negotiations will continue. 

It is also written that in October the United States Government must receive from the Congress a new debt authorization. We (you and I) presumably will communicate with our legislators and let them know how much is enough. So let me see if I understand. People who don’t know how much debt is too much will need to communicate the answer to people who don’t really care. The leadership of the Congress will be too busy blaming each other for outrages past, present and future.

If my duly elected member of Congress called me, and he won’t, I would suggest a new script. Decide how much we are prepared to borrow (right now every person owes about $87,000 and the annual growth rate is about 7.3%) and then debate the shopping list.

Yes, I do understand that the necessary debt to fund the splurge in spending will depend on how much the Congress is prepared to raise taxes. When the new tax rates are set and the debt forecast is made I will be amazed if we are not measuring new debt in billion dollar increments. If the politicians didn’t consider debt somehow free money we wouldn’t owe so much.

Also we should tax our memories—remember inflation. Well it is with us again. Will enormous government outlays affect it? Inflation is merciless; its effects are particularly painful for persons who principally spend their money on essentials. And controlling inflation requires the Federal Reserve to raise interest rates, which of course drive up our cost of borrowing.

Now, returning to the real world, the one we partially understand. Covid 19 is still around, but now in a new costume. Predictably some are scared by the daily theories on its spread and prospective new hospitalizations. It is astonishing to me that theories still prevail in the minds of many. The data is in, vaccines work.

But when it comes to how much we spend, what will actually deliver a long term public benefit, and how much of that should be borrowed, all of us should understand—there are no vaccinations against excess; there is not even one in trials. Fools rush in.