Big Gov, Big Banks and Debt-to-GDP: We Little Guys Are Screwed
It’s a Big world. We Little Guys are just (barely) living in it – for now.
For government school victims, we’ll do the math: That’s a total of $10.53 trillion.
The entire US Gross Domestic Product (GDP) as of June 2022 was $19.73 trillion.
More math: This means our nation’s governments are spending more than 53% of every penny all of us combined create. That is obnoxiously insane.
Just The Feds are spending nearly 30%. Which is itself nauseating – and, of course, unsustainable.
Speaking of unsustainable: Our national debt is $30.6 trillion – and, of course, rapidly and inexorably rising.
Which means our national debt – is currently 155% of GDP. What does it mean to have an outsized debt-to-GDP ratio? Hint: It ain’t great:
“A study by the World Bank found that countries whose debt-to-GDP ratios exceed 77% for prolonged periods experience significant slowdowns in economic growth. Pointedly, every percentage point of debt above this level costs countries 0.017 percentage points in economic growth….
“The U.S. has had a debt-to-GDP over 77% since 1Q 2009. To put these figures into perspective, the U.S.’s highest debt-to-GDP ratio was previously 106% at the end of World War II, in 1946.”
So we’ve had an economy-crushing debt-to-GDP ratio – for thirteen-plus years. And counting – because our federal debt and government budgets only get larger. Our current ratio is more than twice the too-large tipping point – and, again, only looking to get larger.
Obviously, lots of government deficits and debt – mean lots of borrowing. The federal government is going to be borrowing more and more (and more) money. Which means less and less money for everyone else trying to, you know, conduct business and live lives. Which makes things worse. Which makes things worse. Which makes things worse…:
“(M)ost economists understand that deficits and debts may have long-term effects. Because of the lower investment spending, a country’s capital stock will not increase as quickly. As a result, crowding out has the potential to diminish a country’s future productivity.
“A prevalent example of crowding out occurs when a major government, such as the United States, raises its borrowing. In turn, this sets in motion a series of events that causes private-sector expenditure to be cut.
“The sheer magnitude of this form of borrowing can result in significant increases in the real interest rate. Ultimately, consuming the economy’s lending capacity and preventing enterprises from undertaking capital expenditures. Companies frequently finance capital investment projects in part or wholly. However, they are now discouraged from doing so since the cost of borrowing money has increased. In effect, formerly feasible projects supported through loans become cost-prohibitive.”
Very soon the entirety of the US economy – will be a federal-government-debt-servicing effort. Except the debt-servicing-effort – will increasingly strangle the US economy. So….
Who will get to borrow the ever-diminishing available dollars? It ain’t hard to guess.
Imagine DC is a playground. (And why not? DC’s denizens do.) If there are fifty kids – and only ten seats on the merry-go-round – the biggest kids get the seats. By bullying the forty smaller kids off the ride.
As money lending gets tighter and tighter – as there’s less and less money to lend – we Little Guys will be the very first ones bullied off the ride.
In DC parlance, this means an ever-tighter harmonic convergence between Big Government and Big Banks.
When Big Government prints trillions of dollars – screwing the Little Guys with skyrocketing inflation – guess who gets the funny money?
“As the colonial COVID-19 virus wreaks havoc on the African and Indigenous communities, the U.S. government is bailing out the parasitic Wall Street banks with trillions of dollars.”
“The Federal Reserve moved with unprecedented force and speed Friday to pump huge amounts of cash into the financial system to ease disruptions that have escalated since the viral outbreak.
“The New York Federal Reserve Bank said it will offer $1 trillion of overnight loans a day through the end of this month to large banks. That is in addition to $1 trillion in 14-day loans it is offering every week.”
DC has been helping Big Banks – while pretending to rein in Big Banks – for many years.
“Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008. But this is a long way from the truth because the bailout is still ongoing.
“The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail.
“But it isn’t just the government bailout money that tells the story of the bailout. This is a story about lies, cheating, and a multi-faceted corruption which was often criminal.”
“Too-big-to-fail banks got even bigger in terms of both assets and deposits. They also seem to be reaping the lion’s share of what business-lending growth there is in the U.S.”
Big Banks have increased their share of the lending market – because Big Government’s Dodd-Frank murdered their minnow competitors.
Small banks used to lend money to the Little Guys. Oh well.
But slowly, payday lenders have emerged to fill the Little-Guy-lending void left by Big Government’s murder of small banks. So, of course, Big Government is looking to murder payday lenders too.
“Congress is looking to price cap what are called ‘payday loans.’ Here is exceedingly awful Ohio Democrat Senator Sherrod Brown patting himself on the back for co-sponsoring this idiocy.
‘Payday loans’ are so named – because poor people take the loans when they run out of cash prior to payday. Like, say, when their car breaks down – and they need to get the car running…to get to work to get paid on payday.
“As basic economics and 10,000 years of human history tell us – price caps murder the item capped….
“If you can’t make a profit on something – you stop producing that something. Because human nature. Because duh.
“Artificial price caps on payday loans – will make turning a profit on payday loans nigh impossible. So no one will offer payday loans anymore. Because human nature. Because duh.”
Payday lenders are way too small to lend to Big Government. But they are a nuisance competitor to Big Banks’ lending dominance.
And since Big Government needs Big Banks to lend them money – Big Government is yet again doing the Big Banks’ Little-Guy-destroying dirty work.
So that Big Banks will return the favor – as Big Government looks to borrow more and more (and more) money to service its ever-more-atrocious debt-to-GDP ratio.
As always, the people hardest hit by DC’s perpetual crony-fest?
We the Little Guys.