The world is focused on the Russia Ukraine situation, but there’s another thing we must be aware of:
The US debt.
Every year, the United States spends more money than it takes in. The U.S. is over $30 trillion dollars in debt:
How much is $30 trillion?
- That is $28,000,000,000,000
- One trillion seconds of ordinary clock time = 31,546 years
- One trillion ants would weigh over 3000 tons
To see the U.S. debt in real time, click HERE.
Trillion Dollar Budgets
As new budget plan goes through Congress this debt will increase. But what would happen if the FED stopped printing money?
Many of the things we take for granted today won’t be feasible if the FED stopped printing money. For one, the U.S. would have to start creating budgets that can be sustained based on monies we receive. This won’t be easy, because every year the U.S. budget deficit steadily increases.
This chart clearly shows the increased trend of spending more money than we bring in.
This chart shows President Biden’s $1.52 trillion budget proposal:
There is one major poblem with this budget:
If we run this budget as shown here, we will not have enough money to cover it, and will have a budget deficit in the billions of dollars, or a possible deficit one trillion dollars.
So the next logical question is “if we can’t print the money to run our government, where will that money come from?”
For the average person, eliminating the debt ceiling would be akin to having a credit card with no limit but you don’t have a job.
Taxes, Bonds and Exports: Keys to Generating Revenue
Three areas are key for generating revenue: taxes, bonds, and exports. Unfortunately, there’s a problem with this idea:
Problem #1. Many countries are purchasing fewer American bonds. China and other countries are attempting to move away from the U.S. dollar. This is called “de-dollarization:“
As of February 2021, more than 40 countries, including China, Russia, Japan, and European countries have begun the process of de-dollarization. This includes shrinking dollar-denominated foreign exchange reserves and US debt, reducing the use of the dollar in international economic cooperation, and moving away from US control of global clearing.Read the story HERE.
Problem #2. NO ONE wants to pay more in taxes. Raising taxes on the people means less spent in the economy.
The Biden administration is now revealing an unrealized capital gains tax from stocks and bonds. The plan will be included in the Democrats’ US$ 2 trillion reconciliation bill. The new unrealized capital gains tax would levy annual taxes on assets while they still have not been sold. The impacted assets include stocks, bonds, real estate, and art.Read the article HERE.
Problem #3. We are primarily a consumer nation. We continuously import much more than we export (i.e., the trade deficit):
The trade deficit in the US widened to a record high of $73.3 billion in August of 2021, higher than market forecasts of $70.5 billion.Read the full article HERE.
Problem #4. Russia and other countries are conducting billions of dollars in transactions outside the US dollar.
While the US and its allies have imposed economic sanctions on Russia for invading Ukraine, the country has evaded them by conducting business with China and other countries:
MOSCOW/SINGAPORE (Reuters) -President Vladimir Putin unveiled new Russian oil and gas deals with China worth an estimated $117.5 billion on Friday, promising to ramp up Russia’s Far East exports at a time of heightened tension with European customers over Ukraine.
The source said the gas deal would be settled in euros, as Moscow tries to diversify from the U.S. dollar and hedge itself against any potential sanctions from Washington.Read the full story HERE.
Areas of Concern
In other words, if we can’t print money, there will be drastic changes to our overall quality of life. Here are 5 major changes we can expect:
- Budgets will be cut (jobs lost)
- Inflation will more than likely increase
- Taxes will be raised.
- Bond market will crash
- Major stock market crash
The annual inflation rate in the US accelerated to 7.5% in January of 2022, the highest since February of 1982 and well above market forecasts of 7.3%, as soaring energy costs, labour shortages, and supply disruptions coupled with strong demand weigh.Read the article HERE.
As prices rise, people have less money to spend on other items, which ultimately hurts the economy.
We are now seeing a rise in prices and increased inflation. Will budgets be cut next?
These budget cuts could include reduced spending in many government programs as well as the reduction of government employees. Top government spending can be broken down into mandatory spending and discretionary spending:
The mandatory budget cost $2.966 trillion in FY 2021.
- Medicare $722 billion
- Medicaid $448 billion
- Food stamps
- Unemployment Compensation
- Child Nutrition
- Child Tax Credits
- Supplemental Security Income
- Student Loans.
Discretionary spending is $1.485 trillion, and the only government spending Congress can cut or reduce.
- Department of Defense $636.4 billion
- DoD Overseas Contingency Operations $69 billion
- Department of Veterans Affairs $105 billion
- State Department $20.5 billion
- Department of Homeland Security $54.8 billion
- FBI $9.7 billion
- National Nuclear Security Administration $19.7 billion
- Health and Human Services $88.5 billion
What areas of the budget would be cut? How many jobs could be lost?
Stock and Bond Markets
The Federal government is in the midst of a massive bond repurchasing program. Since other countries aren’t buying U.S. bonds as much as they did in the past, the government is forced to buy their own bonds, and using printed money to do so.
Simply put, if the FED stops printing money, they will be no one to buy U.S. bonds, which could crash the markets.
Call To Action
This scenario isn’t discussed on mainstream media, but it’s something everyone should be aware of. People need to start thinking about this and prepare for a potential new reality.
More than ever, it’s critical people discover ways to generate multiple streams of income and passive income. We must become producers. By creating your own products and services, you will be able to raise your prices accordingly to keep up with inflation and the cost of living.
Ask yourself the following questions:
- Will I be able to survive without government assistance (stimulus checks, food stamps, Medicaid, etc.?)
- How will rising food prices affect my household?
- Do I have enough in savings if I lose my job?
- Do I have enough food stockpiled if supply shortages continue?
These are questions we all must think about.
Tip #1. An excellent way to protect yourself is to have money outside the system. This would include owning items such as physical gold and silver and cryptocurrencies. Gold and silver have been used as money for thousands of years and have never gone to zero. Cryptocurrencies are gaining popularity all over the world, with bitcoin being classified as legal tender in many countries including El Salvadore.
Tip # 2. Another tip is to learn how to generate multiple streams of income and passive income. The average person relies on one paycheck to pay all their living expenses. This can be a mistake if that source of income is disrupted or doesn’t keep up with inflation.
The average millionaire has 7 streams of income, with much of it coming from passive investments. This is the key to surviving difficult economic times. This information isn’t taught in school but is a key part of financial literacy and gaining financial freedom.
For more info on passive income and multiple streams of income, register for our online course Tired of the 9-5? How To Retire Early With Passive Income. Now on Udemy.
Tip #3. As inflation and supply shortages continue, we must start stocking up on supplies before they become too expensive or are out of stock altogether.
Top items to purchase include the following:
- Canned goods
- Bottled water
- Gas/solar generators
Aim for at least 3-6 months of supplies.
As the world changes, we must be ready, willing, and able to change along with it. It’s critical you don’t rest on your laurels and continue learning. Get more great tips in my books on Amazon, including Invest For Success: Winning Wealth Strategies Not Taught in School and Planting Seeds: The Children’s Guide to Entrepreneurship.