The Real Reason To Take A Chainsaw To The Administrative State Is The National Debt - The Federal Government CAN Go Bankrupt...

It is possible for countries to go bankrupt - the best example is the old Soviet Union, in the late 1980s. The result is violence and chaos and a lot of looting and criminality...

.When the USSR collapsed - went bankrupt - a friend of mine went over to East Germany and bought a MiG-29 for $500 and flew it, at treetop level, back to West Germany. The Soviet air force hadn't paid or fed their pilots for weeks, and that $500 would get them fed and back home.

We face the possibility of something similar here - and if you think buying gold is going to help, you'd better sleep with one eye open and have lots of brass and lead around, so to speak. Things get violent when governments go bankrupt - and you can just forget about the National Parks and Social Security and Medicare - they're not happening any more, no matter how many Democrats you elect to office. People just don't realize this until it's too late, too often.

Somewhere around here, I have a five million German Mark banknote, from 1923, when the government spent itself into hyperinflation - that nasty feedback loop, using new debt to pay interest on existing debt. The Reichsmark was so worthless that workers would go out and spend their pay to buy food the minute they got paid.

That banknote from 1923 had a Nazi overprint on the back side: “Das Gold, das Silber, und den Speck, nahm uns der Jud, und ließ uns diesen Dreck. Volksgenossen, wie lang wollen wir erlaubt diese Ausplündern?” - which translates to “the gold, the silver, and the currency is taken from us by the Jew and they leave us this trash. Comrades, how much longer will we allow this plunder to continue?”

Money is a surrogate for energy, if you think about it, and debt is a claim on future energy. Economists with the Government and Federal Reserve look at energy as being an infinite resource. I think we know better, that at some point the claim on future energy hits a hard limit. Before that hard limit gets hit, governments will be unable to collect enough taxes to pay for their operations and promised entitlements and defense and interest on the national debt - the latter being the most important, because if there’s a default, there will be no more money to borrow.

If we do a default on even part of our debt interest, "country risk" and interest rates go sky high - like in Russia - then all tax money goes to defense (if still possible) and interest on the national debt - since Congress has no legal duty to pay out anything in Social Security or Medicare - and the bureaucracy goes away unless they want to work for free. There are hard consequences for not balancing energy budgets - and the same goes for debt. It might be a good idea to plan for a day when the Federal Government and its agencies aren't there, anymore.

Right now, DOGE and Musk are making about 5% of the cuts that need to be made. Currently, we're running a $2 trillion deficit - which gets added to national debt. About a trillion of that is new debt to pay interest on the national debt, and that's a feedback loop known as a "doom loop" or "doom spiral" - that's what did in the Greek government back in the 2010s. They still haven't recovered, 15 years later.

"The doom loop is the circle of vulnerability where a country’s banking system can be severely hurt by volatility in the price of the sovereign bonds they hold for reserves resulting in a contraction in lending provided by the banks. This contraction in credit, in turn, slows the domestic economy, resulting in a further deterioration in the price of the sovereign’s bond issues as the government is forced to increase its borrowing to maintain services in a period when tax receipts are falling." https://greenleaftrust.com/news/the-doom-loop/

The goal announced by Musk reduces the rate of growth of the debt to $1 trillion per year, from $2 trillion per year - but that’s still an exponential increase. With a current national debt of $37 trillion, at $2 trillion per year increase, that’s 5.4% per year increase, the doubling time is 70/5.4 = 13 years, and at a $1 trillion per year increase, that’s 2.7% per year increase, and the doubling time is 26 years.

Doubling time means the time in which today’s national debt of $37 trillion becomes $74 trillion. The yield on the current 10 year Treasury bond is 4.2%, which is what gets paid to the owners of the debt, who collect the interest. If that current rate of interest holds for the next 26 years - and doesn’t increase to the 15% that it was from 1979 to 1982 - then the interest on the current debt is $1.6 trillion, increasing to $3.2 trillion in constant 2025 dollars.

But betting that that current rate of interest will hold isn’t a good bet - people simply won’t buy the debt - so it gets added to the “money supply” - which inflates the amount of money without keeping its value constant - in other words, you get hyperinflation.

All that really has to happen is for the interest on the debt to go up to the levels that it was at from 1979 to 1982 - 15%. At 4.2%, we’re using new debt to finance - pay out - about $1.6 trillion of interest. Say the national debt next year hits $40 trillion, then the interest rate gets kicked up to 15% the next year. Then the interest paid out gets to be $6 trillion, and that gets monetized - added to the existing debt, the national debt gets to $46 trillion, the same thing happens the next year, with an increase of $6.9 trillion - that gets added in, making a total of $52.9 trillion, then the next year the interest is $8 trillion over the amount of income taken in.

The increase in total interest to be paid out to holders of the debt, over just three years is $21 trillion - and pretty quickly, the only thing being paid for is interest on the national debt, because if there’s a default on interest payments, it becomes impossible to issue any more debt. That means no more Social Security, no more Medicare, no more Military Industrial Complex, and no more government agencies - unless people will work for free. Hint: probably they won’t. And their unfunded pensions won’t be paid, either.

And that’s what we’re headed for - Elon Musk doesn’t begin to go far enough - we need to at very least balance the budget, ideally we need to have surplusses of at least a trillion per year for the next twenty-five years - and more is better. And that means doing to the federal bureaucracy what will happen to them in 10 years, tops, if we don’t start generating surplusses now - they hit the streets.

We can limit the Federal Government to the limited set of powers enumerated in the Constitution - and that ain’t much, with the rest being left to the states - or it can collapse like the old Soviet Union, with the same result, albeit with a lot more chaos and disorder.

And that means the absolute end - full stop - of the Administrative State. And that’s because we can’t afford it - and haven’t since at least last year, when we started financing our debt with new debt. If people get to a point where they have to get a new credit card to pay the minimum payments on their existing cards, they’re bankrupt. That’s the situation the Federal Government is in now.

Of course, the end could be staved off for a few years by doubling Federal income taxes, and imposing a national sales tax, but that’s a stopgap, eventually it still blows up. And people will simply revolt with doubled income taxes and 20% national sales taxes - because they’d be paying more than 60% of their income for taxes - and not getting much of anything, if anything at all, for their money. And that is Game Over for the US Government.