John Bolton - US National Debt a "Threat to Society"

We have heard this said many times, but White House National Security Adviser John Bolton is the latest official to point to the US debt as a systemic threat. His comments were widely reported and you can read them in this article (a couple of excerpts below).

-------------------------------------------------------------------------------------------------------------------

“It is a fact that when your national debt gets to the level that ours is, that it constitutes an existential threat to the society,” Bolton said. “And that kind of threat ultimately has a national security consequence for it.”

While Congress will have the final say, Bolton also affirmed the White House Office of Management and Budget is planning 5 percent cuts across all government agencies for its fiscal 2020 budget proposal expected in February. That plan, which Trump disclosed at a Cabinet meeting on Oct. 17, has prompted “howls of outrage … from various parts of the government,” Bolton said."

Click here to read the full article

-----------------------------------------------------------------------------------------------------------------------

My added comments: This is nothing new and we have reported comments similar to this for years. here. Readers who want to look at an in depth article that does a good job  of summarizing the overall situation may want to read this article by James Grant. Below are a couple of excepts from that article which points out that despite massive US debt and deficits, markets so far have not reflected any concerns. The conditions for problems are always out there, but until the stock and bond markets reflect concern, no one is motivated to do anything to change the status quo.

"America’s deteriorating public credit is the cold-button issue of the 2018 midterms. With rare bipartisanship, Democrats and Republicans compete to pretend that the country isn’t going broke. In 1992, the third-party presidential candidate Ross Perot likened the widening gap between federal receipts and federal spending to “the crazy aunt tucked away in the room upstairs nobody talks about.” The old gal’s dottier than ever."

. . . .

"The sophists and economists who contend that we ought to borrow because, at an interest rate only slightly over 2 percent, we can hardly afford not to borrow, have a point of a kind. In 1988, on a debt of $2.6 trillion, the Treasury paid net interest of $152 billion. In the just-ended fiscal year, on $21.5 trillion of debt, the Treasury paid net interest of $371 billion. Thus, over the past 30 years, the debt jumped by 727 percent, the cost of servicing it by just 144 percent. To the casual question, “What’s the harm in the Treasury’s availing itself of the market’s over-generous hospitality?” there is no casual, tweetable answer."

. . . .

"But the 21st-century Treasury is under no pressure to take such actions (to reduce the debt). Its creditors, for now, seem perfectly happy. Though the supply of government securities on offer this fiscal year, from all sources, including the Federal Reserve, is projected to be the greatest, as a percentage of national output, since World War II, interest rates have risen only by enough to rattle President Trump and (at this writing) the stock market; the government is still easily financing its $3.9 billion or so of daily new borrowing needs. The dollar-exchange rate likewise signals complacency. In the worldwide laundromat of fiat money, the dollar is the cleanest dirty shirt."