POLITICS AS THEATER
At this WWE event, the contestants (red and blue) act out their carefully orchestrated scripts. The fans stand and scream their support for one and their outrage at the other. The "official" in a stripped shirt pretends to ensure that the "rules" are being followed. At the end of the night, the performers go home richer but bruised and the fans go home poorer but entertained. Most people, but not all, recognize that it was all performance art.
The two US political parties try mightily to convince voters that they are very different. Both argue that they have the solutions necessary to solve the nation's vexing problems. At political fund raising events people stand and scream support for their candidate and their outrage at the other. At the end of the night, the politicians go home richer and their supporters go home poorer but entertained. Most people, but not all, fail to recognize that it was all performance art.
As in "professional wrestling", the differences between the two parties are largely cosmetic. Both have spent decades creating the mess they now propose to solve with ... yet bigger government, more spending, higher taxes and increased debt. The following chart shows the rise of government debt under both the red and blue teams. Plundering the nation's treasury to get elected to office has been a bipartisan strategy for at least fifty years.
Source: Financial Underground
Politicians on both sides of the aisle, and their rabid supporters, castigate their political opponents in an increasingly deranged manner. That anyone still supports either party is a mystery. That they do, proves they have no interest in understanding what has caused their nation to run off the rails - much less having any interest in identifying solutions to those problems. Instead, voters continue to hold the groundless belief, encouraged by the politicians vying for office, that a change from one political party back to the other in the next election is the solution to all that ails the country. That is, history has taught them nothing.
In the distant past, Republicans stood for the principals of small government, low taxes and no foreign entanglements. Democrats stood for the principal of protecting the people's personal rights from encroachments by the government. Apart from vapid slogans ("Hope and Change" and "Make America Great Again"), the two parties are two sides of the same coin. They both seek to buy votes with promises of more government interventions and taxpayer-subsidized benefits while having zero concern for the nation's future well-being. Their goals are limited to getting elected, repaying their political supporters with favors and handouts, and then getting re-elected. Everything else is performance art.
When viewed from outside the political tempest, it is easy to see that those holding political office have been "bought and paid for" by large corporate and special interest donors who then demand "payback" for their largess. The US Supreme Court's 2010 decision in Citizens United v. Federal Election Commission (558 U.S. 310), overturned federal restrictions on corporate, public and private union and other special-interest group's financial contributions to political candidates. As predicted, that has proven to be a dagger to the heart of "government of the people, by the people and for the people".
The dissent in that case, led by Justice John Paul Stevens, warned that treating corporations like natural persons in the political sphere will "undermine the integrity of elected institutions" and allow wealthy, special interests to drown out the voices of ordinary citizens. And so it has proven. Super PACS (organizations now allowed to raise unlimited sums of money from corporations, unions, associations and wealthy individuals) funnel it into political campaigns. The result is further enrichment of the connected few at the expense of the many.
While French political philosopher Alexis de Tocqueville is often credited with this quote, it was written by Scottish historian, Alexander Fraser Tytler.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury.
Most people harbor the naive belief that one day politicians will get around to doing what is necessary to right the sinking ship of state. They will disappointed. Ryan McMaken explains,
Italian sociologist and economist Vilfredo Pareto understood that ruling elites within a democratic regime oversee a complex system of patrons and clients who assist each other in benefiting from what Frédéric Bastiat called legal plunder. This process of exploiting the masses for the benefit of the ruling elite (and its clients) exists in every modern state. The amount of time, effort, ingenuity, and resources that goes into sustaining the power of the governing elite will not be willfully thrown aside. After all, the stakes are incredibly high, as the governing elite’s powers are critical to augmenting the power, wealth, honors, and prestige of its members (and their families). This helps illustrate why it is always a false hope to think that either the Republican or Democratic party will ever threaten the current status quo of the ruling elite. The fact that they alternate as part of the governing elite is proof enough that they are no threat to the governing elites.
Trump's campaign promises to "drain the swamp" (eradicate the influence peddlers in Washington DC), turns out to mean no more than drain the swamp of Democratic influence peddlers. And so the cycle continues with the "people's representatives" always advancing the interests of the wealthy ruling elites while ignoring what is best for the nation and its taxpayers.
US government debt (currently $38.5 trillion) is uncontrolled. This chart shows the growth of that debt as a percentage of total US GDP. It is now more than 120%. Many economists consider a debt ratio over 90% of GDP as threatening a fiscal crisis.
The next chart shows the soaring amount of interest the US government is having to pay annually on its rapidly rising debt - now more than it spends on defense of the country.Source: Federal Reserve Bank of St. Louis
Source: Federal Reserve Bank of St. Louis
Will this debt continue to get worse? Of course it will. In fiscal year 2025, the US government took in $5.23 trillion in revenues....but spent $7.01 trillion. The deficit (more than 6% of the nation's entire GDP) was funded by more borrowing - meaning yet higher interest payments in the years to come. The next chart is based on the Congressional Budget Office's earlier projection of future net interest expenses. Note that this cost will, in time, consume 40% of all federal revenues. Obviously, that is not sustainable. However, the debt is rising faster than predicted by the CBO, so the crisis will come sooner.
Source: Peter G. Peterson Foundation
When you add US federal, state and local government spending together, they now consume well over 40% of the nation's entire GDP (highest since funding World War II). Like the national government, state and local governments are desperately searching for ways to increase tax revenues to support their rapidly growing expenses. Working people are left to support themselves and their families with what little is left over in their paychecks. They are becoming increasingly angry about that and their falling standard of living. Cue social unrest.
The immediate problem for the federal government is that the Treasury has nearly $10 trillion of debt that matures this year alone. Past buyers of this debt, such as Japan and China, are reducing their Treasury holdings to lessen their exposure to the dollar. Consequently, new buyers must be found to pick up the slack or there will be a Treasury bond auction failure. That might require the Federal Reserve Bank, as "buyer of last resort", to step in and purchase them with freshly printed money - debasing the dollar even more. One way to make this mountain of maturing debt more appealing to investors is to raise the yield (interest rate). Unfortunately, that increases the Treasury's interest expense each year. If the average Treasury debt rate is 3% and rises just one percent, the annual interest expense jumps another $300 billion - assuming no increase in the amount of debt outstanding, a false hope.
Your nation's debt to GDP may be higher or lower (e.g., Spain 103%, Belgium 104%, France 113%, Greece 154%, with Japan ringing the bell somewhere between 250-260%) but the point is the same. Is there any realistic probability that debt will be honestly repaid (i.e., not repaid in devalued currency)? If the answer is no, that will have very serious consequences for you, your children and grandchildren.
The US Federal Reserve Bank was created in 1913 following the Great Depression and frequent "bank runs". Those occurred when depositors developed a concern that their money might not be secure and should be quickly withdrawn before the bank "went bust" and they lost their life savings. Such worries typically followed bad harvests or industrial slowdowns when borrowers (farmers and businesses) began defaulting on their bank loans. Banks traditionally keep some money on hand to address routine withdrawal requests (10% +/-) and they lend out the rest of their customers' money to borrowers. Few banks were prepared to meet surges in withdrawal requests.
The Fed was created to help banks get through such periods by lending money to troubled banks - secured by good quality bank assets (loans, mortgages, etc.) and at a penalty rate of interest (higher than the normal lending rate to discourage over-reliance on Fed loans). Should a bank lack sufficient good collateral, it would be shuttered - no bank bailouts! Federal bank deposit guarantees were also enacted to discourage bank runs by assuring depositors that their money was protected - up to the guarantee limit.
Other than providing rare, temporary liquidity during a banking crisis, the Fed's principal statutory duty was to "stabilize prices". The following chart reports on the soaring consumer price index (CPI) and proves that the Fed has been an abject failure in its principal duty. The index has risen from just 21.48 in 1947 to 326.03 in December 2025. Bear in mind this chart is based on government-calculated consumer price data that we have long argued are routinely manipulated lower.
Source: Federal Reserve Bank of St. Louis
The above CPI chart is one way of showing the rapid decline in the purchasing power of the dollar (it now takes far more dollars to buy the same thing than it used to). The next chart shows another way of seeing the situation. A 2026 dollar is worth just three cents of the 1913 dollar. One might think that the dollar cannot go any lower. But it can lose another 97% of its value and be worth just a fraction of a cent. If you are saving in dollars (or your devaluing currency) you might want to re-think that.
Source: Federal Reserve Bank of St. Louis
Since 1913, the Fed has evolved into something entirely different. It is now a guarantor of the nation's big banks and enabler of Congressional fiscal irresponsibility. It does the latter by trying to manipulate interest rates. The twelve "wise men" (and women) on the Fed's Open Market Committee strive to impose an interest rate on what was once a free and open economy where millions of borrowers and their lenders negotiated rates suitable for their individual needs. The FOMC's sorry history in trying to "manage" the US economy, shows that government is no more competent to set the interest rate (the price of money) than it is to set the price of labor or turnips.
Large banks and the national government benefit from the Federal Reserve system while millions of savers are severely disadvantaged by interest rates on their savings, that for long periods of time, have been lower than the inflation rate - meaning that their savings have been quietly confiscated. As Doug Casey is fond of saying, "your money did not disappear, it just changed hands". Thomas Jefferson wrote long ago,
I sincerely believe that banking institutions are more dangerous than standing armies; and that the principle of spending money to be paid by posterity…is but swindling futurity on a large scale.David Stockman (former economic advisor to President Reagan) is outspoken in his antipathy to the Federal Reserve Bank in its present form.
If the Eccles Building is not to be demolished entirely, its sole job should be fostering sound, inflation-free money. Accordingly, cutting money market rates back to negative levels in inflation-adjusted terms is absolutely the last thing it should be doing. Until the Fed allows money market rates to reprice honestly the US is destined to endure one destructive financial bubble after the next. Between serial bubble collapses, economic damage is being done silently and unstintingly, day in and day out. That’s owing to the mis-pricing of financial assets and the malinvestment of capital, labor and technology resources which results from Fed falsification of financial asset prices.
There is, of course, a worse outcome than having the Federal Reserve trying to manipulate interest rates. That would be for politicians to do so. They will always set artificially low rates to appease their donor class. The outcome, as always, would be rising inflation due to loose lending standards followed by recessions or depressions to wash away the bad loans and bad investments. Ludwig von Mises warned,
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.What Can Be Done?
It is obvious that to keep the US debt from growing larger, the first thing that must be done is to stop increasing it by running further budget deficits. The FY 2025 government budget deficit was $1.78 trillion; FY 2026 is expected to be near $2 trillion and may reach $3 trillion soon thereafter. That requires Congress to cut spending and/or raise taxes by that amount. There is zero political will to do that. Elected officials do not want to upset their big political donors with cuts in their "political paybacks" and voters will not stand for any reductions in their benefits. So, it will not be done. Consequently, pressure to force the US government to address its debt problem must come from outside the US. Jeremy Warner at the Telegraph, has one such idea,
The only constraint on Trump Unleashed is the global bond market. If you have a structural fiscal deficit of 6-7pc of GDP, a savings rate near zero and a reliance on the goodwill of foreigners to fund an explosive increase in debt issuance, you might wish to treat global creditors with a little care. The US treasury sold $654bn of federal debt over the four days from Jan 12-15, about the same in one week as the annual GDP of Argentina or the United Arab Emirates.
The market yields on long-term bonds are refusing to come down as the Fed cuts rates, and it is the long end that sets the borrowing cost for mortgage debt, car loans, student loans and corporate debt securities.The way to hold Trump’s feet to the fire is for the whole world – Europe, China, Japan, Brazil, central banks, sovereign wealth funds, pension funds, insurance companies and banks – to sit out the next auction by the US treasury and see how easy it is for US domestic capital markets to cover debt sales running at [$750bn] a month.
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