Bear Market Signal #2

Bear Market Signal #2:

The "Bomb" From Washington D.C. Politicians

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Yesterday, we talked about a key indicator you may have heard about in the financial media – the "inverting" yield curve — and why it's so important to watch it closely.

Today, in Day 2 of our Bear Market Signal series, we look to a problem that is even bigger.

Our government is gorging itself on debt like there is no tomorrow...

Over the past 10 years, total U.S. government debt has nearly doubled from $11.1 trillion to just shy of $22 trillion today. That's roughly equal to $67,000 for every man, woman, and child in America.

And it's expected to grow by another $1 trillion over the next year... and the next year... and the next year after that.

And yet, other than folks like former congressman Dr. Ron Paul, who recently wrote...

President Donald Trump may not be troubled by the debt's effect on the economy because he believes he will be out of office before it becomes a major problem. However, the crisis may come sooner than he, or most people in D.C., expects.

Practically no one else cares. Virtually no politician on either side of the aisle is talking seriously about this problem today.

Why, you ask?

Stansberry Research founder Porter Stansberry, who you'll hear from during the Bear Market Survival Event on May 15, recently got to the heart of the matter...

Since this boom began in 2009, almost nobody has paid any attention to this massive increase in federal debt. You haven't heard a word about our deficits from our politicians. Nobody cares. Why? Because since 2009, these debts haven't caused our country's borrowing costs to rise.

Even though total federal debt outstanding has increased by 126% since 2008, our borrowing costs have fallen. We're still paying about the same amount in interest on this debt as we did back in the early 1990s, when our national debt was only 22% of the size of today's burden.

The thing that matters to policymakers is how much the debt costs to maintain, not how much it costs to repay. That's why you haven't heard anything about it.

But that won't last forever. Already, rising interest rates and the withdrawal of central bank stimulus are pushing the government's debt service costs higher.

According to projections from the Congressional Budget Office, interest payments will nearly double, going from 6% to 11% of the federal budget...

Net Interest Payments on U.S. National Debt

These rising costs are going to have a profound effect on the current widespread political belief that "deficits don't matter," just as soaring default rates on consumer lending are going to lead to much tougher lending standards on cars, colleges, and credit cards.

All that consumption that we've enjoyed on credit for the last decade is going to come back to haunt us. All of us.

And as concerning as this scenario is, it could soon get worse...

You see, under even the rosiest projections, the U.S. government is expected to run annual deficits of more than $1 trillion well into the foreseeable future. If past is prologue, we can expect the actual sums to be significantly higher.

In addition, the Fed is unwinding its quantitative easing program. The largest single buyer of U.S. Treasury bonds over the past few years has suddenly disappeared.

Meanwhile, the White House is engaged in a "trade war" with China, which has been one of the largest foreign buyers of U.S. government debt for decades.

In other words, for the first time in modern history, the government will be required to issue a massive supply of new U.S. Treasury bonds during a period of tightening credit conditions and weakening demand.

This combination could easily trigger a cycle of even higher interest rates and ever-larger deficits that spirals out of control.

Eventually, this government debt bomb will explode. And who do you think is going to suffer the most?

Jared Bernstein, senior fellow at the nonpartisan Center on Budget and Policy Priorities put it this way in an interview with CNBC:

Even if you think that public debt just doesn't matter to economic outcomes, the thing you have to admit is that when we hit a downturn, governments are less likely to take significant steps if the debt is as high as ours is now.

It's not complicated. As debt increases, the ability of economies to grow will slow.

And it's not just government debt that is out of control...

You see, despite a growing economy... near record-low unemployment... and low levels of inflation... American household debt is at a tipping point, and starting to catch up to folks. Click the "Bear Market Signal #3" button below to learn more.

Special Guests

Jim Rogers

Jim Rogers

Jim Rogers is an American businessman, investor, traveler, financial commentator and author based in Singapore. Rogers is the Chairman of Rogers Holdings and Beeland Interests, Inc. He was the co-founder of the Quantum Fund and creator of the Rogers International Commodities Index.

Porter Stansberry

Porter Stansberry

Porter Stansberry founded Stansberry Research in 1999 with the firm's flagship publication, Stansberry's Investment Advisory. He is also the host of Stansberry Investor Hour, a weekly broadcast that has quickly become one of the most popular online financial radio shows. At Stansberry Research, Porter oversees more than twenty of the best editors and analysts in the business, who do an exhaustive amount of real-world, independent research.

Austin Root

Austin Root

Austin Root is editor and portfolio manager for the Stansberry Portfolio Solutions products and American Moonshots. He is also director of corporate development at Stansberry Research and a senior analyst for Stansberry's Investment Advisory.