Tag Archives: Deficit spending

Aug 28 2025

What Happens When Governments Cannot Sell Their Debt?


Posted originally on Aug 28, 2025 by Martin Armstrong |  

1894 20 c Italy

QUESTION: Marty, you have mentioned that at some point in history, when Italy could not pay off its 30-day short-term paper because it could not sell the new debt to pay off the old, as they do today, they converted 30-day paper to long-term. I cannot find the details on that. Could you please explain this, as it is a risk here in Europe today?

Bret

ANSWER: Yes, that was during the Panic of 1893 that became a Global Contagion. Italy, when faced with similar circumstances to what we see today, did not officially default in the classic sense of failing to pay. Still, it executed a coercive debt restructuring that is widely considered a selective default or soft default in 1893-1894. This is what we refer to as a forced loan.

Italy was facing a run on its short-term debt and unable to roll over the maturing paper because there were no buyers, the Italian government, led by Prime Minister Francesco Crispi, did not formally declare a default. Instead, it passed a law (Legge 11 luglio 1894, n. 386) that forcibly converted the short-term Buoni del Tesoro into a new long-term bond.

The law mandated that holders of the short-term Treasury notes could not be repaid in cash upon maturity. Instead, they were forced to exchange their maturing short-term paper for a new long-term government bond, called the “Rendita Italiana 5%” (5% Italian Annuity).

This new bond had a 5% coupon but was issued at a price below par (effectively giving a higher yield to compensate, somewhat, for the forced nature of the deal). Crucially, it was a perpetual bond, meaning it had no final maturity date.

The Italian government unilaterally changed the terms of its debt. Investors lent money for 30 days, expecting to be repaid in cash at the end of that term. The government broke that promise.

Investors had no choice. They could not get their cash back; their only option was to accept the new long-term instrument. While they received a new security, it was illiquid (perpetual) and its value was uncertain. This action caused significant financial losses for many Italian banks and citizens who held the paper.

I would expect that Europe will pull this one off when it can no longer issue new debt to pay off its old debt. We are living in a perpetual Ponzi scheme. There is ONLY one way this ends, and that is a default or a forced loan.

Jul 9 2025

“The Risk Of Burnouts Will Be 100x Higher By 2030.” Dave Walsh On Preserving Base Loan Power


Posted originally on Rumble By Bannon’s War Room on: July 8, 2025, at 1:00 pm EST

Jul 9 2025

Inflationary Pressures Began After 2015 – Tariffs are a Distraction


Posted originally on Jul 9, 2025 by Martin Armstrong

ECM 2015 2020 Detailed

The Federal Reserve’s Survey of Consumer Expectations foresees inflation returning to “pre-tariff” levels. As I have mentioned, the rising costs were a mere price correction and not a permanent rise in inflation. Tariffs were NEVER the root cause of inflation.

The central bank predicts that inflation will read 3% in 13 months, which would be the same level of inflation—at least by the Fed’s calculations—since Trump entered the White House. The Fed was stating that prices would rise 3.6% back in March and April when the tariffs were announced. They blamed the Smoot-Hawley Tariff for the Great Depression, just like they’re now blaming Trump’s tariffs for inflation. It’s a political narrative.

Central bank members see inflation remaining unchanged over the next three to five years at 3% and 2.6% respectively. However, members see prices increasing in food (5.5%), medical (9.3%), gas (4.2%), rent (9.1%), and college tuition (9.1%). There is a plethora of factors leading to inflation in the aforementioned categories, none of which have any relation to tariffs.

BIG BANG ECM 2015.75

Prices have simply not returned to what they once were before the global economy came to a standstill during COVID. Every nation has been affected. The lockdowns and supply chain cracks were exacerbated by a massive increase of government spending. Then the government doubled down on green policies, causing energy prices to rise, and lit the situation ablaze amid the Ukraine war and Russian sanctions. The world was already amid a sovereign debt crisis before COVID, and in fact, the Economic Confidence Model clearly stated that the landscape would permanently change after the Big Bang target of October 1, 2015 (2015.75)—the peak in government confidence.

2015.75 was the beginning of the decline we are witnessing in sovereign bonds globally. The migrant crisis began in 2015 when former German Chancellor Angela Merkel invited Syrian refugees to Europe, leading other Build Back Better nations to follow suit in the years since. Anti-establishment sentiment was already on the rise when Trump first secured the presidency the following year in 2016.

Trump was not the cause, he was the symptom. The people lost faith in the establishment starting in 2015.75 and this is part of the global shift predicted precisely by the system. The Fed thinks inflation is a monetary issue. We are in a sovereign debt crisis, a confidence crisis, and a geopolitical storm and not a normal business cycle.

Jul 5 2025

Steve Bannon: “Big Tech And Wall Street Grip Washington Like The Monarchy Once Gripped Parliament.”


Posted originally on Rumble By Bannon’s War Room on: July 4, 2025, at 4:00 pm EST

Jul 5 2025

Is ChatGPT Epistemic?


Posted originally on Jul 5, 2025 by Martin Armstrong 

Conversion Office for German Foreign Debts 100 Bond Nazi Government sold in the United States New York 1936

QUESTION: You said that the German Nazi Party was raising money selling bonds in the United States before they invaded Poland in 1939. When I asked AI, if the Nazis sold bonds in the US it said “No, the Nazi regime did not sell sovereign bonds in the United States after coming to power in 1933 and before the outbreak of WWII in 1939.” So, who is correct? You or AI?

ANSWER: From what I am being told, a problem is surfacing with ChatGPT-generated content, which often contains factual inaccuracies. The development of language models to engage in AI is presenting a problem. They are learning from the WEB, correct. However, they are not necessarily capable of verifying what is true or false. Here is a Conversion Office for German Foreign Debts $100 Bond (Nazi Government sold in the United States) into the New York 1936. I have the physical evidence that suggests that the answer you received was incorrect.

British Journal of Educational Technology (BJET) recently explained that “no research has yet examined how epistemic beliefs and metacognitive accuracy affect students’ actual use of ChatGPT-generated content, which often contains factual inaccuracies. ” For those unfamiliar with this arcane term of philosophy, linguistics, and rhetoric, epistemic, it traces back to the knowledge of the Greeks. That Greek word is from the verb epistanai, meaning “to know or understand.”

I try to be accurate, and if I state something as fact, I have generally verified it versus making a statement of just an “opinion,” perhaps derived from a belief. Nobody is perfect – not even ChatGPT.

Jul 5 2025

Polling Patriotism – A Stunning Contrast Between Democrats and Republicans


Posted originally on CTH onJuly 4, 2025 | Sundance

CNN broadcast a rather remarkable polling outcome that hits on the issue of pride and patriotism.

The collapse of pride in America from the Democrats polled is only 36% percent. Compared to Republicans 92% proud to be an American. What a contrast.

.

Jun 28 2025

Rep. MTG: “Republicans CANNOT Pass Another Bloated Bill That Betrays The Agenda Americans Voted For”


Posted originally on Rumble By Bannon’s War Room on: June 27, 2025, at 2:00 pm EST

Jun 27 2025

Dollar – Debt- War & Crypto


Posted originally on Jun 26, 2025 by Martin Armstrong 

Fake News Headline

Bloomberg and the other Fake News outlets that hate Trump and want more EQUALITY, following the very same philosophies as Stalin imposed in Russia. All we hear is the danger of wealth disparity. When there is no wealth disparity because people are not allowed to invent or become rich, you get economic stagnation and widespread poverty. But these FAKE NEWS outlets constantly push the same nonsense over and over again. The de-dollarization is all because of Trump, so we better overthrow Trump and bring in Kamala so the Neocons can really help the economy with uncontrolled, endless war spending and a reduction of the population to reduce government obligations.

BRICS De Dollarization

While the FAKE NEWS and the perpetual GOLD-ONLY crowd promote the de-dollarization with BRICS, that means in time of war, you are buying Chinese yuan, Russian rubles, and the country most in debt – Brazil. Their perpetual promotion of BRICS and even the latest absurd forecast for Bitcoin at $21,000 by 2046 suggests that these individuals appear to know little about the world economy, the business cycle, or war. They refuse to consider two critical factors: (1) the sovereign debt crisis, and (2) the war.

Interest Expenditures as % of GDP (Top 30 Economies):

  1. United States: 1.9%
  2. China: 1.2%
  3. Japan: 2.0% (despite high debt, low rates keep payments manageable)
  4. Germany: 0.8%
  5. India: 3.3%
  6. United Kingdom: 3.5%
  7. France: 1.7%
  8. Italy: 3.9%
  9. Brazil: 8.5% (highest among major economies)
  10. Canada: 1.4%

The sovereign debt crisis is brewing, but outside the USA FIRST!!!! Canada’s interest expenditures are on track to exceed healthcare expenditures. While people continue to discuss the US debt as a reason for de-dollarization, consider the BRICS; they are paying more in interest as a percentage of GDP than the US, and Brazil is the worst. Britain is in a precarious state, comparable to Italy, and Starmer’s policies are pushing the UK over the edge. Germany has just abandoned austerity and is now going to inflate to prepare for war. The Sovereign Debt Crisis is UNSUSTAINABLE, but it will break FIRST outside the USA. The United States will be the last standing.

6 25 25 NATO_allies_agree to 5

NATO to Accelerate Sovereign Debt Crisis

As the pressure on funding the war, NATO wants 5% of GDP for its Neocon War objectives. They are handing Ukraine another $40 billion that goes into the pockets of untold politicians and no doubt kickbacks even into NATO. This 5% is greater than the interest expenditures. NATO will not only take us into World War III, but they are also accelerating the Sovereign Debt Crisis.

This is NOT positive for the de-dollarization BS. Europe is highly socialistic, and this shift from social spending to war will lead to more civil unrest. NATO is a warmongering NEOCON retirement home. They have no interest in peace, for that would make them redundant. The only way they can keep their salaries and pensions is to insist on endless wars.

US GDP Q 5 1 25
EU_GDP Q 5 1 25
Canada_GDP Q 5 1 25 1

Just compare the economic growth rate of the United States to the exceptionally socialistic policies of Europe. There is no comparison. But the dollar is trash against everything else? When the bullets start to fly, capital controls will be imposed in the EU, and capital will be trapped. Compare even the GDP of Canada to that of the EU. Carney wants to join Europe.

We are looking at the pressure to raise taxes beyond income. In Australia, some leftists actually proposed that it is unjust for one person to inherit a fortune and another not to. They argued that upon death, everything should be given to the government in the name of “Fairness” and “Equality,” which is their favorite word. In Canada, discussions have been held about proposing a tax on unrealized capital gains on property. The argument is that this was like gambling. They earned this money by mere chance. Such proposals would absolutely destroy society and the economy. They are not likely. However, these extreme examples demonstrate how the LEFT cannot live in peace and always want to take what others have because they have more than they do.

Bitcon Q Tech 6 25 25

As for the absurd forecast that Bitcoin will reach $21,000 by 2046, that is the same emotional analysis used in discussions about climate change. Sorry, 2025 may be a significant high point. With war on the horizon, Bitcoin has been a great vehicle for transferring money from one country to another. It is not being bought as a fantastic store of wealth. In war, take out the power grid and watch what happens. I can attest to being in Florida, when a hurricane takes down the power, not even a credit card will work – CASH ONLY!

Jun 18 2025

Patrick: “Central Banks Around The World Are Looking At Dollars More As A Liability Than An Asset”


Posted originally on Rumble By Bannon’s War Room on: June 17, 2025, at 8:00 pm EST

Jun 8 2025

Are the Budget Forecasts Ever Valid?


Posted originally on Jun 8, 2025 by Martin Armstrong 

Debt Burden

QUESTION: Mr. Armstrong, this feud between Trump and Musk has caused me to wonder about Musk. Then, all of these forecasts are using tools you warned do not work because they rely solely on linear analysis. The Tax Foundation said Trump’s bill would result in a $2.6 trillion increase in the deficit. The University of Pennsylvania’s Penn Wharton Budget Model claimed that the bill would raise deficits by $2.8 trillion. Then Yale’s Budget Lab claimed that over a 30-year window, the bill would add $10.8 trillion to the national debt. None of these organizations even understands that there is a business cycle. I find all of this chatter is no different from the climate change projects, as you said, one degree up this year means that will continue forever, and we will all die in 50 years.

Does Socrates have any view that is more reliable than these fake academic prognostications that are never right even once?

Rich

US Annual Budget 6 7 25
US Annual Budget Array 6 7 25

ANSWER: These forecasts are totally worthless. The CBO’s projections for the federal budget deficit were about $900 billion in 2019, and it was expected to exceed $1 trillion each year beginning in 2022.  The deficits for 2020, 2021, and 2022 were $3.1 trillion, $2.7 trillion, and $1.3 trillion, respectively. They are incapable of forecasting. How many millions do these fake forecasts cost? We will do it for 10% of their budget.  They are all based not just on linear analysis, but on the classic assumption that all things remain equal. They NEVER understand that there is a natural inherent business cycle.

Socrates examines everything, and nothing ever remains the same. We have a Directional Change in the annual budget in 2026, and then you see the big target is 2027. Just looking at the French government, which is in its 5th Republic. France changes government like the Biden Administration changed the definitions of a woman from women’s rights for abortion to his appointment of Jackson to the Supreme Court, who said she could not define what a woman is. The French government is expected to fall in 2027, potentially taking the EU with it.

maa wsj

When you look at the chart for the annual budget deficit, we peaked with the COVID-19 pandemic in 2020. Look at the 1998-2002 period. We had a balanced budget. I was asked by the Wall Street Journal to write about how this was accomplished. In sum, the manner in which President Clinton (1993-2001) was able to balance the budge was (1) the economy recovered in 1994 with capital pouring into the United States as it fled South East Asia resulting in the Asian Currency Crisis in 1997, (2) US Interest rates rose sharply in 1994 attracting huge capital inflows including those from Japan, and (3) Clinton shortened the maturity of the debt funding it short-term to cut interest expenditure.

Clintons Balanced Budge 1998 2001

The National Debt rose from $4,064.6 billion in 1992 to $5,807.5 billion by 2001. The shift in funding slowed the rate of growth. Interest rates at the Fed dropped by 6.5% in 2000 to 1.75% in 2001. When Clinton took office, the Fed Discount Rate stood at 3.5%. The rise began in 1994, which helped to attract foreign capital, especially from Japan, and it peaked in 2000 with the Dot Com Bubble on the heels of the 1998 Long Term Capital Management debacle that followed the collapse of Russian debt.

However, because Clinton shifted from long-term to short-term, which reduced the interest expenditures, now look at how the debt exploded when the rates went back up to 6.5%. This is what I mean by the Fed can no longer control inflation, for the biggest borrower is the government.