Cash in the bank

You spend more than you can afford for too long and pretty soon it’s out of your control. Then, lenders — sensing a train wreck — want more interest to protect themselves. And you can’t go on.

Source: Joint Economic Committee 2026 Economic Report of the President

Tuesday, June 2nd, 2026

Bill Bonner, from Gualfin, Argentina

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In 2007, just as the financial crisis was taking shape, households faced about the same interest rates as today. But between that crisis and today, total debt has doubled.

Yesterday, we were focusing on simple things. For example, as consumer debt, prices and interest rates increase, those who don’t own Nvidia stock gets squeezed. Simple enough.

But the feds feel the vise tightening too. Instead of paying interest at below 2% on new debt, with the total debt at $27 trillion as it was in 2020...they’re now paying 5% to borrow, with a debt load $13 trillion heavier.

And while much of America’s debt was contracted at low rates, that ‘old’ debt will gradually be replaced by ‘new’ debt at higher rates.

At today’s 5% long-term rate, the after-inflation yield is only 1% or 2% — which is historically low...and almost certainly too low to attract new lenders. In order to give investors a real rate over 3%, the nominal rate on US bonds would have to be around 7%.

So, looking a few months into the future...when US debt has been rolled over at the new rates....we will have $40+ trillion in debt and interest payments rising to $2.5 trillion — and beyond.

And returning to the poor folks on the downward stroke of the K-shaped economy, the Committee for a Responsible Federal Budget projects that in 10 years the interest cost — per household — on federal borrowing could reach $17,000 per year.

That is pretty easy to understand, too. You spend more than you can afford for too long and pretty soon it’s out of your control. Then, lenders — sensing a train wreck — want more interest to protect themselves. And you can’t go on.

Pretty obvious too is what you should do about it. Stop…while you still can. But the feds — both Republican and Democrat — show no signs of being aware that the bridge is out...or, if they are, no willingness to put on the brakes.

Why not? That’s where it gets complicated. But to simplify, the money they are spending goes to people who don’t want to see it stop. They have power. They have influence. And they want more.

What, you’re not one of them? Too bad.

For most households, the news just gets worse. The latest job numbers are so low, we haven’t seen anything like them since 1969. CNBC:

According to the Department of Labor, seasonally adjusted initial claims fell to 189,000 for the week ending April 25, down 26,000 from the previous week’s revised level of 215,000. The four-week moving average also dipped to 207,500.

Bloomberg reported that the figure marked the lowest level since 1969. Economists had expected 212,000 claims — meaning the actual number came in far below forecasts.

Yesterday, we mentioned how tariffs and the attack on Iran are pushing up prices. Almost everyone assumes that these problems will soon be behind us.

Maybe not. “You ain’t see nuthin’ yet,” argues the Ashland Chronicle:

We are running an economy this week on the country we were in February. The shelves still look mostly normal. The shipping bays still seem mostly full. The cargo still appears mostly on time where it is supposed to appear. None of this is the world we are actually living in. We are spending down the last inventory of the country we used to have and we are spending it down on a clock.

Inventory is mercy. Inventory is the cushion the world leaves you between the moment a thing breaks and the moment you feel it break. The blast wave is real, but the blast wave is also delayed by the length of a supply chain, by the contents of a warehouse, by the days it takes a tanker to cross an ocean.

Inventory is a pile of firewood...a well-stocked supply chain for food and medicines...oil reserves...and cash in the bank.

But who looks at the woodpile until the temperature drops?

Regards,

Bill Bonner