Downfall

While we all know that the feds can ‘print’ money, what few realize is that the private sector has printing presses too.

All sector debt in the US—household, corporate, and state, local, and federal government—hit $107 trillion by the end of 2025. Only recessions tend to slow debt growth by destroying money and credit.

Tuesday, April 14th, 2026

Bill Bonner, from Baltimore, Maryland

‘War is the state’s escape from a collapsed internal economy.’

—Frank Chodorow

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Blowing things up didn’t work in Vietnam. It didn’t work in Iraq. It didn’t work in Afghanistan either. Nor did it work in Iran.

Hegseth and Trump are proud of the destruction wrought by their planes and missiles, but Iran never surrendered, never gave up its enriched uranium and now controls the Strait. And when presented with a ‘take it or leave it’ ultimatum in Islamabad, replied that it would leave it.

So, what does the Trump Team do now? Violence didn’t work so far...but what else do we have?

“What’s the point of having this superb military that you’re always talking about if you can’t use it,” asked Clinton-era Sec. of Defense Madeleine Albright. She had a point. A late, degenerate empire, with the biggest bazooka in the world, must find a target.

On the surface war is a matter of choice. But deeper down, there are ‘primary trends’ that are hard to reverse. A beautiful spring does not become a hot summer because the people vote for it. Nor does a caterpillar, by willpower alone, become a butterfly. And now, the US must do what it must do. MoneyWeek:

Amid the fog of war, it would have been easy to overlook the latest deficit number coming out of Washington. According to figures from the Treasury Department, the US national debt is now more than $39 trillion. It is only five months since it went past $38 trillion. US debt has doubled from only $19 trillion when Donald Trump was sworn in for his first term as president.

Behind Donald Trump’s bluff, bombast, and bombs is a reality that cannot be blown up or wiped away. The US government is approaching $40 trillion in debt, a world with rising long-term interest rates…and a late-cycle debt crisis.

At just 5%, as more and more old loans are re-financed at new rates, it will soon mean annual interest payments of $2 trillion. Where do the feds get that kind of money? From the 80 million citizens who are living ‘paycheck to paycheck?’ From the 2.5 million Latinos who just got deported (or self-deported)? From the 2 million desperadoes in prisons and detentions? From the war budget...social security payments...Medicare?

While we all know that the feds can ‘print’ money, what few realize is that the private sector has printing presses too.

When you take out a mortgage, for example, the ‘money’ isn’t sitting in the bank’s vaults. It is created ‘out of thin air.’ In 1999, there was about $5 trillion worth of residential mortgage debt in the US. That amount has grown to $15 trillion.

The Fed had set the pace. And all through the economy, the calculation was about the same: taking on more debt was a shrewd thing to do. First, your purchase — bid up by the rising tide of new credit — was likely to go up in value. Second, the dollar was almost sure to go down. So, you made money coming and going.

Likewise, when you pay with your credit card, no money is taken from your account to pay the charge. The seller registers ‘income’ from the credit card company, as the amount of debt (unpaid balances) goes up...and up...and up. Lending Tree:

U.S. credit card debt has grown from around $478 billion in 1999 to a record $1.28 trillion by the end of 2025, reflecting long-term growth with periods of decline during economic crises.

Not included in these conventional money-printing/debt building operations is another form of credit rarely even considered — BNPL (buy now, pay later.) Consumer Financial Protection Bureau:

‘From 2022 to 2023, the number of loans made by the lenders we surveyed increased by 23 percent, and the total dollar amount of loans originated increased by 26 percent when adjusted for inflation, representing slower rates of growth than in prior years.’

All of this private sector debt, added to federal, state, and local debt, comes to about $110 trillion. Not chump change. There again, the math is easy; it’s the repayment that is hard. At 5%....the interest would be about be about five and a half trillion per year — or nearly 20% of GDP.

This is the classic crunch that is coming: huge debts without enough real income to pay them.

It must have been in anticipation that private equity firms have begun telling their investors that they can’t get their money back. So far, Apollo, Ares, Blue Owl, BlackRock and Morgan Stanley have told investors to take a number and get in line.

As our old friend, Sid Taylor, used to say, ‘when your outgo exceeds your income, your upkeep is your downfall.’ Sid was describing the real threat to the republic -- not Iran...not Cuba...not Russia...not China, but too much debt.

A responsible government would stop its dilly-dallying and immediately tackle the debt problem. But that would leave History sadly unfulfilled, like George Armstrong Custer without the Little Big Horn.

Tomorrow....why the feds must saddle up...again!

Regards,

Bill Bonner