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Guns and Butter

The phrase "guns and butter" is often used in economics and political discourse to describe a trade-off between defense spending (indicated by "guns") and domestic,

civilian, or social spending (denoted by "butter"). It reflects the idea that resources allocated to one area, such as defense, maybe be at the expense of resources available for other societal needs, like education, healthcare, infrastructure, or welfare programs. What happens if the government keeps buying guns and butter and borrowing money at an unprecedented rate to pay for both?

At the beginning of 2011, the U.S. national debt was approximately $14.8 trillion. By September 2021, the U.S. national debt had surpassed $28.7 trillion. This change represents substantial growth over the decade due to various factors, including government spending, economic challenges, and the response to events such as the COVID-19 pandemic. At the current growth rate, the U.S. National Debt could reach $40 Trillion by 2027 and over $50 Trillion by the end of the decade. The recent growth rate indicates future market instability and the potential for a significant reset. Yet, the outlook for the rest of this year and going into 2024 is a strong economy with only a side whisper as long as the following doesn't happen: the U.S. presidential election becomes a disaster, multiple geopolitical events come to fruition, continuing uncontrolled open borders, escalation of the Israel conflict, and a host of other current events that could rattle markets. However, those events have nothing to do with smart investing, right? Considering everything, even the government has to pay its debt at some point, how will they do it? I haven't seen any plans, have you?

I just met with my financial advisor, where I expressed my concerns, and he replied straight from the textbooks, "To be financially successful, one must stay the course!" Followed by, "Debt is GOOD for the market. Sorry, I meant 'Government Debt' is good for the economy." Can the government continue to spend forever without ever paying off its debt, and the market remains good? It was implied I was being too pessimistic and missing all the growth opportunities. A pessimist sees the bad. An optimist sees the good. There's a third option: I'm an engineer; I see the good and bad in all my designs, and everything matters. No system left unchecked will go on forever. There are failure modes; one can and should predict when and where the system will fail. However, in my case, my old boss was right, "John, you're not a pessimist, just a frustrated idealist."

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Lynn Verot
Lynn Verot
13 ott 2023

Tell it like it tis. When does the Government pay their debt?

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