Dominoes

Artificially low interest rates make Federal debt obligations unattractive to investors.

Higher interest rates increase the annual deficits and the total debt outstanding.

Uncontrolled entitlements like Social Security, Medicare, Medicaid and Federal retirement programs add to the deficit and debt.

Increased funding of Federal debt by the Federal Reserve (Fed) is more likely than higher taxes or annual surpluses.

Deficits that are not funded by investors (domestic or foreign) are funded by the Federal Reserve.

The purchase of Federal debt by the Fed increases the money supply.

Increases in the money supply filter into higher prices for assets and investments or consumer goods and services.

Increases in prices result in larger deficits and financial hardship for consumers.

The government usually tries to curtail inflation with price controls. (Like capping health insurance premiums.)

Price controls motivate residents to invest in hard assets or to move money outside the country.

An outflow of U.S. dollars into passive assets or overseas leads to currency controls.

Higher prices also lead to a decrease in the value of the U.S. dollar vis-a-vis other currencies.

An eventual inability to meet current debt obligations without increased expansion of the money supply leads to a devaluation of the dollar vis-a-vis other currencies.

An inability to stop the inflation spiral leads to hyper-inflation and further devaluation and price controls.

Meanwhile, investors and entrepreneurs begin to move abroad and many give up their citizenship to avoid being subject to laws that are created out of desperation.

It has happened in many other countries.

It can happen here unless those currently in control of the Federal Government and the Federal Reserve are replaced by leaders who understand that unrestrained spending does not create prosperity and abundance.

Vern