To set the record straight, the U.S. has been insolvent for several years and it looks like it is now entering into a Ch. 11 type Reorganization. The U.S. national debt is at $36 trillion and rising, and its Debt/GDP ratio is at 123%. Financial experts have long said that once a country’s debt exceeds 90% of its GDP it has entered a sink hole where the interest on the debt will start suffocating economic growth. China, Russia, and the BRICS countries have also seen this and for several years have been trying to establish a new currency backed by gold to escape from the current U.S.-led monetary order. The only parties who have not seen this financial train-wreck coming is Democrats and the media who are now saying “the start of the Trump Recession is beginning” because of President Trump’s policies being implemented. This is “Fake News”!!
For clarity purposes we need to look closely at the Federal Reserve Bank of Atlanta’s ‘GDPNow’ model projections for real GDP growth. During the Biden Administration the Atlanta Fed GDPNow estimated growth in the third quarter of 2021 had dropped 3.8 points (falling from 6.8% to 2.3%) - - and again in July 2022 estimated growth had dropped 3.4 points (falling from 1.3% to a minus <2.1%>). The media only called this a “Growth Scare.” When real GDP declined in two consecutive quarters in 2022—meeting the technical definition of a “Recession”—many analysts, commentators and economists rushed to declare this was not a recession. What followed in the remaining quarters of the Biden Administration was an abnormal increase in government spending that meets the government’s definition of “growth”— and the media was able to report on strong economic growth leading up to the 2024 Presidential election. This too was “Fake News” as the abnormal increase in government spending was deficit spending financed by national debt increases. Since when is borrowing money to spend called “economic growth”?
From 2021-2024 Government spending financed by $8.5t of debt accounted for 25% of the $7.6t of GDP growth and was the overwhelming driver of the inflation spike in 2022 that has permanently increased the cost of living by more than 21%.
Two months ago, the Trump Administration took over the checkbook and immediately froze government spending, established DOGE to cut wasteful spending and terminate many federal employees, attempted to claw back billions of dollars spent wastefully in the last 90 days of the Biden Administration, redefined GDP to exclude government spending since it does not create productive economic growth. These types of actions are exactly what bankruptcy trustees do. If we are truthful, the U.S. is now reorganizing its finances like a Ch. 11 proceeding.
Steve Gardes is a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA) with over 40 years of public accounting experience.
by Steve Gardes
