10 Ways to Solve the National Debt Problem
Hello friends, my name is Jack Raines. I will be writing on Alpha’s platform once a week. I
also write a newsletter, Young Money, where I cover all things investing, finance, and careers. You can check it out here. Hope you guys enjoy today’s piece!
Thirty Trillion Dollars. That is our national debt in 2022.
Alpha Letter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Enough is enough. I have created a list of 10 possible solutions, from least to most plausible, to solve the debt crisis. Please forward this to your state legislatures. Let's begin.
10) Raise taxes and lower government expenses to run a budget surplus
What a boring, dumb, reckless idea! Why would the federal government, which controls the money supply, ever want to run a balanced book? The whole point of being the federal government is to not have to run a balanced budget.
9) Keep interest rates low forever
This idea has accidentally sort of been happening already.
Interest rates and inflation have an interesting relationship. Have you heard people saying that inflation is killing your savings account because the interest paid on savings accounts underperforms inflation? that same dynamic affects loans too.
Say that you secured a 4%, $500,000 mortgage to purchase your house last year when interest rates were low. Then inflation hits 8% YoY. Guess what? Your 4% payment on a $500,000 mortgage is now cheaper to service. The relative cost of those interest payments decreases as inflation increases, because the expense is a fixed amount of a depreciating currency.
The higher the inflation, the less costly the loan over time.
This applies to interest payments on our national debt too.
If interest rates stay historically low and inflation stays elevated, our national debt becomes cheaper to service over time, just like a mortgage. Conspiracy theory: Is our current high inflation intentional?
8) Put the debt on the blockchain
*Two web3 crypto bros are sitting in a Silicon Valley apartment with no furniture except a couple of mattresses on the floor*
Brad: Bro, the national debt is getting pretty high.
Chad: Bro, I think you are getting pretty high.
Brad: True. But also, the national debt is getting pretty high.
Chad: You're right. It's a good thing none of our money is in fiat. Inflation is sending the dollar to zero.
*conveniently ignores the fact that every single crypto he is invested in is down 80% this year*
Brad: Bro, what if we solve the debt crisis?
*Brad dramatically pulls down sunglasses*
Brad: We could put the national debt... on the blockchain.
Chad: We need to call a16z NOW.
7) Transfer all of the debt to people in hospice care, Then let them die
For the Christian readership out there, I am borrowing an idea from the Gospel of John.
The story of Christ goes something like this. We humans are sinners, therefore we deserve to burn in Hell when we die. Jesus, God's son, wasn't a sinner. Jesus took on all of humanity's collective sin when he was killed on the cross, so we would be able to go to Heaven.
I am proposing that we apply this same framework to our debt crisis.
Is this sacrilegious? I have no idea.
So here's how we are going to do this.
We take some credit cards with really high ($100k+) limits. Then we take anyone and everyone with less than a month to live. Hospice care, terminal illness. Whatever. We have all of these individuals that are about to die max out these high-limit credit cards on a portion of the national debt. Let's say $100k a pop.
When they die, that debt can't be inherited. At worst, it eats into their estates. But then it disappears. We do this over and over again with people right before they die until the US national debt dies too.
A few credit card companies may fail along the way, but who cares. We can always open some new banks.
6) Have Jim Cramer say that he is bullish on the national debt
Everything that Jim Cramer has predicted over the last two years (or really the last 14 years, going back to telling investors *not* to sell Bear Stearns) has been wrong. Like really wrong.
Scroll through my favorite Twitter account, Inverse Cramer, for evidence:
Here's how this works:
We get Jerome Powell to go on Mad Money with Cramer to talk about the economy. Cramer does his pre-show routine of snorting raw coffee grounds or whatever, then comes out fired up.
"JEROME HOW YA DOING MAN! THIS MONEY PRINTING AND QUANTITATIVE EASING AND TIGHTENING AND RECESSION AND STUFF IS NUTS. I MEAN I'VE SEEN SOME CRAZY STUFF. CRAZY. BUT YOU'RE PRINTING MONEY LIKE THERE'S NO TOMORROW. WHY STOP AT $30 TRILLION? WHY NOT $100 TRILLION? A MILLION TRILLION? LET'S SEE HOW MANY TRILLIONS THAT MONEY PRINTER OF YOURS CAN PRINT! HOW MUCH INK DO YOU PUT IN THAT THING?"
Jerome Powell starts to reply, "Thanks Ji-"
"ALRIGHT THAT'S ALL WE HAVE TIME FOR TODAY GUYS THE FEDERAL RESERVE IS GOING TO PRINT $100 TRILLION! THE US DOLLAR IS TOAST AND WE'RE GOING TO DEFAULT ON OUR DEBT!!"
And that's it.
As soon as any prediction, and I mean any prediction, gets the Cramer kiss of death, the inverse hits. I don't know how the actual mechanics will work. It literally doesn't matter. If Jim Cramer says our debt will keep climbing, it'll hit zero within a year.
5) Have every American work in a Chinese Nike sweatshop for five months
Okay, so this wouldn't actually pay off our entire national debt. It would, however, pay off our debt obligation to China. And whether or not our foreign debt owned by China actually matters, people seem to think it matters.
Anyways, here is the math. The majority (more than $20T) of our debt is actually owned by the US. We do have a few trillion owned by foreign countries, with Japan owning the most ($1.2T) and China owning the second-most ($1T). But China is scary and evil, so we should pay off the China debt.
We can accomplish this by having every American work in a Chinese Nike sweatshop for five months.
I've done the math on this.
This 2019 Marketplace piece quoted a mid-career shoe factory worker in China making $570 per month. Let's bump that to $600 per month now, because inflation.
We have ~330M people in America.
We owe China ~$1T.
The average pay is ~$600 per month in a Chinese Nike factory.
330M people x $600 = $198B (rounding to $200B).
After five months of intense labor, we could pay off our $1T debt.
We could enact similar plans with other countries. In Japan, for example, we could work for Toyota and Nintendo, and in the UK we could all work as bartenders for like three days. Boom, foreign debt to $0.
4) Mint 30 trillion-dollar coins
I didn't actually create this idea, Congress did. Sort of.
You may have noticed that every single year, the US government has to vote to raise the debt ceiling. To put this in the simplest possible terms, this is because the US government spends more money than it generates in tax revenue. We could either A) run a balanced budget or B) raise our debt ceiling, so we typically go with B.
The trillion-dollar coin is a concept that emerged during the United States debt-ceiling crisis of 2011, as a proposed way to bypass any necessity for the United States Congress to raise the country's borrowing limit, through the minting of very high-value platinum coins. This is only possible because of an interesting fluke in how the US Mint accounts for new currency issuances. The issuance of paper currency is subject to various accounting and quantity restrictions that platinum coinage is not.
According to 31 U.S.C. 5112(k) as originally enacted by Public Law 104-208 in 1996:
The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time.
Platinum bullion coins can, by this statute, be minted in any denomination, whereas coins in any other specified metal are restricted to amounts of $50, $25, $10, $5 and $1.
Originally, this was proposed as a way to circumvent the debt ceiling. I have gone galaxy brain and now suggest that we simply issue thirty of these bad boys and delete the debt. A platinum coin for China, a platinum coin for Japan, and England can get a coin too! We'll use some more coins to pay off our domestic debt and boom! Debt is gone.
I hope, if we ever do this, that we mint some massive coins. Like those human-sized checks they give you for hitting a half-court shot at an NBA game.
3) Sell Alaska
I thought I had created an original idea here. Nope! The Washington Post published a piece on this idea when I was 15.
Steven Mufson made a great argument for Alaska being worth $2.5T in 2012.
I think in 2022, Alaska is worth $30T.
First, we have discovered more oil and gas reserves, while energy prices are now much higher than they were a decade ago. Therefore, energy resources are more valuable now. Additionally, a country that doesn't actually have any environmental laws like Russia or China could add like 10x more refineries and wells to extract even more resources, thus making this real estate more valuable for them.
The increased production of fossil fuels would expedite global warming, which would increase temperatures around the world and flood coastal cities. Plus cities near the equator would become too hot, and people would need to relocate.
While coastal cities sink to the ocean floor and the equator becomes a death zone, Alaska becomes the world's premier beach destination with a great year-round climate.
It's a perfect flywheel, really. Sell the state to a country that will 10x fossil fuel production, let the expedited global warming push more people to live in Alaska, profit.
Sorry, Sarah Palin.
2) Make our coffee at home
Dave Ramsey told me I was poor because I drink Starbucks every day.
According to Ramsey's calculations, consuming the cheapest Starbucks coffee every day will cost me $22,995 in excess expenses over 30 years. Well I don't drink cheap coffee. I drink grande frappaccinos, because I'm not poor.
So let's double that expense to ~$45,000 in 30 years. I think I have a good 60 years left in me, so that's ~$90,000 in today's dollars before I die.
WELL GUESS WHAT ELSE IS ~$90,000?
THE NATIONAL DEBT PER CITIZEN. SO ASSUMING THAT THE AVERAGE CITIZEN WILL CONSUME A LIFETIME EXTRA COFFEE EXPENSE OF $90,000 WORTH OF STARBUCKS COFFEE, IT IS SAFE TO SAY THAT WE COULD ACTUALLY PAY OFF THE NATIONAL DEBT BY SIMPLY MAKING OUR COFFEE AT HOME.
DAVE RAMSEY WAS RIGHT. MAKE YOUR COFFEE AT HOME OR HAVE FUN STAYING POOR.
Please take every assumption that I made as a 100% fully accurate representation of the broader US population's spending habits. They're definitely true.
1) Take the US National Debt public through a SPAC
Okay, this one takes the cake. You may be thinking, "Jack this is stupid. It doesn't even make sense."
Actually, yes it does. Trevor Milton used a PowerPoint, seven computer-rendered images of a pickup truck, and a falsified promo video of a semi-truck to take Nikola Motors public through a SPAC. One week later, this half-baked idea was worth $25B. It was literally worth more than Ford.
So yeah, we could 100% use a SPAC to take the national debt public. It would probably be a more legitimate investment than 99% of the companies that went public through SPACs over the last two years anyway.
First, a brief description of a SPAC for the uninitiated:
SPACs offer a new method for companies to go public.
Normally, private companies would hire banks to help them price their IPOs. These banks would drum up investor interest, and they would advise the companies on how much money to raise and at what price to issue new shares.
Say the private company wants to raise $1B in new capital. When they "go public," they could issue 10M new shares at $100 per share to raise $1B in new capital.
A SPAC is basically a publicly traded bank account. A SPAC with $1B in capital would approach a company and say, "Hey company, we'll give you $1B for 10% of your company." And the company would say, "Hey, that sounds great. Let's do it."
And the SPAC (and its shareholders) would now own 10% of a $10B company once the merger closes.
For a $30T deal, we'll need a big-name SPAC. The SPAC Daddy of them all. We need Chamath Palihapitiya. Chamath started the SPAC revolution in 2019 when he took Virgin Galactic public through his SPAC, IPOA. He proceeded to launch IPOB, IPOC, IPOD, IPOE, and IPOF, with plans to make it all the way to IPOZ.
I seriously doubt that ever happens.
Chamath is a wizard. He would find a company that he liked, agree to take them public at whatever price he liked, throw a couple of bullet points on a word doc and call it his "one-pager investment thesis," tweet out said word doc, and the price of the SPAC would jump 200% as his followers FOMO'd into his next great idea. No one was better at creating shareholder value.
Now Chamath can cement his legacy by solving the US National Debt problem. I think it would go something like this.
Chamath: Hey Jerome.
J Pow: Hey Chamath. Are you still managing your liquidity?
Chamath: Haha, very funny Jerome. I have a proposal for you. I want to take the US National Debt public through my SPAC: IPOF.
J Pow: That is the stupidest thing that I've ever heard. That doesn't even make sense. How would it work?
Chamath: Well it's simple. We agree to merge the national debt with my SPAC to make it publicly traded. Then I tweet a word document explaining my investment thesis of how taking the US national debt public will solve climate change. Then I talk about it on my podcast. Then a bunch of my Twitter followers buy it, and then they own the debt and are responsible for paying it back, instead of the US government.
J Pow: Is this legal?
Chamath: Morally? It's questionable at best. Legally? It's 100% allowed or I would be in prison right now. I've been doing this for years.
J Pow: Cool, let's do it.
Chamath: Sweet. Time to hop on Twitter. *Cracks knuckles*
Thank you, Chamath, for saving America.
If you liked today’s piece, check out Young Money here!
Alpha Letter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Disclaimer: The publisher does not guarantee the accuracy or completeness of the information provided in this page. All statements and expressions herein are the sole opinion of the author or paid advertiser.
Alpha Letter is a publisher of financial information, not an investment advisor. We do not provide personalized or individualized investment advice or information that is tailored to the needs of any particular recipient.
THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATION AND DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN.
No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned.
Any projections, market outlooks or estimates herein are forward looking statements and are inherently unreliable. They are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. The information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the publisher undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional material.
The publisher, its affiliates, and clients of the a publisher or its affiliates may currently have long or short positions in the securities of the companies mentioned herein, or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions.
Neither the publisher nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein.
the Jim Cramer idea is the only way out of this.
Sell Alaska? How about no!!! YOU CANNOT Sell a sovereign state of the US. Period and it's stupid as hell to even talk about it. Also it's huge in Oil reserves. Dumbest idea I've ever heard.