Darrell Castle talks about the economy in general as well as the United States economy specifically, and why American families are struggling financially.

Transcription / Notes

IT’S THE ECONOMY

Hello, this is Darrell Castle with today’s Castle Report. This is Friday the 21st day of November in the year of our Lord 2025. I will be talking about the economy in general as well as the United States economy specifically. You probably remember when Democrat policy advisor James Carville told then candidate Bill Clinton, “it’s the economy stupid.” He was correct and the advice is still correct today.

 Remember that next week is Thanksgiving so there will be no Castle Report. I will join you again on Friday December 5.

Carville was a very effective political operative in those days and was apparently able to convince Mr. Clinton that the people who would elect him or his opponent cared more about their standard of living than they did about any foreign policy issue. They should have cared more about donating their children to the foreign policy whims of whoever was in office but when push comes to shove everyone has to eat. A family of four, and those relationships used to exist, is acutely aware of what food and gasoline cost.

I’m a layperson in economics in the sense that I’m not trained in economics but I do have a family with the same economic needs as everyone else. Most importantly I have been a bankruptcy attorney for 46 years which has kept me in the forefront of the economic needs of ordinary people. Tens of thousands of people and businesses have told me about their struggles in cities all over the country and I have helped them find a way through their economic troubles.

With all that said let’s look at some of the economic facts that trouble the country right now. When I say, as I do from time to time, that an economic catastrophe is coming with the only question being when it will arrive, why do I believe that. Not much makes sense these days since America is the hottest economy attracting trillions in capital but inflation is still present and it seems that almost weekly another major corporation announces layoffs or store closings. Last week the fast-food chain, Wendy’s, announced that it would be closing 400 restaurants. Amazon announced that it would be replacing about 30,000 employees with robots.

The economy depends on federal spending and that is now completely out of control. My fear is that so many irreversible commitments have been made that the federal government is not capable of living within its means and if true that would signal eventual disaster. Fiscal year 2025, which ended on September 30 of this year posted a deficit of $1.8 trillion. Deficit means that the government spent $1.8 trillion more than it received in revenue. It’s simple if you think about it from the standpoint of your family. Suppose you make $75 thousand per year but you spend $100 thousand and you do that year after year. You know what is going to happen eventually and that means you will be in my office to consult about bankruptcy.

You can keep the plates in the air for a while by borrowing, pay day loans and the like, and by using one credit card to pay another until there is no more credit limit left on any cards. You can last for a while by just making interest payments on the cards but then you can’t even do that. This problem gets worse and worse until it becomes unfixable and bankruptcy results. That is exactly what the federal government is doing to manage its spending. One of the major warning signs of impending trouble that economists always warn us about is when interest becomes the biggest item in the budget.

It doesn’t exceed medical expenses or social security yet but this year, ominously, interest was higher than the massive defense budget. Just as you do with your credit cards the government has to borrow just to pay the interest. In other words, the government is paying debt by incurring more debt which drives the debt and next year’s payments even higher. This all means that annual interest, which now exceeds 20% of tax revenue will continue to increase. The debt is purchased primarily by foreign governments, central banks, large corporations, commercial banks and individual investors. Recently, in an ominous trend, those foreigners have been net sellers of U.S. debt.

That means that the financing of the debt falls to domestic investors meaning you and me. People individually, through retirement accounts or through purchase of some investment fund, finance government debt with their savings. It is necessary that individual Americans do well because they have to save to invest in U.S. debt. Unfortunately, this year net savings is on track to be less than $1trillion, the lowest figure in many years while the deficit is on track to be roughly $2 trillion.

This all means there are not enough foreign buyers and not enough domestic savers to finance the debt so the only option is for the banking system, i.e., the Federal Reserve, to create the money to pay for the excessive spending. I say excessive because if you spend more than you make with no plan to pay it, I call that excessive. When you get yourself into that cycle you have to stop, to reverse course before it is too late. It’s almost like alcoholism or some other addiction. You can stop for a while, but then it’s too late and you can’t stop on your own.

Inflation is the result when money is created and pumped into the economy without any corresponding increase in production. Energy, it is estimated, is about 50% of the cost of producing everything. When you make energy decisions on a national level that cut back available energy and add to the costs, everything increases in price across the economy. When politicians of one party or another decide to put on their virtue signaling act by refusing to allow domestic production it costs everyone. Everything families use, food, fuel, autos, and clothes for individuals cost more and the products necessary for business from machinery to microchips increase as well.

There is no corresponding increase in wages for people so their standard of living is diminished. If a person usually pays $2.75 per gallon for gas and uses 20 gallons per week that is $55 per week so if it goes to $3.00 he just took a $5.00 reduction in his standard of living. People see this happening and they circle the wagons by cutting back on spending. When people reduce spending huge corporations such as Walmart and Amazon cut back as well which means jobs are lost and the process gets worse and worse. Lay-offs are becoming common and technology such as AI along with robotics makes reducing the workforce easier to do.

As I said earlier, Amazon has announced plans to replace 30,000 workers with robots. Those machines never have sick days, they take no vacations, they do not get pregnant, and they don’t worry about retirement.  Bad policies from the federal government and most policies are bad, make our lives more complicated and more expensive. For example, Obamacare was called The Affordable Care Act but it has made the cost of healthcare much higher and the cost of insurance is skyrocketing.

There are several indicators that can be followed to track the status of the economy. The first and most obvious is shipping records. The giant container ships that you see pictures of and view on television represent the health of the population economically. Timber is another indicator and prices are lower this year. That’s good for consumers because it means things made from timber are also lower but it also bodes ill for the overall health of the economy. Lower demand for timber means lower demand for new houses. Builders aren’t building as much and that means the housing market is slow.

 Not many are looking to build a new home because they can’t afford it. Instead, people who have low-interest rate mortgages are sitting tight which means fewer homes on the market and higher prices. The young suffer because they don’t have a lower interest rate loan and houses are rising so they can’t afford to move out of their apartment to have a family. Most people who start a family want a place with a yard for their kids to play in, I know I did when my daughter was born. High home prices mean that for the first time in U.S. history, the average age of first-time home buyers is above 40.

The president sees all this as well as I do and he is very conscious of the fact that his tariffs have added to the cost of everything whether he admits it or not. A tariff is a charge whether we call it a tax or not, it is a fee we charge foreigners for the privilege of having access to the American market. The result when it ripples through the economy is more money burning a hole in the government’s pocket and higher prices for individuals. The president sees that and he hears the crying so he comes up with a plan to send $2000 to each American below a certain income. I’m opposed to it for many reasons but the primary one is that it will fuel more inflation and make everything cost more and be self-defeating. Who wouldn’t want an extra $2000 he hasn’t earned but in the long run it will not help. My local newspaper, which is owned by the USA Today group and therefore is an almost exact copy of the New York Times, except the sports coverage is not as good, said in an article I received last Wednesday that the cost of it “could be $600 million” while the tariffs have brought in only $300 million.

So, the cost could be this or that but I assume everything in the article is slanted and a lie so you can’t depend on it for information. Instead, the paper should say, look folks, this country is $38 trillion in debt and on track to spend $2 trillion more than it takes in so to have some chance to avoid a catastrophe use the money to at least reduce the deficit.

Finally, folks, is there any way to restore the system and avoid what I have called a looming catastrophe? Sure there is, just see the results Javier Milieu has achieved in Argentina in only two years. Cut spending and stop only tying excessive spending to fraud. Just say we can’t afford it anymore. Close overseas bases and stop fighting other people’s wars. Come home and mind your own business. Wasteful programs, and that is almost all of them, will have to go. So that is the obvious formula but will we attempt it, no I’m certain we will not.

At least that’s the way I see it,

Until December 5th folks,

This is Darrell Castle,

Thanks for listening.