Why The Biggest “Threat To Democracy” Is The US National Debt
Why The Biggest “Threat To Democracy” Is The US National Debt
Notes From the Field By James Hickman (Simon Black) January 12 2026
On September 1, 1575, a royal courier from King Philip II of Spain arrived to the banking house of Niccolò de Grimaldi in Genoa. The Grimaldi bank had loaned Philip quite a sum of money, and the Italian bankers already knew that the king’s finances were on shaky ground. So when they opened the royal letter, it probably wasn’t much of a surprise: King Philip II of Spain was suspending all debt payments. Effective immediately.
Amazingly, this was Philip’s third bankruptcy in less than two decades—he’d already defaulted in 1557 and 1560.
Bear in mind that Spain wasn’t some struggling backwater in the 1500s; this was the richest nation on Earth.
Spanish galleons transported 180 tonnes of silver annually from the Americas. The empire spanned four continents. Its army was Europe’s most feared military force.
Yet the King couldn’t pay his bills.
Philip’s treasury officials knew exactly what needed to be done: cut spending on endless wars, reform the tax system, reduce royal court expenses, stop borrowing at rates up to 40%.
But all of that was politically impossible. There were too many entrenched interests. Spain’s nobility controlled parliament, so naturally they refused to pass any new taxes (as they would be the ones paying!)
The Church owned vast estates and wielded enormous influence… so touching Church revenues was out of the question.
Military spending was non-negotiable— there were simply too many foreign powers threatening the empire, not to mention war in the Netherlands, skirmishes with the Ottomans, brewing conflict with England.
Every constituency had a reason why their particular spending was essential. Every reform threatened someone’s interests. So nothing changed.
They could have made reforms voluntarily. But it was easier to simply keep borrowing and make the problem worse every year.
Thing is, this approach of kicking the can down the road only lasts for so long… because, sooner or later, the creditors stop lending more money.
Why would they? Why would Italy’s Grimaldi bank keep sending money to Philip knowing that he would not pay them? No lender wants to sink money into a financial black hole.
What often happens in these situations is that foreign creditors do come back to the table. But not as bankers or lenders or bond investors.
No. Once a nation defaults (or is on the brink of default), creditors come back when they can essentially take control of the government… when they can oversee and approve expenses, tax revenues, and even legislation.
We’ve seen this multiple times even in the 21st century. In the aftermath of the 2008 Global Financial Crisis, many European nations (like Greece) were forced into ‘austerity’ programs whereby their domestic economic agenda was dictated by foreign creditors.
In 2022, the British Prime Minister was forced to resign because the bond market didn’t like her tax plan.
All of this ultimately constitutes a loss of sovereignty.
The same thing happened to Spain in the 1500s; suddenly Italian bankers had veto power over Spanish military campaigns… meaning that Philip was a king in name only, and the Spanish Empire ultimately became a subsidiary of the banks.
Within 100 years, Spain had gone from dominant superpower to a weak, second-tier player—economically exhausted and militarily overextended.
Spain had everything needed to remain a great power: vast resources, global trade networks, military strength, and smart administrators who understood what needed to be done.
What it lacked was the political will to make changes before a crisis forced those choices upon them, in a way entirely outside their control.
A similar trend is taking place in America today… though, again, it’s not too late.
Treasury Secretary Scott Bessent recently stated that he believes up to 10%—roughly $600 billion—of the US government budget is fraud. Not waste. Not inefficiency. Fraud of the sort that recently came to light in Minnesota.
And that’s not even counting the ‘legitimate graft’—the type we wrote about last week in California, where Gavin Newsom has given away nearly $100 billion to pointless Leftist initiatives.
The US still has absurdly strong economic potential. The key to reining in this future debt crisis is to cut spending, i.e. freeze the budget in place and spend the same amount of money more wisely. Stop the bleeding.
On top of that, take a hatchet to America’s bureaucratic regulatory maze. If 10% of the US budget is fraud, I’d expect at least 25% (and probably much more) of the United States Code of Federal Regulations is outright destructive.
Those two things would boost real economic growth, generate more tax revenue, substantially reduce the deficit, and bring inflation under control.
There are many paths forward, and a number of creative ways to make this happen. The problem is time. The window is still open. America still has agency over how this plays out.
But actually doing it requires political will that has been absent for decades.
And that’s the point. Staying on this trajectory—the one they’ve been on for years—is a guaranteed problem.
There are signs that some powerful people want off this ride. The fact that Bessent is even talking about $600 billion in fraud publicly is notable.
But if that doesn’t translate into action—it ultimately comes down to Congress finding the will and the courage to freeze spending… or voters becoming smart enough to elect representatives who will get the job done.
We’ve been hearing over and over again for the past several years about various ‘threats to democracy’. The legacy media seems to always be howling that some politician or some legislation is a threat to democracy.
Realistically, the biggest threat to American democracy is actually the US national debt.
Because if voters don’t wake up and demand that their Congressional representatives fix this problem, then sooner or later the bond market is going to be calling the shots— tax policy, defense spending, Social Security— voters’ wishes be damned.
And that’s about as far from ‘democracy’ as it gets.
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC