Gradually — Then Suddenly

Dear reader,

The national debt of the United States national debt has scaled $39 trillion. 

Just yesterday it seems — and I exaggerate only slightly — the clock read $38 trillion.

The figure came in at $37 trillion a mere 7.5 months ago.

Thus the United States government is packing on $1 trillion of debt in 3.75 months. 

United States debt first scaled $1 trillion 205 years after its inception. And today?

The work of 205 years presently reduces to 114 days.

And so what was once the work of 205 years… is presently the work of 114 days.

Impossible — but there you have it.

I hazard the underway conflict with Iran will accelerate the sprint to $40 trillion. 

How long until the dreaded $50 trillion mile marker?

Under present acceleration $50 trillion debt is some 3.5 years distant.

And so today a pearl of sorrow courses down my cheek… a mournful tear upon the ashes of the nation’s finances.

I fear its debt is assuming the hellacious form of a parabola.

That is, the business begins to assume an exponential aspect.

If only the nation’s gross domestic product could maintain pace with its parabolic and exponential debt.

It cannot… alas.

The United States economy is an overburdened and swaybacked draft horse guttering along.

The Federal Reserve’s Atlanta outpost presently forecasts a 1.6% first-quarter economic expansion.

In comparison — and as demonstrated — debt expansion is lightning itself. It is an unbridled quarter horse under full steam.

This racer presently runs laps and laps ahead of the laggard. And its lead expands with each harrowing tick of the nation’s debt clock.

I noted that the nation’s debt is scheduled to scale $50 trillion in 3.5 years — in 2029’s second half.

What figure will the gross domestic product register in 2029?

The Federal Reserve informs us that the gross domestic product presently ranges between $30.5 trillion and $31.4 trillion.

I distrust, greatly, the Federal Reserve’s economic calculations. Yet let us assume the figure is correct.

Goldman Sachs projects 2.1% annual economic expansion through 2029.

Let us assume — again, against all superior judgement — that the Federal Reserve’s generous $31.4 figure is correct.

2.1% annual economic expansion through 2029’s second half would leave us with a gross domestic product of $33.7 trillion.

Recall, the nation’s debt is projected to scale $50 trillion by 2029’s second half.

Thus the nation’s debt-to-GDP ratio would register 148% in 2029’s second half.

The figure presently comes in at 124%.

Economists Carmen Reinhart and Kenneth Rogoff have indicated that annual economic growth recedes 2% per year when the debt-to-GDP ratio exceeds 60%.

At 90%, growth is “roughly cut in half.”

What — then — are we to make of a 148% debt-to-GDP ratio?

And so the nation’s finances will attain an even greater rate of decay — should the divinations prove accurate.

I realize of course that they may not prove accurate. They may prove excessively pessimistic, it is true. 

Yet you must concede they may also prove optimistic.

As a fellow conditioned by hard experience to assume the worst… I incline towards option no.2.

The trend is inexorable. Growth crawls, debt gallops.

And so, as I have argued before: The Keynesian “multiplier” — the holy miracle of water into wine — has taken up division.

It presently performs the anti-miracle of wine into water.

A certain Maya MacGuineas, presides over the Committee for a Responsible Federal Budget (do not laugh!). From whom:

Where do we need to be as a nation? I confess that I do not know the answer.

Yet where are we heading as a nation? Bankruptcy court perhaps? The gutter?

The United States government — the United States taxpayers, that is — presently shovels out $2.8-$3 billion each day to service the nation’s debt.

How much more must they shovel out as the nation’s debt takes its exponential leaps?

I do not know. Yet I do know the figure will be plenty handsome. 

Reports the above-cited Committee for a Responsible Federal Budget:

What will be left for Social Security, Medicare, Medicaid, national offense?

How will the United States afford its bread — and its circuses?

It is a question we will likely confront sooner than later.

How does a man descend into bankruptcy?

Gradually — then suddenly — in Mr. Hemingway’s famous telling.

The United States government has passed beyond bankruptcy’s gradual phase.

I fear it is entering bankruptcy’s sudden phase.

Brian Maher

for Freedom Financial News

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