Not alarmist at all. The can was kicked in 08. We are in a debt spiral. Government spending is a component of GDP, % of GDP is NOT the context. We are insolvent. 210+ trillion in unfunded liabilities! And about 70% of spending is mandatory.
The USD as world reserve currency is the biggest sword the US has.
At current rates or higher we just piss off every country as they trade in eurodollars. They have started the process and will move off USD unless we get back to a favorable rate for their debt loads.
With our debt load, it's either lower rates and continue to print and inflation (traditional and/or more asset bubbles). Or elevate rates and boost our interest expense and suppress the economy while fighting inflation until entities quit buying our debt and we lose significant power. And then, we still need our money printer and more inflation occurs.
As for me, I'm going with keeping recent "elevated" rates so big banks can scoop up smaller ones in short term and inflation has some check, then back to lower rates after election. I'll hold inflation hedging assets indefinitely.
US is screwed financially. Still better than most economies, but still screwed. Unfunded liabilities, AI, wage gap, education and housing costs, populism, political divide, geopolitical battles. There is no thesis that is great for the US unfortunately. It's best pitch is other countries are just as screwed or more.
There is no way out of the debt load. All solutions require printing like crazy. Or defaulting but you cannot give up the world reserve currency and the fallout would be catastrophic.
There is one way. US government can mint print any coin denomination they like. If US Mint print 10T usd coin for just special occasion and hand it over to Feds, all is good. I am waiting for this crazy idea to happen.
It used to be calculated as total debt as a percentage of GDP (as opposed to interest payments) and there were concerns it shouldn't go above 100%, otherwise we'd get stagflation like Japan. Now the new goalpost is interest payments as a percentage of GDP.
I think this is the first year in history that the interest payment was greater than the amount we spend on defense and we have exceeded WWII spending as a percentage of GDP in 2020 and on.
Also, a substantial portion of that $1T is money that the government owes to itself. For example, the Fed purchased a large amount when it was doing QE.
It seems silly to count money that moves from one pocket to another within the Federal government.
US government collected about 4.4T. Out of that 25% went to paying JUST interest. Do you think this is not alarming? Massive amount of USA manufacturing now gone or on life support. Boeing? Tesla? The 10T spent in Afghan supposed to be ROI with the lithium mines there. Gone. Solyndra? Gone. Or how about Ukraine? Gone. Apple? Sales tanked 19% in China. Now we wait for Huawei 2nm next year. Then 2026 Taiwan gone. Possibly destruction of pacific carrier fleets as well with 100K drones swarm then. Look at gold prices. Used to be suppressed because of USA has secret paper gold traders for Feds and Treasury. As long as no physical deliveries and "trust me bro of Fort Knox", paper gold is just like USD, easily printed as needed. That loopholes closed recently because of massive Chinese physical gold deliveries from UK to China 100+ tons annually. This really spooked American Treasury. USA is on last leg now similar to last day of Rome just that instead of centuries, we will see that happen for USA within 10 years time. The only good thing is likely USA will split into multiple smaller countries as what happened to John Titor timeline or turn into Byzantium like western Rome. Worst, it will just be Great Britain into just Britain like scenario.
The Federal Reserve will be incentivized somehow or coerced into more situations where it simply devalues the dollar in order to make debt payments easier to make.
The national equivalent of having a long-term mortgage. The house becomes cheaper to pay off over time.
The Fed doesn't set the value of the dollar, but it can influence the market value of the dollar lower by (1) reducing short-term interest rates, or (2) monetary policy (buying bonds on the open market).
But in actual fact, it's been doing the exact opposite of that: (1) raising short-term interest rates, and (2) selling bonds on the open market and letting others mature.
And it seems reluctant to change direction in any big way any time soon.
Which as we all know from our high school civics class, the debt reckoning is going to happen, and every citizen will be asked to personally pay that debt to the debt reaper, and if you can't pay it, it's off to debtor's prison with you, so you'd better be saving past your most recent paycheck, or else.
Seriously though, what does that even mean?
Per capita, we rank fairly low for national debt, which means we should be spending way more per person to maintain and improve our existing infrastructure. HSR when?
> Which as we all know from out high school civics class, the debt reckoning is going to happen, and every citizen will be asked to personally pay that debt to the debt reaper, and if you can't pay it, it's off to debtor's prison with you, so you'd better be saving past your most recent paycheck, or else.
A lot of this debt is money we lent to the government via past social security surpluses. The other large debtee are other American organizations, only a small part of this debt is held overseas.
If you think that number is high, consider that most people are forced to pay that amount every 30-60 days in rent just to keep a roof over their head. That's a tangible debt that exists and affects people.
The concept of "national debt" is a joke in the face of cost of living. The overwhelming expense that hamstrings most people is every 30 days is losing 30-50% of their income to rent after they just lost 40% of it to taxes.
This "$3k per person debt" on the other hand is related to printed money largely pocketed by corrupt people in our government - who now will print over $1T dollars in a single go for the latest cause ("keeping the govt open", Ukraine, etc.) - it has nothing to do with what Americans ask for or receive in benefit.
People are over-burdened with excessive living costs and really have to take that hit each month, this so-called debt is a joke. I wish the U.S. would default on the debt already and start replacing government infrastructure with modern technology so our country can operate like a functioning machine again.
Ok now add in the $210 trillion in unfunded liabilities that aren't part of the national debt. And mix in a little wage gap, AI impact, political divide, foreign conflicts, wars and military spending. Oh and the current annual interest expense is about 38% of all federal individual and Corp tax revenue.
How do you service the debt? You print and print. And then that causes more unrest. You can't default and you can't keep rates high enough for long to matter on inflation. Because you have to print to service the debt which only grows with higher rates and time, which you have less of when unrest grows.
In other words, if you receive more than $3000 per year in US Treasury interest payments, then you're benefitting from this. If less, then you're paying for it.
If you are making $3000 per year in US treasury interest payments, you are likely paying far more in US taxes, part of which will fund these interest payments.
The follow plot shows interest as a percent of GDP -- that is, in relation to the size of the economy, which is how we should all look at this:
https://fred.stlouisfed.org/series/FYOIGDA188S
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