Deep Dive: US national debt hits 100% of GDP. Should the credit markets care?

At the end of World War II the % of USA National Debt to GDP [Gross Domestic Product] was at 112% of GDP. As the end of the year 2020 were back at 100%. With respect to Covid-19 the world has gone through some sort of financial reset. You don't see it entirely in food but in the USA you do see it in building materials and supplies such as a 2 x 4 stud.

Public debt was $251.43 billion or 112% of GDP at the conclusion of the war in 1945 and was $260 billion in 1950.

So Biden just released his Trillion Dollar package. The question is that will the USD be taken down or can it be recovered? Well that's up to the powers that be and how they feel about China and the USA. Bilderberg anyone?

Assuming they want to get back to the good ole days the USD can recover. The USA and world did it post WWII. It may already have begun here in the USA with the Infrastructure investment plan.

I hold an MBA from a globally ranked top 50 accredited University. Part of our program was to study at Hong Kong University and then onto China for another week. I am only stating the above as several things were ingrained into us. One of which that states:

[1] History DOES repeat itself.

Since history does repeat itself lets take a look at where we are at:

[1] The US National Debt in 1945 was at 112% of GDP. At the end of 2020 it was at 100% of GDP. Today its obviously higher.

[2] Living in the USA in post WWII was spartan but not hell. Jobs were available at decent wages.

[3] Looking at the migrants along with many others allowed to enter the USA. Were they essentially recruited to staff the USA infrastructure plan along with all others who are at the lower end of the USA financial Bell curve.

[4] A rising tide lifts all boats. In the USA today much is written about race and equality to the point of a company having its doors kicked in or else if they do not comply. Are you sensing this?

[5] China? Well they can have a soft landing also cant they? They can also keep rattling their sabres along with cousin Kid Rock up the block in Pyongyang but the rest of the world is suffering economically. My guess is that all those Trillionaires and Billionaires have taken notice as they also have families and so do their children. So what China me thinks say they?

[6] Make America Great Again is possible but we have to read the tea leaves. Heres the article:

Deep Dive: US national debt hits 100% of GDP. Should the credit markets care?

Then again we also have that Disclosure thing coming up don't we Depending how they play it what a great opportunity to rally around the flag for all of mankind.

Not much is real concerning the economy of the USA and probably most of the European industrialized countries.
We are living in the time of the deceiver, how long before people wake up and smell the croakuses.

a reply to: Waterglass

Also government expenditure as a percentage of GDP is over 50% - throughout history whenever this happens economic growth slows down and the private sector continues to struggle as government waste/corruption begins to result in the outcomes from what economists call the "law of diminishing returns" (in addition to cronyism and human nature, whereby most of the currency units pass through the corrupt politicians and barely anything of economic value ends up happening at the other end of the equation):

data.oecd.org...

In addition to the chart I also include this excerpt from an interview with Marc Faber that just came out in the past day or so where he explains this very predicament (start at around 13 mins. 15 seconds and watch for about 1+ minutes to get the gist of it):


I am so scared for the future of the US economy/dollar and that is an understatement.

Just trying to become more self-sufficient and hopefully stretch my dollars & diversify so I don't get wiped out but THIS is the sh** I lose sleep over...

a reply to: Waterglass

We're screwed. If we couldn't get the "conservative" side of the government to at least start paying down the debt then we certainly have no chance of getting these big spenders to do anything but make it worse.

My advice to everyone right now is to put all your extra cash into tangible assets. Bullets, silver, Gold, canned foods, medical supplies etc.. One day soon we are gonna wake up to a worthless dollar.

the entire purpose of the pandemic and lockdowns was to kill the dollar and destroy the middle class.

There's not a chance in hell they are going to try to bring it back to normal.

Higher cheap ass numbers often means lower value.

What we are witnessing at the border is recruitment of the workforce for the next $5 Trillion of infrastructure spending.

Politicians are all shouting "High Wage Good Paying Jobs" coming with the Legislation.

Watch what REALLY happens soon ☠️ Don't be such an easy sap 😑

a reply to: Waterglass

What happens when 200+ nations around the world, owe billions, trillions... ?

What happens when the debtors decide to collect from everyone, at the same time ?

How did they come to own all of this 'debt' ?

Will they be paid back in natural resources, land, national parks, public infrastructure like railroads, ports, airports, etc... ?

Will our nations, or the new owners, raise land-ownership taxes to the point where nobody can afford to continue to own their land ?

Will we own nothing ?

Will we roll-over, and be 'happy' ?

100% isn't much of an issue since we make enough revenue to keep our economy strong even if its not growing, its not like we're the only nation over 100% either, or the only first world nation near or over 100%. as long as you make money for your debtor they wont demand everything up front. sure we're over 20 trillion but our economy moves many times that amount every year.

originally posted by: booyakasha
the entire purpose of the pandemic and lockdowns was to kill the dollar and destroy the middle class.

There's not a chance in hell they are going to try to bring it back to normal.

Yep either that or all of the overspending and mismanagement during the last number of decades by western countries has reached critical mass and they need an excuse.

They have dwarfed their screwups by blowing trillions over the last 12 months on covid.

“Darn covid look how it wrecked the world economy. Don’t blame us!!”

a reply to: Waterglass

Do you really believe they plan to pay off the US debt. I don’t.

originally posted by: FamCore
a reply to: Waterglass

Also government expenditure as a percentage of GDP is over 50% - throughout history whenever this happens economic growth slows down and the private sector continues to struggle as government waste/corruption begins to result in the outcomes from what economists call the "law of diminishing returns" (in addition to cronyism and human nature, whereby most of the currency units pass through the corrupt politicians and barely anything of economic value ends up happening at the other end of the equation):

data.oecd.org...

In addition to the chart I also include this excerpt from an interview with Marc Faber that just came out in the past day or so where he explains this very predicament (start at around 13 mins. 15 seconds and watch for about 1+ minutes to get the gist of it):

I am so scared for the future of the US economy/dollar and that is an understatement.

Just trying to become more self-sufficient and hopefully stretch my dollars & diversify so I don't get wiped out but THIS is the sh** I lose sleep over...

US government expenditure isn't over 50%.

Using the source you provided it's about 38%.

a reply to: ScepticScot

My apologies, that chart is using 2019 data. It's closer to 48% for 2020: www.statista.com...

100%? It's 129,9% right now.
www.usdebtclock.org...

The most scary part is though I think-, look at largest budget items in that same debt clock link.

Count those up so; ''MEDICARE/MEDICAID: 1,29 trillion, SOCIAL SECURITY: 1,11 trillion, DEFENSE/WAR; 0,724 trillion, INTEREST ON DEBT; 0,4 TRILLION

Total: 3.524 Trillion.

Then look at the US federal tax revenue/income: 3,479 trillion.

So only those 4 largest budget items is more then the total revenue from US federal tax. They can't spend more really on other stuff but of course they do and must do so otherwise no GDP increase/growth.
So they are spending trillions more/year so everything seems great and the DOW is on records high, when they don't the DOW tanks like hell, they do everything to keep the DOW at records high (even with covid and other # going on new records!).
They do socialism for the BIG MONEY/STOCKS/BANKS/BIG COMPANY'S/RICH PPL. Thought the US hated socialism? Go figure.. only when spending on the poor they see it like that I Guess... and more people in poverty then never before.

More things change, the more they stay the same.

a reply to: Waterglass

Money no longer really needs to be backed by gold or oil this days, as the senile president is trying to get rid of oil, is all digital, fake, a figure in a big screen that can be added up when spending trillions are needed or wiped out when the debt becomes to close to collapsing the economy.

Welcome to the digital fake money. Debt? what debt.

Hit the darn panic button

originally posted by: FamCore
a reply to: ScepticScot

My apologies, that chart is using 2019 data. It's closer to 48% for 2020: www.statista.com...

Is 2020 is always going to be a bit of an anomaly year with GDP down and spending up by necessity.

Excluding a few short periods its stayed within the same few % points for about 40 years.

originally posted by: ScepticScot

originally posted by: FamCore
a reply to: ScepticScot

My apologies, that chart is using 2019 data. It's closer to 48% for 2020: www.statista.com...

Is 2020 is always going to be a bit of an anomaly year with GDP down and spending up by necessity.

Excluding a few short periods its stayed within the same few % points for about 40 years.

2020 as an anomaly is not what I was trying to point out.. I'm trying to point out that government is taking a bigger and bigger piece of the economic pie (trillions being spent on new "programs" in addition to $2+ trillion annual budget deficits are NOTnthe norm throughout history of the US)

We are now at a point where policymakers claim "deficits don't matter" and Modern Monetary Theory AKA print as much as we want is fine without consequence (hint: they're wrong)

originally posted by: FamCore

originally posted by: ScepticScot

originally posted by: FamCore
a reply to: ScepticScot

My apologies, that chart is using 2019 data. It's closer to 48% for 2020: www.statista.com...

Is 2020 is always going to be a bit of an anomaly year with GDP down and spending up by necessity.

Excluding a few short periods its stayed within the same few % points for about 40 years.

2020 as an anomaly is not what I was trying to point out.. I'm trying to point out that government is taking a bigger and bigger piece of the economic pie (trillions being spent on new "programs" in addition to $2+ trillion annual budget deficits are NOTnthe norm throughout history of the US)

We are now at a point where policymakers claim "deficits don't matter" and Modern Monetary Theory AKA print as much as we want is fine without consequence (hint: they're wrong)

Excluding a few anomally years the share if the economy that is government spending has been pretty consistent, not really taking a bigger slice of the pie.

MMT says a lot of thing, some of which I agree with some I don't. One thing it doesn't say is that you can print as much as you want without consequences.

a reply to: ScepticScot

Actually, that's essentially what MMT says... that asking "how will we pay for it?" shouldn't be a central question for US policymakers:

The Economist Who Believes the Government Should Just Print More Money

I've listened to dozens of interviews with MMT proponents and am currently reading Stephanie Kelton's "The Deficit Myth" right now (she is the most prominent MMT talking head).

The premise of MMT is essentially "countries who issue their own currency simply need to raise taxes if inflation runs too hot", and their foundational theory is in direct conflict with some of the most basic economic principles such as supply and demand/scarcity, law of diminishing returns, balancing budgets, etc.

I'd also be willing to bet that if we fast forward to 2022, 2023 you WILL continue to see the US government expenditure as a percentage of GDP continue to rise (if not accelerate) on trend.

originally posted by: FamCore
a reply to: ScepticScot

Actually, that's essentially what MMT says... that asking "how will we pay for it?" shouldn't be a central question for US policymakers:

The Economist Who Believes the Government Should Just Print More Money

I've listened to dozens of interviews with MMT proponents and am currently reading Stephanie Kelton's "The Deficit Myth" right now (she is the most prominent MMT talking head).

The premise of MMT is essentially "countries who issue their own currency simply need to raise taxes if inflation runs too hot", and their foundational theory is in direct conflict with some of the most basic economic principles such as supply and demand/scarcity, law of diminishing returns, balancing budgets, etc.

I'd also be willing to bet that if we fast forward to 2022, 2023 you WILL continue to see the US government expenditure as a percentage of GDP continue to rise (if not accelerate) on trend.

No it isn't what MMT says. Your article is behind a paywall so can't say if the article is misrepresenting that or not.

MMT doesn't say 'Deficits don't matter' what it does say is that deficits aren't inherently good or bad, it depends on the state of the economy. You even acknowledge this in your post with mentioning taxes.

Not really sure what part of demand/supply or diminishing returns you think MMT contradicts. Even amongst most orthodox economists there is no established view that a balanced budget is a good thing (because it isnt).

MMT does say that the spending of a government issuing its own currency isn't constrained by its own budget. The constraints are the condition of the economy and the government should as much as possible set its tax and spending to optimise the economy.