We're currently adding a fresh trillion of debt every hundred days, on our way to $35 trillion.
Meanwhile, the deficit is about to break $2 trillion – for perspective, all federal revenue under George W Bush averaged around $2 trillion.
Debt interest *alone is set to cross $1 trillion, eclipsing even our bloated military budget that beaches quarter-billion dollar piers in Gaza for sport.
The next milestone after that is Medicare spending, which together with Social Security has its own $78 trillion unfunded liability, according to its own Board of Trustees – outside estimates are higher.
Governments Are Rabid by Nature Now, none of this is shocking: governments by nature try to spend too much – indeed, much of economic history is made up of governments desperately trying to finance their mountains of debt.
Debt brought down Rome, first with hyperinflation then with a gutted military that barbarians walked right over.
It brought down Spain, as New World gold finances an effective government takeover of the private sector. And France, bankrupted by financing foreign wars – in this case, the American Revolution. The Qing collapsed under debt and even Great Britain who owned half the earth for nearly a hundred years.
It's why we got the Magna Carta – indeed, Constitutions – as kings pleaded for more money. It's how we got central banks, as first Britain then the rest of the world licensed money printers in exchange for debt finance.
To this day government debt crashes countries – countries from Turkey to Venezuela to Nigeria are currently undergoing debt crises, with Argentina desperately trying to pull out of one.
How Does It End? And, with so many historical cases, we know exactly how this ends: investors stop buying government debt, shutting out governments and leading to massive austerity and soaring inflation as the government retrenches.
Going by history, the government will cancel the trillions it promised — starting with Social Security and Medicare — then pull back to where it can pay the Praetorian Guard and not much else.
In short, once debt hits the magic line, Washington goes from Sugar Daddy to wild animal. And, historically, it happens much faster than people imagine — in Hemingway’s famous phrase, countries go bankrupt gradually then all at once.
Great post! Don't we have a ton of wiggle room technically? Japan is a great example. They have 260% debt GDP which is almost double of ours - and they aren't thriving, but they are managing.
Taking a realistic look, couldn't the U.S. also have 260% debt/GDP and be able to manage itself?
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The wiggle room is all cultural, but the underlying problem isn't changed in any way.
In Japan's case they can shoulder so much debt because the mindset of the average Japanese consumer is incredibly obedient. They'll work 80-hour work weeks without vacation for decades at a time just because it is expected of them. When their government expects things from them the story is the same. They obey blindly.
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Yes, it could, but that will not prevent the quality of life from deteriorating little by little until the population has nothing and is happy, like countries with economic crises.
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It is surprising how governments have turned Fiat money into the main enemy of the common citizen through inflation and denigrating their purchasing power.
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Totally, it is a method of energy extraction that does not allow people to enjoy the results of their own energy through work and savings.
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