Tuesday, May 1, 2012

$$ Federal Debt to GDP Since the Founding of the U.S.

I was having some idle thoughts about debt and deficits and thought I'd share a chart. 
In this instance pictures are better than words. From the Federal Bureau of Economic Analysis:

A few Fed officials spoke of the potential for the country to go over a fiscal cliff at the Milken Conference today. Lol... Ya think so?

The good news here? Revolutionary War and War of 1812 debt was worked off and the country was relatively debt free until the Civil War (although I recognize that the Bank Panic of 1837 and resulting multi year depression opens the door to a broader discussion concerning debt, resurrecting an economy, etc). Of course, the 1830s was then, and then is then and now is now.

The bad news, the above chart guestimates debt to GDP holding at just above 100% through 2016. Are they kidding? The country is already at the 100% debt to GDP level now with multi-trillion dollar deficits expected  for as far as the eye can see. The brunt of Obamacare costs are yet to hit the fan, to say nothing of other profligate spending policy in Washington. Most with a clue also know that the estimates of future debt growth somehow always end up being conservative when the actual outcome of debt growth occurs in a given time frame versus what the guys with the pocket protectors forecasted 4 or 5 years beforehand.

For now, we can thank our lucky stars that debt servicing costs remain low. Should the Fed lose it's grip on keeping rates low - the denoumont of this long standing fiat drama will have arrived. Carry on for the time being.

Have a Day!

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