The debt ratio will be 175% by the time of the US semiquincentennial in 2026
Continuing Coverage of the Spending Crisis . . .
Debt Ratio Above 100% – Attains Critical Mass
By: George Noga – February 7, 2021
The two issues we have written about for the longest time and also the most frequently are manmade climate change and the spending crisis. Ironically, the issue that is real (spending) and is certain to result in disaster is not taken seriously by progressives and the media. Concomitantly, these same groups regard the issue that is phony (climate) as an existential threat to humanity. They have it completely bass ackward.
We last wrote about the spending crisis on May 3, 10 and 17, 2020 and in a four-part series beginning April 8, 2019. These are available on our website (www.mllg.us). Our headline uses the term critical mass in its scientific sense. There is now enough fuel (debt) to trigger a chain reaction which becomes self-sustaining. That is illustrated by the numbers shown on the lines below. But instead of trying to slow the chain reaction, politicians (with full-throated media support) are adding more and more fuel.
The debt ratio is 101%; it will hit 175% by 2026 and 250% by 2031.
The crisis explodes long before we hit 500% in 2038 or 1,000% in 2044.
We updated the numbers based on all data extant. The public debt to GDP ratio is now 101%. The ratio will hit 175% in 2026 and 250% in 2031 on its way to 500%, 1,000% and oblivion. Before 2040, annual interest on the debt will exceed GDP; the timing depends on interest rates. Our forecasts, on which the above ratios are based, have proven far more accurate than those made by government or private economists.
The debt ratios speak for themselves and don’t require sophisticated economic analysis to understand. The Titanic has hit the iceberg and there is no way to unhit it. The key question now is how much time remains until Titanic sinks. No reasonable person can look at the data and conclude there are more than five or ten years left.
Progressives tout Modern Monetary Theory as a panacea. Our 5/3/20 post, devoted entirely to MMT, provides a primer. MMT explains certain economic phenomena better than mainstream economics. Proponents of MMT assert governments can borrow more, much more, in the short term than previously thought possible without raising interest rates; however, no economists assert the borrowing can be unlimited.
Following are some of our conclusions about which we are highly confident.
– Debt crisis is moral, not economic: As a nation we chose the easy path to avoid making difficult decisions and to seek social peace with massive borrowing.
– Crisis arrives within 10 years: It is impossible to discern any viable path forward with a ratio of 250% in 2031 and heading, via self-sustaining chain reaction, for 1,000%. However, the crisis could materialize sooner – much sooner – than ten years.
– MMT buys time: MMT permits more borrowing than previously thought possible but the amounts are limited. MMT can defer the day of reckoning, but can’t prevent it.
– Crisis hits suddenly: There will be no time to react. One morning everything will seem fairly normal but by the end of the day no one will buy US government debt.
– Government will print money: Initially, government will create monopoly money. Interest rates likely will soar and inflation will take off. Pension assets are at risk.
– No end until excess debt is purged: Once begun, the crisis will persist until all excess debt is purged. This will require one generation (lost generation) and America will be a far different and much poorer country when the crisis finally abates.
Americans know better; but we chose – and continue to choose – to believe progressive politicians and talking heads who promised us the moon was Stilton, wishes were horses and pigs had wings. They promised social peace by avoiding confrontations inherent in making difficult choices. How is that working out for America?
Next on February 14th – The implosion of the population bomb.