Much has been written about the U.S. national debt. Americans may not know every statistic, but they do know that the debt is soaring and seemingly out of control.
For the record, the U.S. official debt-to-GDP ratio is now 106% and climbing. That’s the highest since the end of World War II, when it was about 120%.
The World War II debt level can be justified because wars are existential; countries just do what they have to do, issue debt to cover the costs and worry about repaying it later. If you win the war, you can easily find ways to repay. If you lose the war, the debt probably doesn’t matter because you either default or cease to exist as a nation.
From 1945–1980, presidents of both parties along with Congress and the Fed worked hard to lower the debt ratio. It was a long-term bipartisan effort, and it worked. By 1980, at the end of the Carter administration, the ratio had been lowered to 30%, which is a completely sustainable level. It has been going up ever since.
Americans can rightly ask what we got for the money. The Reagan-era debt ratio increase from 30% to 50% was instrumental in winning the Cold War (remember “Star Wars” and the 600-ship Navy?) Those efforts broke the bank at the old Soviet Union when they tried to keep up.
George H.W. Bush and Bill Clinton held the line. But the further increase to 106% (mostly under Obama, and now Trump) has produced no material economic growth or geopolitical success.
Since 2009, we’ve had the weakest recovery ever. Yet according to this article, the problem of high debt and low growth is not unique to the U.S. It’s global.
Total global debt reached $250 trillion in early 2019 and continues to surge. The biggest borrowers are China and the U.S. Both are suffering weak growth and higher debt-to-GDP levels. The high debt ratio actually causes weaker growth, so it’s a vicious circle of more debt and less growth.
There’s no escape from it except default or inflation. A global debt crackup is coming. The time to get ready is now.
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