US Debt-to-GDP Ratio Worsens Further, Despite Solid Economic Growth, as Government Debt Balloons at a Scary Pace

The economy grew solidly. The debt spiked.

By Wolf Richter for WOLF STREET.

The US government debt is measured in “current dollars,” meaning: not adjusted for inflation. So we compare it to GDP in “current dollars,” not adjusted for inflation. The hope is that current-dollar GDP, grew faster than the current-dollar debt, so that the burden of the debt on the economy would shrink, and that the astronomical debt-to GDP ratio would decline. But no.

Current-dollar GDP grew by 5.8% in Q4 year-over-year, and it did so despite the 5%-plus interest rates, and that was pretty good. But the current-dollar government debt, oh dearie, it grew by 8.2%!

So the Debt-to-GDP ratio worsened to 121.7% at the end of Q4, after having already risen in the prior two quarters.

The spike in Q2 2020 to 133% had occurred largely because GDP had collapsed, and to a lesser extent because the debt had begun to jump. Then, as the economy leaped out of the hole and then grew faster than the debt through Q1 2023, the Debt-to-GDP ratio declined.

But in Q2, Q3, and Q4 2023, it went in the wrong direction, as the government opened the spending floodgates and piled on debt at a scary rate, despite decent economic growth.

This is the size of the economy: Current-dollar GDP (not adjusted for inflation) in Q4 rose by 5.8% year-over-year to $27.9 trillion, according to the Bureau of Economic Analysis on Thursday: The Year of the Recession that Didn’t Come. Over the past four years, it grew by 27.6%.

And this is the size of the US debt: $34.0 trillion at the end of 2023. And we marked this day here by tearing out our hair.

In 2023, the debt grew by $2.58 trillion or by 8.2%, a gigantic surge, especially during non-recessionary times. This spending of borrowed money also represents a huge amount of fiscal stimulus handed to the economy, and it’s practically impossible to even have any kind of slowdown, much less a recession, with this kind of fiscal stimulus washing over the land.

Over the past four years, the debt grew by 46.5%, while the economy grew by only 27.6% (both in current dollars). The green label in the chart is the technical jargon for what is going on here that we’ve used for many years, at first jokingly, but in recent years it has become reality:

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  301 comments for “US Debt-to-GDP Ratio Worsens Further, Despite Solid Economic Growth, as Government Debt Balloons at a Scary Pace

  1. Iws says:

    The horse has left the barn.
    This can’t/wont be paid back in today’s dollars.
    What happens? Inflate it away? Dollar crisis? Both?

    • jon says:

      Yep that’s the only choice. Buy BTC

      • Apple says:


      • Frederick says:

        Gold even better

        • Kelly Schaeffer says:

          Wolf, you have a large fan base I think. I can see why. Have you thought on doing an AMA (ask me anything). It could be a pinned post for a while or a YouTube AMA or just a post once a quarter or every six month. I think it could be a lot of fun.

        • phleep says:

          Well-placed land. Whatever the economy does, I can ‘t live in BTC or gold or AI or metaverse or ….

      • ChrisR says:


    • Z33 says:

      I’d guess Congress eventually will have the Treasury mint a trillion dollar platinum coin (or a few) and have it deposited at the Fed and use that to pay debts to an extent. So basically devalue currency and take away from the rest of us. I’m already rapidly losing confidence in Congress, the Fed, and the dollar and really not liking holding dollars and trying to get into assets I want very long-term.

      This debt issue is not unexpected…debt-based fiat results in compounding interest expense in the long run. Compounding interest is a double-edged sword…great to have compounding interest if you get it as income, but terrible if you’re the one having to pay it back…

      • CRV says:

        Why a coin? An NFT will do.

        • Nathan Dumbrowski says:

          Because the then we could spend $30M to create the mold and commission the Mint to create the $1T coin. Government waste at it’s finest.

        • joedidee says:

          I believe that CONgress and it’s heirs, potus and heirs and SPOTUS and heirs
          are entirely 100% responsible for repayment of any debt they create
          because IMHO they are issuing it FRAUDULENTLY – ie they have NO INTENTION OF REPAYING IT

      • Ding Bat says:

        ‘rapidly losing confidence in congress, the fed and dollar’?
        I cannot imagine why anyone would have any confidence in any part of this system. Corrupt currency always equals corrupt governance and fiat bankruptcy. Just as it has for more than 5000 years of recorded human history. This time is no different.

        • Bead says:

          Hey, Weimar Republic had remarkably low unemployment before everything went south. Huge deficits can keep unemployment low, share prices at all-time highs, and the nitwits at the Brookings Institution delighted, not to mention the Wall Street distributors. Everything is wonderful. We can medicate the unhappy renters.

        • Quark says:

          Because to the rest of the world the dollar is the shiniest turd in the punch bowl.

      • Troy says:

        If that was an option, then it would have been done by now. So obviously it is not an option.

        Any other ideas?

      • Enlightened Libertarian says:

        I am trying to prime my 12 year grandson [and his generation] to repudiate the debt.
        Just don’t pay. He [they] didn’t run up the debt. It is insane to hand him a 50-60 trillion dollar debt when he gets out of college. Hell, it should be criminal.

        • Cmoore says:

          I have never understood why 513 people who know nothing have saddled 330 million people with 34 trillion in debt and the 513 have no accountability…

        • Matt says:

          Because the 330 million people allowed it to happen and voted the 513 in

    • ChS says:

      The US has been carrying debt for a long time and it won’t ever be paid off. The issue is with our ability to service the debt. The situation in the 80’s was worse, but we worked our way through it. A couple years of a balanced budget and things would look pretty good. It’s what we should clearly expect from our government.

      • WB says:

        “The situation in the 80’s was worse”…

        LMFAO!!! What was our debt:GDP in the 80’s again? Volker was able to raise the Fed Funds rate to 20%.

        Try again.

        • ChS says:

          Scroll on down and look at Wolf’s pretty graphs. Maybe it will make sense to you.

        • Pablo says:

          He is 100% accurate. Debt service was higher in the 80’s and what happened then- Cold War end and good economic growth. Now the total debt to gdp is higher but if congress can get the deficit to around 3% (800 billion) the debt is serviceable essentially for as long as forecastable. That really isn’t THAT hard to do…but will only take place when it is forced because there will be some reckoning.

      • repo says:

        The debt will be “repaid” but we won’t have the money to do it. Similar to a car, what we took out the debt for, our selfish, ignorant, arrogant lifestyle will be, is already being, repossessed.

    • Wolf Richter says:


      Inflation boosts current-dollar tax receipts and current-dollar GDP but it doesn’t affect the existing debt. The existing debt is fixed, it’s Treasury securities that are out there. Only newly added debt is impacted by inflation. So the burden of the debt declines. But in 2023, there wasn’t enough inflation. There was enough in 2021 and 2022, and you can see the Debt-to-GDP ratio declined. So maybe in 2024, this gets rectified with higher inflation.

      • ChS says:

        The problem with the higher inflation path is that it is a stealth tax on everyone. Most people have their hand out to the government and want more more more spending, but seem to have no clue they will pay for it one way or another in the end. The better path is a reduction in government spending.

        • Wolf Richter says:

          Sure, inflation is a huge problem. And yes, it’s a stealth tax, and yes, for everyone, even the richest people. Which is why inflation will not be allowed to get out of hand, it will just do its work at a moderate level.

          Government spending reduction is precisely what is nearly impossible. They’ll talk about it, and at best they can slow the increases, but actual reduction? I mean actual reductions in overall spending in the “next fiscal year,” not some reduction “over 10 years,” or whatever bullmalarky, well, good luck. Inflation is a lot more convenient. That’s how it has always been done.

        • Swamp Creature says:

          The CEO of Blackstone was on Fox business the other day talking from Davos. He said the inflation was good for business and government. It was helping pay off the debt by devaluating the currency and making the debt go away.

        • Depth Charge says:

          “The CEO of Blackstone was on Fox business the other day talking from Davos.”

          Where’s an errant Daisy Cutter when you need it?

      • Seth says:

        But isn’t there a clear conflict between the Fed and congress on the inflation solution? The latter seems to be angling for it, while the former may raise short term rates even higher if/ when inflation rises in 2024 and beyond. Who wins out?

      • DR_ECE_Prof_FinancialWizard says:

        I don’t know if your statement
        “So maybe in 2024, this gets rectified with higher inflation.”
        is a thought or sarcasm. But IMHO, we can continue good life as drunkard soldiers as long as the foreigners keep treating us as royals and sell their products for pennies, and park that meagre money here (only to see that it get’s frozen at our will).
        As an old man and exposure to others cultures, let me add this: Does it matter for a person under water (and who cannot swim) if the water is an inch or a feet above his head :) or /s

      • dennis says:

        But inflation is the devaluation of the dollar, because it takes more dollars to buy things. Money is borrowed into existence, therefore the debt continues to grow to create the new money needed to support the economy.

      • John H. says:


        How does the inflation solution you mention above square with:

        1. the old definition of Mandate 2: “stable prices”? — i.e. 0%

        2. the updated definition of stable prices: “A low and stable rate of inflation maintained over an extended period — i.e. 2% target?

        Where does the redefinition of acceptable inflation end?

        Sort of makes a mockery of the concept of the “stable prices” mandate, doesn’t it?

        • Aman says:

          If at all the Fed abandons the 2% goal it would be after they have achieved the goal and maintained the goal for a sufficient amount of time. Then likely a paper will be written that flexible targeting is more efficient, a consensus will be built etc. etc.

          Right now even a whiff of suspicion that the goal is flexible will likely result in a run on the long dated treasuries and wreck havoc to the global financial system.

          Agree with you John H that the whole notion of CPI targeting ignoring credit aggregates is absolutely stupid. But that is the system we have and no one has any incentive to change it. So likely rolling crisis is the future till the world has deglobalized sufficiently to permit countries to make changes to policies. Right now everything is so interconnected that unilateral changes are likely to do more harm than good. Finance has gone rogue :)

        • John H. says:


          My preference (if I were king!) would be that NO inflation would be the goal. “Stability” would mean no inflation over the long-run. That would be a return to the policy that was in place for the first 9 decades of the Fed’s lifespan.

          If you’re proposing that the Federal Reserve must continue to target inflation because other CB’s have adopted the 2% inflation target, I don’t understand why, but am curious to know your thinking.

        • Aman says:

          John H,
          I too think that a 0% inflation target is ideal. But given that there is inertia to change from 2% target, the CB’s should also focus on credit growth. So even if inflation in running well below 2% and credit is expanding rapidly, it could be an indication of inflating assets as was the case from 2003 to 2007 and as is the case right now.

          By reducing rates in line with CPI, the CB’s are letting the asset owners benefit from the natural deflation from productivity improvements leaving the wage earning behind and creating wealth inequality.

        • The Squeezed says:

          We should not have a 0% inflation target. That implies no growth, nothing new created, and static salaries, i.e. no hope for a brighter future.

      • Harry Houndstooth says:

        “the government opened the spending floodgates and piled on debt at a scary rate, despite decent economic growth”

        The reason we had decent economic growth is because 7% of GDP was deficit government spending. If you want to know the truth, look at GDI.

        Yes, my wife broke a chair this morning when I told her I bought a huge amount of SQQQ at 12.

        She settled down, understanding that the only time we will need cash is AFTER the crash.

    • dang says:

      I can only categorize it as willful arrogance by the financial industry. Don’t get me started about their mafia like domination of the Fed that explains the reason that our government policy seems to have been engineered, by the wealthy, to create an aristocracy. Who’s protection of their private interests are protected by a huge tax on joe schmoe to support a trillion dollar military budget.

      SF should stop grandma from profiting from, not even an arms length transactions, but open face pay to play graft.

      • eg says:

        Most of the “Joe schmoes” are foreigners whose exports are the modern day equivalent of ancient tribute, in exchange for which they receive dollars and, if they’re well behaved, protection.

        Hudson examined the US balance of payments in the 60s and it turned out that the entire deficit was for military spending. It’s all there in his “Super Imperialism”

    • longstreet says:

      Speaking of horses…
      They keep “doping” the race horse.

    • duane says:

      How about raise taxes?

      • phleep says:

        If only. The rich saw that their passivity during the New Deal and afterward enriched and pumped up the masses, and resolved to never let THAT happen again. So they have hired armies of lawyers and accountants and politicians. Tax shelters and havens are preserved through a massive industry. I have known many in that field. One way is to play US states and also nations against each other in a race to bottom-level taxes. That’s why major big tech firms are scattered across Ireland, etc. And lots of rich folks are tax-planning their California non-residency. Then, overall, government shrinks and is in distress which makes the well-off ever more relatively powerful. They are merely pursuing their interests.
        Frankly, even as petty in assets as I am, I fear the growing poor of California raiding my assets to grow their teeming rug rats and overbuilt cities.

      • JeffD says:

        Even better — phase out existing tax breaks, credits, and exclusions with no new taxes. In other words, get rid of existing (special interest) legislation rather than adding onto it.

        • Bead says:

          When would Congress ever agree to that? That’s like a doctor giving up prescriptions. You need to offer something for those contributions.

    • LarryMotuz says:

      Raising government revenue by restoring prior to Trump tax rates would help. Going back even further would substantially reduce the ratio of government debt to GDP.

    • JC says:

      tax the heck out of the wealthy

  2. low expectations says:

    i’m not worried about it. someone will print some more dollars … that’s how these things sort themselves out.

    • Wolf Richter says:

      Inflation will be the solution.

      • Djreef says:

        This does not sound like it will end well either way.

        • Einhal says:

          It’ll continue as long as foreigners are still willing to lend money to the U.S. and to trade their stuff for our dollars. Once that ends, the game is over, and in a big way.

        • dang says:

          The cold reality is that the obese Fed balance sheet will manage inflation in the time honored manner, silently destroying the dreams of so many children of working class who haven’t had a productivity raise for 50 years.

          Capitalism is normally distributed which suggests it is at it’s best at the mean. A creative mix of law that supports competitive markets yet opposes concentrated market structures like oligopoly and outright monopoly.

        • Sean Shasta says:

          @Einhal: You’re absolutely correct. The rest of the world fully knows that this is happening and have expressed strong concerns about this. That’s why the BRICS countries are working very hard on de-dollarization – to create an alternative reserve currency and/or trade in their own currencies.

          There are no signs of a quick transition and that could be our saving grace if we do something about it.

          Wolf has had articles and charts on the steady decline of the US dollars being held as reserves by foreign countries. My concern is that the above-mentioned recent efforts may speed up this decline – and that would be disastrous for us.

          I can only hope that our government has some clear plans to address this before the sh** hits the fan.

        • Zest says:

          @Sean Shasta:

          BRICS’s main reason for pursuing an alternative basket of currency is not primarily out of concern for the dollar’s stability.

          Quite the opposite. Russia and China’s goal is to undercut US/Western influence on global finances, and to capture some of that power for themselves. And if they can destabilize or damage the US economy in the process, all the better for them.

        • Einhal says:

          Zest, I’m sure it’s a combination of both. The fact is, the U.S. has been acting like the reserve currency and an ever increasing standard of living, paid for by out-of-control deficit spending, is a birthright.

          That pisses a lot of people off overseas.

      • roddy6667 says:

        This has been the government “solution” since ancient times. The Romans shaved a little gold or silver off the outside of coins. That’s why they are serrated now. Later, they just minted the coins with a higher mix of base metals. Now that it is all computerized, it’s much easier. I have friends in Caracas. They don’t stagger around with wheelbarrows of cash, getting paid several times a day. They get regular cost of living raises, they shop with debit and credit cards, and prices go up daily. In trade with outside countries, the VE currency is worthless, trading at one US dollar equals 3,600,000 Bolivars. Eventually, it all collapses.

        • Pablo says:

          Dollar won’t collapse, it will likely devalue over time and then perhaps another currency or scheme (more likely) will become the trading unit of account which will make demand for dollars lower and require the US to balance its trade. It’s not the end of the world, just like the end of the pound as the reserve wasn’t the end of the U.K. it just makes the government have to act with restraint and limits, it might even be a net positive for the US people.

  3. Auld Kodjer says:

    It’s like a baton of recklessness that gets passed around from the Banking Sector to the FED to the Government, each taking their turn

    • dang says:

      Indeed. Indicative of a crime seen in which the prosecutors declined to prosecute the greatest swindle in American history. All I can come up with is yeah they were too big too fail.

      After 20+ years of life support, one would think that the Fed would stop being the banking industries patsies and continue to do what they are currently doing. That is not to exhonerate this deeply, anti democratic bastion of wealth, who financed the offshoring of American industry to the Chinese Communist Parties’ idled workforce, more than willing to work for a small sum because, not only the present, but the future was so bleak’

      • longstreet says:

        ” the Fed would stop being the banking industries patsies ”

        The Fed is the banking industry

        • LarryMotuz says:


          It is a ‘just pretend’ we’re a government agency even though we’re run exclusively by private bankers.

        • eg says:

          It’s kind of the other way around, LarryMotuz — the Fed (with the complicity of the FIRE sector) maintains the fiction that the banks are private sector entities when their charters, regulations and the Fed backstop manifestly demonstrate that they are themselves creatures of government.
          I intuited this in the ’80s (it’s more obvious n Canada where there are essentially only 5 or 6 banks) but it took me decades to figure out how the whole Rube Goldberg contraption works — the banking sector has very good PR and the general populace is thoroughly and persistently brainwashed.

  4. Sands says:

    Wolf – how far up can this ratio go without a collapse of something? Are there any other examples of other countries where this ratio has been higher and something to learn from them?

    • Wolf Richter says:

      The limit is inflation. This deficit spending will trigger more inflation, and big-enough inflation will bring the ratio down. We saw that in 2021 and 2022. We just didn’t have enough inflation in 2023 🤣

      • Aman says:

        There are only two ways to address this
        1. Productivity growth – UK during the industrial revolution is the only country that was able to do it via productivity growth.

        2. Inflation and debt monetization – which is all other cases.

        Agree that the US will continue to tolerate higher inflation but not too high. Fed will not do QE to keep unanchored inflation in check.

        What I don’t get is why the bond market is so sanguine. I guess even the blind can see it coming then why be okay with 4% change on 10 year bond….Bond investors have already lost their shirt in the last 2-4 years.

        Is it just the Fed created so much reserves that they have no place to go? That 4% is okay than speculating in the highly overvalued stocks.

        Next decade will make an interesting history on the great monetary experiment in the west civilization. Remains to be seen whether Bernanke, Yellen, Draghi are seen as heroes or idiots.

        • dang says:

          Yes it will be interesting whether the Bernanke, Yellen, Draghi are seen as heroes or idiots. I think that you ask an important question without providing the context like one who already knows the answer he wants to hear. For instance, which schools did they attend. In Bernanke’s case, the application of extraordinary monetary stimulus as a policy was at best, hypothetical.

          The outcome seems to be success. I’m still grateful. The whole world adopted it and now seem to be backing away from an obviously foolish ignorance that “we” indulged in.

          Not that agree with any of it.

        • The Real Tony says:

          Bernanke doesn’t look like much of a hero anymore.

        • kavanagh piano says:

          Our retirement funds are supporting the bond market and real estate bubble. Top holding in an employer sponsored health savings account bond fund is Fannie May mortgage backed securities. No doubt those bonds/funds are sold to uninformed, unaware people for a reason.

        • WB says:

          Productive growth requires an ever-increasing amount of inputs. Mainly energy and commodities. Before you lecture me on increasing efficiency, I can tell you from experience that the R&D that is required to bring about those innovations requires a tremendous amount of energy and commodities.

          Eventually, through chaos/war or otherwise, a real market returns and energy and commodities are allocated through real supply/demand/value relationships. This is actually my main concern with the crypto space, especially bitcoin. Eventually, all the energy that is required to simply maintain/create this ledger will be allocated to actually providing real services that we need (i.e. growing food, heating our home, or manufacturing another useful product.

      • DawnsEarlyLight says:

        Wolf is really humorously laying it on today! Must be a weekend! 🙈

      • Julian says:

        “The limit is inflation. This deficit spending will trigger more inflation, and big-enough inflation will bring the ratio down.”

        In addition, interest rates will remain high, “higher for longer”.

        I don’t understand why there is talk of interest rate cuts, because if that happens inflation will fly up again

      • Kelly Schaeffer says:

        Fundamentally, having some gold/Bitcoin in your portfolio could protect you from inflation. I know it’s not really a 1:1 hedge as there is a ton of volatility and/or manipulation/concentration. But I generally like the idea of an asset w/ finite supply (outside of investing in RE and stocks).

        • Wolf Richter says:

          “Fundamentally” Bitcoin is nothing but a gambling token where people (like you) talk each other into betting on the same side.

        • phleep says:

          Even BTC’s main use-case for crime (or other evasion of the hands of officaldom) is somewhat diminished now that it can be digitally triangulated and tracked fairly efficiently. If government wants revenues badly enough, it will just focus on collecting from gains in that asset.

        • Anthony says:

          Bitcoin is the easiest way, for criminals to hide and transfer money that I have seen in a long time.

        • Pablo says:

          The best hedge on inflation is to own assets not currency. So buy with today’s currency and get the appreciation. What to buy? Things with either pricing power or high upfront capital expense and long asset life with some amount of pricing leverage.

          Gold never really beats productive assets

      • LarryMotuz says:

        Just how much of this debt results from to federal government tax revenue shortfalls owing to tax reductions largely passed by Republicans?

        In other words, just how high would this debt be if pre-Reagan tax rates on income and profits had been maintained over the past four decades? [Assume that federal spending would be perhaps 2-3% higher over that period, okay.]

    • John H. says:


      An article in Epoch Times Friday brings up a contemporary tale of another chronically challenged indebted national economy: the UK.

      Of course, their story is not over yet, but one upshot of their experience was the loss of world financial hegemony during the early 1930’s.

      Opening paragraphs of article:

      “ A record-high tax burden, big public debt, and a sluggish economy will leave the UK’s next government facing the biggest quandary in 70 years, according to the Institute for Fiscal Studies (IFS).

      While the Conservative Party and Labour Party both have promised to reduce debt as a share of national income, it will be more difficult to deliver that promise “over the next parliament than in any other parliament since the 1950s,” the think tank stated.”

    • eg says:

      Sands, the “how far can it go?” query is kind of answered by Japan which has a, what, 240% debt to GDP ratio?

      I see no evidence from their experience over the past 30 years that it means what most people think it does.

  5. Jon says:

    Thanks WR.
    Inflating away the debt is the only game in town aided by money printing which has been happening for quite some time .

    Dollars purchasing power would be greatly diminished and it already had.

    There is absolutely no dollar crisis coming.

    • Wolf Richter says:

      Inflation is here and this deficit spending makes it worse. Inflation is why the Fed cannot do money printing. That’s the constraint now. But enough inflation will take care of the debt-to-GDP ratio, without money printing.

      • RichardW says:

        But that only works if the real interest rate on government debt is negative. What will happen when potential buyers of treasuries realise they’re being taken for a ride?

        Personally, I don’t own any bonds. I prefer value stocks in companies that should be able to increase their prices in line with inflation and hopefully raise their dividends in line with inflation.

      • GuessWhat says:

        The big inflation is gone. Core PCE annualized has dropped from 4.9 to 2.9% over the past 12 months. While it may continue to rise slowly, it’s obvious that it’s forming a peak. Unless we have some sort of major disruption to oil flow, we’re not looking at anything like the 3 head fakes from the late ’70’s – early 80’s. Rather, it’s just going to stay stuck higher & longer than what the Fed wants.

        As I’ve been saying on for more than a year now, the most important issue is whether or not Congress trots out rent & mortgage relief when the next recession arrives. Anyone worth their salt knows housing is unaffordable mainly because of prices & not interest rates. With the big bought of inflation we’ve just suffered through, interest rates had to rise dramatically. The next battle is when to start dropping them which is playing out as we speak.

        At some point, a real recession has to hit housing. All that’s happened to-date is the froth has been knocked off. The final battle is whether or not Congress will allow markets / foreclosures to sort out high prices or will they continue to choose winners & losers. That’s the real issue and one that needs to be sorted out a lot sooner than the Fed wants for all those people who can’t afford to own housing which builds generational wealth.

        $2T in annual deficit spending is going to keep a real recession at bay for as long as that money keeps flowing. The question is that 2 more years or 10 years? At some point, the deficit spending will have to be addressed. The question is WHEN?

        Please don’t censor my post, Wolf!

        • Jon says:

          Congress would never allow real price discovery.

          When the next recession hits.. assume suspension of all kinds of loans to happen.

          Don’t believe my words just wait and watch.

        • Wolf Richter says:

          That’s a mix of nonsense and wishful thinking. People forget. In 2020, it was a pandemic and a lockdown of part of the economy. The next recession is going to be a normal recession, not a lockdown, and recessions last two or three quarters, and they’re usually over by the time Congress figures this out. If unemployment is big and people spend a long time on the unemployment rolls AFTER the recession, Congress will extend the time period of unemployment insurance so that people don’t run out of unemployment insurance. That’s kind of standard now. And that’s about it.

        • longstreet says:

          Guess What
          3 % inflation takes 70% off the dollar in 20 yrs.
          Not to mention stacking these lesser incremental increases on top of the price spike in the past 3 yrs way way above the Feds 2% per annum is hiding the embedded damage.

        • Wolf Richter says:

          The math is not correct. With 3% inflation for 20 years, $100 will have a purchasing power of $54.38. That’s a loss of purchasing power of 45.6% in 20 years (not 70%).

          To lose 70% of the purchasing power, you need 3% inflation for 40 years.

          To lose 90% of the purchasing power, you need 3% inflation for 75 years.

          But ironically — which is how the math of fiat currencies work — you will never lose 100% of the purchasing power due to inflation. After 250 years of 3% inflation, you’ve lost only 95% of the purchasing power LOL

        • longstreet says:

          With 3% inflation, compounded
          a $100 item will cost $126.7 in year ten
          and will cost $170.24 in year twenty.

        • Wolf Richter says:

          That’s not how loss of purchasing power is calculated. You’re doing it backwards, you’re doing price increases. So according to you, if the $100 item then costs $250, the dollar lost 150% of its purchasing power??? 🤣 That can never ever happen. The most the dollar can lose is 100%, at which point it’s worthless and useless.

          So if that $100 item goes to $200, that’s a 100% increase in price (your calculation), and the dollar lost 50% of its purchasing power (not 100%, LOL)

        • Vinyl1 says:

          QT will eventually kill inflation. However, it does this by removing liquidity. If the Treasury keeps issuing $2 trillion a year, it will gradually pull all the liquidity into Treasury bills, notes, and bonds. This would be accompanied by much higher long term rates, and price deflation. The only alternative would be to resume QE, which would fix deflation but not higher long term rates, as bond buyers demand higher yields because they’re afraid the whole mess will blow up.

  6. Dirty Work says:

    There’s no path out of this that doesn’t involve great pain.

    • Freewary says:

      Sadly for the nation, true.

      Individuals do have options.

    • dang says:

      I think the nation will continue to evolve. The idea that there is no path is unaware of the multiple ways that will be played out over the course of the next generation.

      There is no need for pain if we simply apply the progressive tax system in the manner and spirit it was devised.

      The budget shortfall is what’s currently left of the GI era in which the top marginal tax rate exceeded 90% by popular demand. An Army coming home, brothers in arms.

      • Gattopardo says:

        “There is no need for pain if we simply apply the progressive tax system in the manner and spirit it was devised.”

        Totally, no pain at all from higher taxes. None. LOL.

        “the top marginal tax rate exceeded 90%”

        No one paid that.

      • Vinyl1 says:

        The problem with higher taxes is that they’d have to be broadly based in order to raise significant revenue. The top 40-50% of households would have to pay more. Since many of them households are living paycheck to paycheck, the effect on household finances would be devastating. Many people would no longer be able to pay their mortgages, property tax, and car loans.

  7. Glen says:

    This is very good news. One could expect this will bring fiscal sanity to Congress and a spirit of bipartisanship along with accountability for military spending and the amount we use those forces to bring the American Dream to all those we deem missing it. Kumbaya around the campfire time for sure now.

    • Another Craig says:

      > One could expect this will bring fiscal sanity to Congress and a spirit of bipartisanship

      Thanks, Glen. Best laugh I’ve had all week.

      • Mark says:

        Hey Another Craig –

        Hahahahahahahhahaha me too

        ( I hope Glen’s comment isn’t LSD related , though ……)

        • Glen says:

          Mostly CBD gummies with a little THC these days.The era of legalisation has been a big positive.

    • dang says:

      The problem with your argument that total failure is good news because the Congress of the US will admit that have a spending problem and agree to go to rehab. Under their own volition, I don’t think so.

  8. MDM says:

    Today’s WSJ has an article on Josh Frost and how Jim Cramer described him as “the most important man in finance.”

    The article also relates:

    “Yellen brought up Cramer’s segment in a staff meeting, offering to show other Treasury officials the clip on her phone, according to people familiar with the event. But as she searched her bag for her phone, Yellen realized that it wasn’t there because she was meeting in a secure room where cellphones are barred, according to the people. So she couldn’t actually show the clip.”

    Mind you, these people that are getting excited about Jim Cramer are the people that are deciding what government debt to sell.

    • typecheck says:

      Thanks for the laugh. Greenspan was a musician. Powell is a lawyer. These are politicians pretending to know economics.

      • Wolf Richter says:

        Bernanke is an economist, and he came up with QE and 0%. I’d rather have a musician or a lawyer in charge, than an economist.

        • spencer says:

          Bernanke caused the GFC. He held the means-of-payment money supply constant for 4 years. He drained legal reserves for 29 contiguous months. He destroyed the nonbanks by remunerating interbank demand deposits.

        • Wolf Richter says:

          “Bernanke caused the GFC.”

          You keep posting the same nonsense (wild economic theories obtained from your passed-on “mentor,” as you said), and I keep deleting it. The GFC was caused by financial firms getting overleveraged. The trigger for the GFC came when overleveraged real estate began unwinding, along with many other bets unwinding. Greenspan added to the conditions for the GFC because he kept rates too low for too long, thus encouraging leverage and RE price inflation. There were also regulatory contributors – such as those that allowed commercial banks to get massively huge int non-banking activities with bets that then blew up. All this is pretty well understood by now.

        • The Real Tony says:

          Zero interest rate policy sure worked out well for Japan. Now they’re a basket case.

        • Johnny Witt says:

          I’m pretty sure it was Prof. Richard Werner “Princes of The Yen” who came up with the concept of QE.
          Bernanke like Greenspan was too smart by half. Or, as Nasim Taleb wrote in his book “Anti Fragile”: “intellectuals, yet idiots”. This would most acutely apply to Yellen, who is still out there making trouble and fostering mayhem with what remains of our economic credibility.

        • Wolf Richter says:

          The Fed used QE in the 1940s to deal with the war debt and stopped when inflation hit 17%. But they didn’t call it “QE.” That term is relatively new. I don’t know who came up with it.

        • WB says:

          I agree completely. From now on I think you should emphasize the con in eCONomist in all of your writing.

      • longstreet says:

        Greenspan played the clarinet and clarinet “jammed” with Woody Allen. Imagine that get together.

    • dang says:

      Who cares, really ? IMO the worst investment advice ever to be allowed to be broadcast across the public air waves. Finance ain’t making things. It was developed as a system to measure the true value of a business.

      A good carnival barker is always in demand.

  9. Seba says:

    Yikes, even the “cleanest shirt in the drawer” is looking a bit hoboesque these days. What you gonna do though, just gotta keep wearing it and hope you don’t develop a rash like with the other ones I guess.

    • dang says:

      Just a tip about dirty shirts, don’t put them in a drawer. Create three piles of dirty clothes according to their wearabilty factor.

  10. Glen says:

    Chickens always come home to roost.

  11. Putter says:

    This will continue until there is a crisis. Bond vigilante comes to mind. Last time they rode into town was the 1970-1980.

    • Escierto says:

      Bond vigilantes? You can’t be serious. The vigilantes all left town to become crypto traders.

  12. Sam says:

    Who cares? As long as we are the number one economy, strongest military, world reserve currency, etc then why invest elsewhere? Tell us who is better to invest with? China, Russia, India??

    • Glen says:

      This isn’t an Us versus Them thing or one winner takes it all. BRICS is doing some fairly insignificant trading among their currencies but several decades from now may likely be a significant chunk. This combined already declining foreign holdings will drive yields up. The US is addicted to spending and really hard to pull a lot of it back. Plus local and state governments might feel the affect first which then might require the government spend more.
      In my mind a paradigm shift is needed regarding trade, foreign policy and a host of other things but it will likely double down on what brought us here.

      • phleep says:

        Those “emerging markets” are aptly named, as they are always in some kind of emergency. I don’t see their governance getting better. Ours IS deteriorating, admittedly. But we are still inventing the world.

        • EnglishEnglish says:

          ‘ An emerging market, it is said, is one from which it is difficult to emerge in an emergency ‘

          – The Economist

        • 91B20 1stCav (AUS) says:

          ‘…the general human condition always remains irrational longer than it’s individuals remain ‘solvent’?’ (if they were ever, truly, ‘solvent’ at any point. Still, as long as we do, Thos. More’s ghost will walk among us…).

          may we all find a better day.

    • dang says:

      I dunno. Which is the most undervalued or overvalued which seems to be the case.

    • Frederick says:

      Strongest military? You’re kidding right ?

    • Einhal says:

      If I was super wealthy, I’d be moving cash into hard assets like land in remote areas, gold, famous art and so forth.

      The fact is, we don’t really have the number one economy, at least not the way you think. Sure, we have the highest GDP. But a lot of our economy is unproductive, and can only function as such as long as foreigners are willing to buy our debt and willing to accept our dollars.

      Once that ends, and no, you don’t get a warning, the unproductive (what some people call “fake”) parts of the economy will end abruptly, and we’d see what the U.S. economy looks like without consumption driven by the unproductive parts of that economy.

      What America really has is confidence. This confidence allows us to get away with printing money, it allows us to get away with selling 10 year treasuries for 4% when there’s no real way out of our debt without inflation, it allows us to run huge deficits for non-productive spending, and so forth. Once that confidence is gone, then the game is over.

      When that is is anyone’s guess.

      • Pat Connor says:

        Einhal – this is one of the best analysis I’ve read. Thanks!

        • phleep says:

          Not that simple. We have all kinds of valuable things alongside messed up things.

        • Einhal says:

          Phleep, of course. Our tech companies produce great stuff, we manufacture great cars (most of the Japanese and Korean models sold in the U.S. are made in the Southeast, as an example), and we have great energy and food production.

          But we have a ton of crap too. We have a ton of “analysts” that do nothing more than prepare models guessing what stocks will do. We have a ton of traders who don’t add any real value to society. We have instagram influencers, tiktok videos, and other things that are really just about advertising. Advertising is fine, but to the extent that it’s advertising for non-productive goods or services, it’s just part of the “fake” economy.

          You don’t have scores of analysts and traders studying Venezuelan or Argentinian stocks, for example. So it’s truly about investors’ (foreign and domestic) confidence in the U.S.

      • ChrisR says:

        When could be if say the ten year went from say 4% to 11%, could it not?

      • eg says:

        This analysis is mostly correct, Einhal, though what you call the “fake” part of the economy ought more properly called economic rents — what the classical economists used to call unearned income.

    • Perth says:


  13. John H. says:

    “The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.”
    — Cicero, 55 BC

    True enough sentiments then. Equally relevant today….

    • dang says:

      A society that doesn’t borrow from their citizens too fund the public good is inept. Cicero’s warning will not be heeded by those who make such decisions. The telescope is not as powerful as the microscope in the every day course of one’s life.

      The creation of a society based on trapping people into progressive debt doesn’t seem to me that Congress is more a den of thieves than concerned representatives of the every day people.

    • roddy6667 says:

      Cicero for President! Dig him up! Couldn’t be any worse than the Weekend-At-Bernies we have now.

    • Clykke says:

      Ironic and maybe worrying given Cicero’s death at a time of political upheaval marked the start of a transition from a Roman republic to empire.

  14. John H. says:

    Thanks for this balanced article on a very ugly topic.

    The Federal Reserve system, through ZIRP and QE, played a leading role in allowing such a gross display of fiscal incompetence.

    I’m not in the “end the Fed” camp (partly because I think it’s impossible to put it out of existence, and partly because I believe a central banking institution provides some necessary regulatory and administrative functions), but its remit and scope must be significantly trimmed if we’re to have any hope of returning to the desirable state of balanced annual budgets.

    • dang says:

      I suspect that monetization of the debt through inflation is the plan. A perfectly acceptable plan to the asset owners, thanking God and the Federal Reserve that the value of their assets didn’t fall while the Fed does the heavy lifting of supplying liquidity to several of the so called markets, unable to sustain their vigor without stimulation by the Fed.

  15. SuperficialIntelligence says:

    I get the feeling that you like safe investments, wolf. Everyone always describes treasuries as risk free. How much confidence do you actually have in the us gov to maintain the value of the dollar while honoring all the interest payments. I’m starting to get the impression that it is not as easy as ‘growing the economy’ or ‘raising taxes’ on the rich anymore.

    • Wolf Richter says:

      I have 100% confidence that the US government will honor the Treasury securities. That’s one thing I don’t lose sleep over.

      I also know that this problem will get solved (at least somewhat) over time with inflation. That’s the classic method. That worked in 2021 and 2022, as you can see the ratio declined. But in 2023, we just didn’t have enough inflation. But 2024 might provide some more relief — you know, higher for longer. That’s the motto.

  16. Indelible says:

    If we run at this debt accumulation rate for another 5, 10 or maybe 15 years, there is virtually no chance to pay it off.

    It would take decades of fiscal discipline/austerity, which is unlikely to be steadily applied. Black swan events, lack of consistent political willpower and a government- dependent populace will derail any such effort.

    I expect some sort of implicit default, in stages. Maybe holders of the debt will get a 9 for 10 reverse split. Maybe some ‘less preferred” holders will get 7 for 10 or 5 for 10.

    Has anyone seen a legitimate proposal for actually paying off the debt? Or even substancially reducing it (in absolute dollars)?

    • Indelible says:


    • Glen says:

      Well, if you got spending under control then perhaps selling Alaska is an option. It’s a 6th of the US land and while it wouldn’t pay off the deficit it might take off a chunk. Sometimes you have to sell off the guesthouse to afford the mortgage on the main house.

      • Indelible says:

        I like the creative brainstorming!

        I saw a recent article that Russia wants Alaska back…

      • Wolf Richter says:

        I think they’re better off selling Louisiana back to the French, or maybe they could sell California to Austria, which used to own it when it still owned Mexico. California would bring a lot more than Alaska. At least the weather is better. Austria might also be interested in buying back its other former possessions: Nevada, Utah, New Mexico, much of Arizona and Colorado, and parts of what is now Oklahoma, plus some portion of Kansas and Wyoming. I mean they could make all kinds of deals.

        • Yaun says:

          Buy/Conquer low, sell high. All for it. Just don’t vote for Trump who wants to buy overpriced Greenland from the sleazy Danish used terriority salesmen.

        • Frederick says:

          California wouldn’t bring ten cents It’s a giant Clusterf..k and liability IMO anyway Shame because it used to be a great place to live

        • Xavier Caveat says:

          Emperor Maximilian doesn’t show up in Mexico from Austria until the 1860’s, Wolf.

        • Wolf Richter says:

          Xavier Caveat,

          Habsburg Spain dates back to the 1500s.

        • phleep says:

          Frederick, California is what, the fourth or fifth largest economy in the world, if counted as a country?

        • ChrisR says:

          Buy Cali etc with debt and then inflate it away. Nice I suppose the only problem is that as collateral, Austria would have to post the whole of Austria. Isn’t that known as betting the farm in some circles?

        • 91B20 1stCav (AUS) says:

          Frederick – (if this is the ‘Frederick’ of old), are you still in Poland after leaving your previous Turkish paradise?

          may we all find a better day.

    • Yaun says:

      You underestimate how much worse it can get. The sky is the limit. Look at Argentina. The government can still do yield curve control by printing lots of money, publish completely fake inflation numbers and threaten legal action against those who dare to publish alternative numbers, devalue entitlements, introduce price controls, ban exports of certaing goods, and run the economy into the ground for good.

      You’ll know that the system has finally reached breaking point if a guy swinging chainsaws above his head gets elected.

      • Wolf Richter says:

        Once you get inflation that is big enough, you cannot do yield-curve control anymore, and you cannot print money anymore because that will just completely ignite inflation — see Argentina. The wealthy in the US will see to it that it doesn’t happen because it would wipe out their financial assets.

        • WB says:


          I think you need to be more specific. From what I have witnessed the wealthy love it when their assets inflate!!!!!

          What inflation are you talking about? My in-laws are billionaires, they openly welcome a feudal society and a constantly preach that a benevolent dictatorship would be the best thing for American. Crazy, I know, and these are Stanford/Harvard MBAs… VC guys with hedge funds. They really believe this crap, and have senators in their hip pockets. Two came to my niece’s wedding. People really need to wake up to what is happening.

        • Wolf Richter says:

          All financial assets get eaten by inflation. You just cannot see it. Even the purchasing power of real assets gets eaten. When there is a lot of inflation, lenders demand high interest rates to compensate them for inflation, or they stop making loans. And a lot of this highly leveraged stuff, funded short-term in the repo market ($4 trillion) or funded with floating rate debt, etc. will fall apart. Those 4% 10-year corporate bonds will have to be refinanced at multiples of that rate… Unlike the US, companies can and do go default and go bankrupt when interest rates go up – we’re already seeing this in CRE all over the place. This economy is not at all prepared for high inflation.

    • dang says:

      From experience, I assure that what happened 10 or 15 years ago is not relevant other than as fodder for old men’s stories.

      The present happens now. The future is the consequence’

    • Jon says:

      You should know uSA would never default since it can print as infinitum.

      As I said the only game is ..inflating the debt away.

      In last 2 decades dollar has already lost most of its purchasing power.

      • phleep says:

        It sure was nice to dump those depreciating dollars into something holding value. My pity for those who did not. But that is absolutely standard personal finance since forever. Lately I bought the robot that will eat my job: MSFT a year ago. Up about 60% now. That’s the game. Sorry Gen Z, there will be some wait. But that is finance, is no reason to absolutely abandon/discount the future and not start. This is not some “to the moon” world, usually. The delusion was created in the cheap money interval. Patience takes, like, decades.

  17. Debt-Free-Bubba says:

    Howdy Folks. No worries, Govern ment will find the right tool and make the needed adjustments to the numbers. Move along and don t forget to vote…..

  18. hahahahahaha says:

    It will continue until it stops. Being There 2.0

    • dang says:

      Right along with I found it in the last place I looked.

    • phleep says:

      The game is not knowing that it (absolutely, inevitably, of course) will end. A broken clock is right twice a day. There is no new information there.
      The game is positioning in the meantime. And we are all strapped to the nose cone of that carnival ride. There is no such thing as not choosing.

  19. Glen says:

    I wonder how governments that link part of their debt to inflation fair. Seems like they can’t inflate part of themselves out of it. Debt spending just increases with inflation so seems they would be more motivated to control inflation.

  20. SoCalBeachDude says:

    Buying ‘growth’ this way is a shortened road to complete collapse.

    • dang says:

      Complete collapse is unlikely. I mean Italy, the center of the Roman Empire, is still thriving on their charm, beauty, and morality all these centuries later after the collapse of the Roman Empire in 565 AD.

      • 91B20 1stCav (AUS) says:

        dang – there was that brief pre-Garibaldi era, though…

        may we all find a better day.

  21. Brant Lee says:

    I wish the U.S. government would at least buy something with substance which they could with printed money. They could stockpile and corner the market on a lot of commodities, especially metals. It would be one form of continued dominance for the dollar.

    But hell no, let’s just blow off the free money into thin air with nothing to show for it.

    • Raging Texan says:

      Since you are wishing for the US to continue violating the Constitution by engaging in interstate commerce for the benefit of insiders, be happy knowing US government blows it’s printed $$ on assets of substance, mortgages, office buildings, and military hardware.

      Look up who the legal owner of a property is when a property is mortgaged.

      • Brant Lee says:

        Whatever are you talking about Mr Tex? Insiders? I think you have been sipping on some toxic cactus out west.

    • dang says:

      Not wanting too put too fine a point in response, I find myself in a quagmire of doubt, the driving force of debt creation.

      I’m in the camp that the wages and benefits for the people should exceed the more tax cuts for the wealthy.

    • roddy6667 says:

      Booze is always a good investment. I knew an old timer who owned a restaurant and bar he built in 1937. Every week, when he ordered liquor, or bought an extra bottle of bottom shelf/well whiskey or vodka as his retirement. When he sold the place in 1978, he had a large section of the basement full of unknown brands of perfectly good liquor. He sold a lot of it to the new owners, and took the rest with him. Probably sold it to other bars. Keep it dry and clean and it keeps forever. In bad times, people need a drink more than ever.

      • ApartmentInvestor says:

        Booze will always be worth something, but you need to be careful about storing it since the bottles can break (especially here in CA with our earthquakes).

        Years ago an old guy at the range told me the “lead” in his safe had gone up in value more than the “gold” in his safe (I now have entire gun safes with nothing but ammo in them at home and at the cabin that keeps going up in value).

        I agree with Einhal that everyone should have some hard assets, but I’m guessing that I’ll have an easier time raising cash selling the boxes I have with 1,000 rounds of 9mm and .223 ammo than anyone trying to sell art.

      • VintageVNvet says:

        1. Booze can and does evaporate through cork and plastic covers. Seen exactly that recently with a bottle of fine booze meant for the last one living of WE ”3mousekateers” , (buds since elementary school) alive and able to drink it…. Every old fine wine must be recorked from time to time as one example, though opinion is divided on frequency.
        2. Trade goods will be best, as only items of practical use will have ANY value if the poop hits the paddle as some insist it must at some point in every epoch.
        3. OF COURSE ”it’s different this time.” /s

  22. fred flintstone says:

    Depending on your opinion of the source you may pay more attention.
    When some internet folks state scary things….so what
    However Jamie Dimon put out a statement recently indicating he thinks that roughly 10 years from now, if spending is not substantially altered, a collision will occur for the dollar.
    Wolf consistently publishes disturbing facts which supports this opinion.
    I sure wish those people in DC would do the right thing and get back to being out of control 2015 style. We thought they were nuts back then but now…’s gone into the stratosphere of out the wazoo. The 2015 style of crazy spending was almost reasonable compared to today.

    • Raging Texan says:

      If you’re feeling nostalgic, go back further and check out fake fighter Reagan’s deficit spending spree- looks tame today.

      • roddy6667 says:

        I remember how the media clutched their pearls and fainted when the deficit hit ONE trillion. In later years, Obama could do that on his lunch break.

      • Pete in Toronto says:

        My understanding is all U.S. government spending originates with the House of Representatives (not the president).

        But I’m a Canadian, so what do I know?

        • 91B20 1stCav (AUS) says:

          Pete – demonstrating that U.S. civics may be better-taught and understood outside of our Yankee borders…

          may we all find a better day.

    • dang says:

      Jamie Dimon is not likely to telegraph his intentions. Much more like a Cobra that chomps into your neck, injecting venom into your artery.

  23. Gary says:

    I don’t get how we can go from the Federal Reserve will never go broke because it can print money with no competition on the planet to being worried about government debt. So what if the government spends more money than they take in, it is the Treasury who runs over to the Federal Reserve and gets “cashed off” either by selling the stuff to whomever, or the Federal Reserve buys it in droves themselves. Then, there is the taxation tool of inflation; work the numbers: 10% of 30 trillion debt is 3 trillion that’s is a year and a half of spending 2 trillion extra a year. Then there is interest on the debt, well the Federal Reserve sets that and a low percentages, can be set at zero for a decade and foreigners and pension funds still have bidding wars for that Treasury paper. Throughout history, governments have traditionally pushed the limits of currency debasement for decades like us.

    • eg says:

      This is operationally correct. Outside of the inflation created by insufficient real resource availability (including labor) the nominal amounts are, literally, meaningless.

  24. stratus says:

    Some of the countries in the Middle East suffer from the “Oil Curse”. I think the US suffers from the ” Reserve Currency Curse “. We have been able to get away with being irresponsible for so long it is nearly impossible to change course.
    Low wage earners and Social Security recipients will be bearing a big part of the burden. Austerity will be part of the mix.

    • dang says:

      I agree, sort of, we seem to have forgotten who actually won the Second World War, the only swinging dick left standing, when it was all over. The natural currency required to stabilize a world in chaos.

  25. Eider says:

    These comments adhere to the “concept-that-shall-not-be-named”. I’ll say it-spending is up, but tax rates are way lower than in the past. Look up the tax rate in “the good old days” when the US was developing the interstate system and other massive infrastructure project we pay to maintain today. It’s a revenue problem as much as a spending problem.
    You can either pay it to a corporation or the government. The certainty is that your money will leave your wallet.

    • Einhal says:

      This nonsense again? When the U.S. had a 91% highest marginal tax rate, almost nobody actually paid that, because of deductions that are not available today and other reasons.

      The fact is, while there’s an argument that that the long term capital gains rate (how the truly “rich” get most of their income) should be taxed as ordinary income, ordinary income rates are about as high as they can be.

      California, for example, has a 13.3% top rate. Add that to the 37% top federal rate, and you’re over 50. And this isn’t even including the 3.8% Medicare, so now you’re at about 54%.

      People aren’t going to work to give 70% of their income to the government. They’re just not.

    • Iknownothing says:

      Is there a chart available for total US revenue vs GDP?

    • Happy1 says:

      Back in your so called good old days in the 50s we had no Federal spending on Medicare, Medicaid, or welfare, so we could spend money on infrastructure. And literally no one paid those 90% rates, there were tax shelters galore. And Europe and Asia were smoking ruins so there was no economic competition.

      • Publius says:

        And you couldn’t move your money across the globe in 5 minutes with a few mouse clicks.

    • Eider says:

      They were still smart enough to raise taxes when needed to make it balance better. E.g. Eisenhower and the gas tax.
      And your assumption was that meant to jack income rates all the way up. Not so. Most of the bigger cuts in TCJA need to go back (or go a bit higher) As Einhal mentions, capital gains taxes can be more progressive (two lowest tax brackets have 0%, but don’t have significant cap gains anyway. But the upper brackets pay less than half their marginal income tax rate.

      I just think that focusing soley on the spending side of the ledger is the true nonsense.

  26. Dealing with Inflation says:

    I will do my part to deal with inflation. Tomorrow, I am going to grill a nice steak, toss a salad, air fry some tater tots, and crack open couple Mac & Jack African Amber. Then, take a nap.

    If our world is going to end, might as well be well fed, hydrated, and rested to meet that end. I got maybe 25 years of life before they shake the rest of money out of my worn out corpse in order to save my life. The kids will be alright without us.

    • dang says:

      You should at least elaborate about air fried tater tots. The correct method to prepare them, etc.

    • John H. says:

      “The kids will be alright without us.”

      Ay, there’s the rub.

  27. Earl says:

    This is an off topic impulsive post prompted by the Sports Illustrated story and the current stress of both legacy and new alternative media publishers.
    Could Sports Illustrated’s owner Area Group Holdings, Inc, NYSEAmerican:AREN, qualify as an “imploded stock”? Currently about $1D down from $10 in a year. Area licenses SI from Authentic Brands Group that owns or manages so many familiar cultural brands from Graceland to Eddy Bauer.

  28. BuySome says:

    Pick up all ye glasses boys,
    We’ll gather on the bahh,
    To order up another round,
    And sing “In Vino Veritas!”.
    Let the waters swirl around our feet,
    Let the floods carry away the cahh,
    We’ll soon be free of the dinner bill,
    Hail “In Vino Veritas!”.

    Harvard Business-1 General Rabble-0

    Damn Yankees!!

    • dang says:

      “In Vino Veritas!” is certainly an incantation that ruminates with many of us,

      older, yet, succinctly prescient in the sense that life should be enjoyable.

  29. Marcus says:

    Out of control! When inflation is the solution, the Fed/Government have to produce a lot of inflation until we see an impact on the government debt. Debt is expanding in a record pace. Or the governments doing a haircut on their bonds.

  30. Pants_Explosion says:

    Hello Wolf,

    If inflation is the way out of this, wouldn’t that be bullish for residential SFH prices?

    Generally speaking, if a mom & pop owned a couple rental SFH, this ballooning deficit spending would lead to more inflation which would either bolster or elevate SFH values, wouldn’t it?

    • Einhal says:

      In theory, yes, inflation would increase the values of all assets. In practice though, it’s very tough to skate that line between “controlled inflation” (which would decrease the relatively debt burden and do what you describe) and “uncontrolled inflation,” which leads to a crack-up boom and the collapse of the financial system.

      That’s why it’s dangerous to seek out inflation.

    • Wolf Richter says:

      No, because high inflation means high mortgage rates. If we stabilize around 5% inflation, give or take, mortgage rates may be around 8%, give or take. High mortgage rates will cause real estate to be repriced — already doing it in commercial real estate.

      • Pants_Explosion says:

        That makes sense, thanks for the response!

        Would there presumably be a push-and pull between the 5% inflation propping prices up while a Buyers strike at 8% mtg rate pressured prices downward?

        Based on the seller standoff the past two years, it seems likely that prices would merely stagnate. But adjusted for inflation, the homes would be losing value.

    • Jon says:

      Unless the wage increases proportion with sfhs..
      Also residential real estate is deeply tied to 10Y yield.. higher inflation means higher mortgage rates…Means lower purchasing power of people in general

  31. Mike says:

    It’s surprising how Moody’s still has the US at AAA credit rating. Fitch downgraded US to AA+ last year. Looking at these numbers of debt to GDP ratio for any other country you’d think we would be A or worse.

    • Jon says:

      These ratings are just symbolic and has absolutely no bearing on the ability of us govt to pay on its treasury obligation as us can print dollars ad infinitum.

      • John H. says:


        “…. [U.S.] can print dollars ad infinitum. ”

        Unless and until the rest of world loses confidence in the integrity of the US$ due to gross fiscal and monetary mis-management, and decides to run away from the US$. (“Run” toward what, is a point of speculation…)

        That would be market-determined inflation originating outside our borders — as opposed to the Fed induced variety — and would signal a new and heightened stage of inflationary crisis.

        Scary prospects. Weimar-ish stuff.

      • eg says:

        The “meaning” of the ratings is the comparison between nations — it’s “least dirty shirt” stuff, not some objective standard.

  32. Asul says:

    After GFC and zero rates for a decade the US is entering a new phase of experimental economy. Keynes said that in the long term we are all dead, well, this will not end well.

  33. Herpderp says:

    Thoughts on how the new corporate 15% minimum tax may impact tax receipts this year?

  34. Stymie says:

    Not news to y’all, I’m sure, but it does not take an economics degree to see that we got grossly out of whack in government spending versus revenue recently:

    The problem is that once the government takes on the role of an insurer (“the lender of last resort”) it tends to stick (at least that is my take-away from the St. Louis Fed graph). We ratcheted up spending over revenue in response to the financial crisis, and it stuck, and we had gross spending over revenue in response to the pandemic, and it will stick, too. I think you have to consider the alternative of not increasing spending over revenues in response to a crisis, and the social and political impact–not spending into a crisis is probably not an option. It is just that once the spending precedent is set, it is hard to reset it back to the baseline. I guess the assumption is that with inflation, revenues will go up (since salaries will go up and so will tax receipts as a percentage) and so if government spending stays flat, eventually the amount of new debt that is required will come down.

      • Stymie says:

        Presumably the debt payments will always be made as a constraint, but how? If revenues and economic growth are not keeping up, then if the government will not default, something has to give. As you describe, inflation erodes the debt, if I understand correctly, keeping it in check, in theory. So how much inflation and for how long, assuming nothing else is done (although presumably the debt-driven spending will eventually be scaled back—I guess that’s the wildcard)? Politically inflation is not explicit: “Sorry folks, to pay for that pandemic relief we provided, we have decided to have inflation.” It’s not like Congress passes bills aimed at paying the debt off with inflation. Yet it happens as a form of regressive taxation. Nobody seems to bring this up in national politics.

      • Andre says:

        This is what I find scary. Wolf, you appear to be very sanguine and unconcerned over what IMO is a parlous state of economic affairs. The interest bill will, at this rate, be the US’ biggest expenditure soon.

        • Wolf Richter says:

          My fear is high inflation. I don’t believe this theory that it’s just going away. People don’t understand or don’t take seriously how bad high inflation is for the economy and for assets.

          High inflation would resolve those debt issues — and have in the past — but at a very high price to be paid by everyone.

        • John H. says:

          Milei spoke of that pain in the WSJournal this morning. Looks like we might get a look at a live case study of how a country tries to rid itself of fiscal imprudence, replete with angry mobs in the streets.

          Prayers for the long-suffering Argentinian people.

        • WB says:

          Correct. Look at the data above that Wolf has posted, inflation and taxes are going UP, WAY UP.

          There is no other option. It’s math.

          It’s that or the global elite that are unhappy turn over the monopoly board (war) in an attempt to hide/erase the debt and start over…

          Interesting times.

      • Perth says:

        Nothing goes up in a straight line, but that line will continue to shoot up as old, cheap debt is retired and high expensive debt is issued.

        The end point on that line is going to hit well over 70% before it starts to level off in the next couple of years and maybe even higher if spending continues to grow.

      • VintageVNvet says:

        Ten year yield hit almost 16% in fall of 1981 after this ratio was spiking very close to recently. Then yield spiked to 14% in ’84.
        But yield did not spike nearly so high corresponding to this ratio’s spike in approximately 1993 or 2008-09.
        VERY interesting !!!
        Definitely many factors at play, eh?
        Thank you.

  35. David S says:

    This is how we are achieving the “soft landing” being praised by so many “experts”. Historically during our boom/bust cycles the govt deficit spending would be reduced during the boom times and explode during the bust times to keep the economy growing. This cycle we have kept the “drunken sailor” spending (as Wolf calls it, lol) going hard and heavy even as the economy has been growing decently even in the face of sharply rising interest rates. The question to ask is how much higher will our deficit spending have to go when we inevitable reach the next bust cycle if our “drunken sailors” never pull back from the govt stimulus spending?

  36. Brewski says:

    The problem that our “Drunken Sailors” will face is the hangover. My guess is that it will be very painful and extended.

    Unfortunately, the headaches and pain will be felt mostly by the middle class and the poor.

    The elites and protected class will prosper and increase in power.



    • Debt-Free-Bubba says:

      Howdy Brewski So many are in debt and will be hungover forever. There are some that will not be hungover. Squirrels like me are loving these times. ZIRP is dead and hopefully never to return in my lifetime………

      • roddy6667 says:

        My wife and I have been debt-free since we met over 20 years ago. You can save a lot of money and weather a lot of financial storms when you have no debt. We have been comfortably retired since 2013. There is almost nothing more important than not being a slave to your debts. We saved enought to buy a home for cash in 8 years, on blue collar income. No need for a mortgage. Or car payment. Or credit card payments. We live on SS and 2 pensions. Our savings and investments will probably never be touched. When we croak, our granddaughter will get over one million in cash and home. This is all very doable, but the average person just has to have a $70,000 pickup truck and a $40,000 SUV and a home a lot bigger than they need and a lot of other toys. Mental illness.

        • Thomas Curtis says:


          Yes, paying interest on loans is an expensive habit to get into. It is tough to avoid when you are first starting out but avoiding paying interest and the associated habit of ‘instant gratification’ will pay large dividends in money, security, and freedom from worry over a lifetime.

          I haven’t borrowed in over 30 years. I am proud to say that the financial rating companies have no rating on me.

        • OutsideTheBox says:


          Agreed, but few willingly embrace the austerity of a Trappist monk.

          And that is what you describe.

        • Debt-Free-Bubba says:

          Howdy roddy666. not sure how many squirrels are still out there. ZIRP taught a generation it is pointless to save money.

        • Matt B says:

          As a millennial, it’s hard to save money when you started out with nothing from your parents because they lost their own house in the recession, your savings have been paying 0.01%, your 401k is currently paying -17%, and your landlord is squeezing you for every last dime because he knows theres nowhere else to go.

        • Dumbroadski says:

          You said the magic word – Pensions. Now explain to your children / grandchildren why they will never see one.

    • Jon says:

      I hope that elite class would be fine .
      The problem or good thing depends on your perspective with usa is.. too many guns.

  37. Between the lines says:

    You mean like depleting the SPR?

  38. spencer says:

    Yeah, the public sector is crowding out the private sector. Raising taxes to accomplish a reduction in the deficit would be counter-productive. A lot of this debt is short-term. Combine this with the factor with the constant roll-over of some of the long-term debt and it becomes obvious that the burden of higher interest rates will be compounded. The burden becomes a function of the major portion of the debt, not just the current deficits. The burden, in fact, becomes exponential. In other words, if the trend is not stopped, the debt inevitably has to be repudiated.

    • Wolf Richter says:

      Inflation is a more or less gradual repudiation of the debt. Ask any bondholder. So they demand being compensated for inflation by higher interest rates, but that impacts only currently issued debt. So the government pays higher interest rates on recently issued debt, but with deflated dollars, and it pays off the principal of longer-term debt (by rolling over the debt) with vastly deflated dollars. A high rate of inflation is brutal for bondholders holding this previously issued debt. They’re paying for it directly.

      Not even Argentina had to repudiate its peso-debt. Where Argentina gets in trouble is with its foreign-currency debt, on which it defaults every few years. It has never defaulted on its peso debt. It just destroys the peso with 160% inflation and pays off that peso debt with worthless pesos.

  39. Imposter says:

    Just got the monthly statement for the credit card I gave to my government, courtesy of “Debt Clock”.

    Holy smokes, its $264,634! I can’t even afford the minimum payment on it!

    I guess I’m sounding like some old fuddy duddy, but the bill is just too much, I simply can’t pay it.

    • Debt-Free-Bubba says:

      Howdy Imposter The Lone Wolf taught me how Govern ment uses inflation to pay for its debts…… Guess they can do whatever they want………

    • Glen says:

      Sell a kidney yet?

  40. Glen says:

    Perhaps start with reducing the 750 overseas military bases in more than 80 countries. China has one in Africa in order to deal with humanitarian and piracy issues. The 750 is the most any nation or empire has ever had.
    Admittedly this will reduce our ability to overthrow governments around the world but perhaps the CIA and the Pentagon will have to get more creative and go back to the simple Guatemalan tactics to do that to protect economic interests. Coups are a lot easy and cheaper than planes, missiles and boots on the ground.

    • Debt-Free-Bubba says:

      Howdy Glen. Limited Govern ment is fiction. Forefathers knew it and did this to US anyway..

      • Glen says:

        I have no issue with large government assuming they were competent and worked for the interests of society. I’m not clueless enough to believe in utopian concepts but certainly there could be more balance. Admittedly not going to happen here in the US in the years I have left but there are enough parallels to Rome to realize it will fall for the same reasons(corruption, exploitation, overspending, imperialism, etc.) as Rome but fairly confident Germanic tribes won’t be one of the main causes!

    • Perth says:

      Tired of hearing about that useless, idiotic number of 750 bases.

      Did you know that included in that number are such things as a radio tower with zero people assigned to the facility or a press office in a building?

      In fact it doesn’t even include many of the real bases where there are actual people.

      These kind of ridiculous reports are nothing more than crap research that gets cited time after time based on false premises and data

      • VintageVNvet says:

        Last number of ”active military personnel at foreign facilities” I have seen was 288?
        Been a while.
        Anyone have recent report?

      • Jeff S says:


        How does the 1/2 trillon effectively “spent” on student debt “forgiveness” effect these values? Does that increase debt or is it hidden somewhere else?



        • Wolf Richter says:

          It doesn’t change the current “debt.” The debt is already borrowed to fund these student loans. However, debt forgiveness will increase future debt from what this future debt would have been if student loans ever got paid off.

          Student loan forgiveness increases the current “budget deficit.”

  41. RickV says:

    The Fed has embarked on QT and raised interest rates since 2022. Remember those .75% rate increases? Real interest rates now exceed 2%, not seen since 2006 indicating significant tightening of financial conditions. On the other hand, as Wolfe ably points out, the current dollar national debt increased 8.2 % in 2023 or 2.4% more than current dollar GDP growth, which effectively negates the Feds attempt to tighten. What is the Fed to do?

    • WB says:

      Correct. The Fed should have begun aggressively raising rates during Obama’s first term, and congress should have arrested Hank Paulson and half of Wall Street during the same time period.

      Our representation is 100% owned, probably long before (1971?), but the response to the Great Financial Fraud made it clear to me that TPTB were no longer going to even bother hiding it.

      Interesting times.

    • longstreet says:

      “Real interest rates now exceed 2%,”

      Let’s measure from when this inflation began.
      Spring of 2021.
      Three years ago….lets measure based on that point, then take the 2% Fed target for those 3 years. (with compounding a little over 6%)
      Now, what have we seen? Anywhere between 15% and 25% increase in inflation depending on the metric used. That is a NEGATIVE and dramatic real interest rate environment …..and for a couple of years!
      YOY metrics are part of the game. The entire episode and any success at battling its ill effects must begin with …….when it began. IMO

  42. WB says:

    So, for every dollar of eCONomic activity we need to add 1.4 dollars of new debt.

    Meh, just digits on a computer gentlemen. If this was truly problematic, Japan would have imploded a long time ago.

    I have no doubt that uncle Sam will honor my treasuries and continue to pay the interest on those T-bills. However, like The Fed, every single central bank on the planet cannot go bankrupt, NOR can they guarantee the purchasing power of their fiat currencies…

    The game has be global for 100+ years. Therefore, this time, hyperinflation will not be contained to a relatively small region as it was prior to WWI and WWII. It may take a but longer, but the math is what it is, and humans have never been good at understanding exponential equations. Do you own/control productive capacity? Can you defend it? You better.

    Hedge accordingly

    • Wolf Richter says:

      “So, for every dollar of eCONomic activity we need to add 1.4 dollars of new debt.”

      Well, not quite because a lot of government spending does not go into GDP to avoid double-counting it. It goes into GDP only when the recipients spend or invest this money, which could be years later or decades later — if they just save it.

      • WB says:

        Fair enough, but the point is we have long past the “event horizon”. It’s well above 1.2 dollars in debt for every dollar in GPD. Moreover, if some of us took that stimulus and bought treasuries when the yields went up, that becomes an additional burden on the treasury.

  43. Thomas Curtis says:

    Robert Rubin talked about this on Wall Street Week Bloomberg on Friday. Rubin was part of the last administration to balance the budget, a treasury secretary, and a Goldman Sachs honcho.

    Google for ‘YouTube Wall Street Week Bloomberg 1/26/24’ to see it.

    My guess is things will have to be a lot worse before the politics can be worked out.

    • rojogrande says:

      It’s also worth noting Rubin was paid over $100 million by Citibank in the decade preceding the banking crash of 2008. He was there as the bank essentially went bankrupt necessitating a massive government bailout. He was a direct beneficiary of the revolving door between Washington and Wall Street and taxpayers were left to help clean up the mess. For me, anything he says is colored by his disastrous, though highly compensated, stint at Citibank.

      • Thomas Curtis says:


        All of the big banks went bankrupt not just Citi.

        My real thoughts on the debt are that one side is spending so that the other side can’t give tax cuts.

        The debt is going to get larger and inflation is going to be with us.

        So, put some of your investments overseas.

        • rojogrande says:

          I know all the big banks went BK, I just thought a balanced exposition of Rubin’s resume was needed. He is a failure like all the rest, it’s just he was paid handsomely to fail. Investing overseas may make sense, but I’d caution you need to really understand the market you’re investing in. That may be difficult for a lot of people.

        • Vinyl1 says:

          That is not correct. JP Morgan Chase actually made a profit in both 2008 and 2009. That shows what prudent management can do.

        • 91B20 1stCav (AUS) says:

          TC – ref: Glen’s/Perth’s comments above, ‘overseas investments’ bolstered/protected by a robust domestic police force if not the U.S.-international variety…

          may we all find a better day.

        • rojogrande says:


          Dimon now claims JP Morgan didn’t need it, but the bank participated in the 2008 bailouts. Cheap taxpayer bailouts can be very profitable I guess. JP Morgan is arguably the cleanest shirt in the laundry, but it’s still dirty.

    • longstreet says:

      That was the “Contract with America” ala Gingrich and a GOP House.
      Rubin and Clinton had little to do with it. At least they didnt block it.
      Rubin also encouraged the removal of the Glass Steagall Act which in so doing, in the opinion of some, caused the 2008 financial debacle.

  44. Einhal says:

    There’s an article today in the Washington Post (Google “Falling inflation, rising growth give U.S. the world’s best recovery”). Here are some choice snippets:

    “Since 2020, the United States has powered through a once-in-a-century pandemic, the highest inflation in 40 years and fallout from two foreign wars. Now, after posting faster annual growth last year than in 2022, the U.S. economy is quashing fears of a new recession while offering lessons for future crisis-fighting.

    “The U.S. has really come out of this into a place of strength and is moving forward like covid never happened,” said Claudia Sahm, a former Federal Reserve economist who now runs an eponymous consulting firm. “We earned this; it wasn’t just a fluke.”

    Washington’s success in reviving the economy also suggests a new approach to future downturns, one that relies more on the government’s power of the purse and less on the Federal Reserve’s control of the cost of credit.

    “The U.S. has seen a particularly strong GDP recovery and inflation has cooled sooner and more quickly than in other large, advanced economies. And the increase in real wages is unique to our country’s recovery,” Treasury Secretary Janet L. Yellen said in a Chicago speech last week.

    The Fed helped by cutting borrowing costs for consumers and businesses and by buying trillions of dollars’ worth of government and mortgage-backed securities to goose the economy.”

    The problem with all of this is that it discounts that all we really did was print money and hand it out, which effectively seized dollars held by people, whether Americans or foreigners, to pay for the binge. Even if assets rise in price to equal the new number of dollars out there, and even if wages increase such that people are equally well off by income, the 80 year old woman who had $200k in savings now has effectively $150k in savings. That money was stolen from her, without her consent.

    Same for foreigners who bought our treasury bills or who kept U.S. cash in other ways.

    Those people are ignored by all of the intelligentsia, including the clowns who wrote this article.

    But the fact that our response is being touted as a “model” means that they’re suggesting we do it every time a downturn comes. Just print money and hand it out. Who cares about the people whose meager savings you are confiscating? As long as GDP numbers stay up and unemployment stays down, that’s a fair sacrifice for them to make!

    Ultimately, if we do this at every downturn, the dollar will die. People might believe that it’s one thing to use it for a once in a 100 year year pandemic, but if it’s used every 5-7 years, and 25% of the dollar’s purchasing power is shaved off during those 2 year periods of binging, no one will buy treasuries at 4%.

    Our leaders are way too confident that the reserve status of our currency is infallible.

    It’s not. Nothing is.

    • Bobber says:

      It’s interesting the former Fed economist acknowledges our highest inflation in 40 years, then speaks of earning economic growth through good crisis management. Interesting, but not surprising.

    • 91B20 1stCav (AUS) says:

      …”earned this”? Sounds more akin to: “…we drank our way to prosperity…”.

      may we all find a better day.

    • eg says:

      The US dollar won’t “die” until the US Federal government is unable to enforce collection of it to extinguish the taxes, fees and fines it levies.

      I have great confidence that it will retain this capacity well past the time I am returned to dust.

  45. Richard Arguile says:

    Why compare current tax receipts to current GDP? I’d think tax receipts will be lagged by a year as tax liability is accumulated in the previous year.
    This will be true of business more than people perhaps but significant.
    Secondly, the 2017 Tax Cuts expire at the end of 2024 so that allows Congress to pretend to cut taxes when they are, in fact, raised.

  46. joe2 says:

    Let me get this straight:

    debt rose by 8.2% to 34 trillion
    GDP rose by 5.8% year-over-year to $27.9 trillion

    So the government borrowed $2.58 trillion and spent it into the economy which is included in GDP which rose by 1.53 trillion. Or the government spent about $1.70 to achieve a GDP increase of $1.00.

    So what’s with this “The economy grew solidly.’ stuff? So where did the $0.70 go?

    • Wolf Richter says:

      The principle of what you say is correct, which is why government deficit spending is so stimulative to the economy.

      But your math is not correct because lot of government spending is not counted in GDP to avoid double-counting it. It goes into GDP only when the recipients spend or invest this money, which could be years later or decades later — if they just save it.

  47. Winston says:

    What’s up with this: in the past 12 months the federal deficit increased by $1.3 trillion, but we only got half that in GDP — about $600 billion. In Q4 we got just $300 billion in extra GDP for $834 billion of new federal debt.

    • Wolf Richter says:

      Your GDP numbers are wrong:

      1. current-dollar GDP increased by $1.5 trillion over the past 12 months.

      2. In Q4, current-dollar GDP increased by $330 billion.

      See GDP chart in the article.

      3. In addition, a lot of government spending is not counted in GDP to avoid double-counting it; that portion counted in GDP only when the recipients spend or invest this money, which could be years later or decades later, or maybe never it they buy stocks with it and lose all of it. The government spending calculus in GDP is much more complex to avoid double-counting government spending.

  48. AliceinWonderland says:


    When do you think the bond market is going to finally wake up?

    You need to write a segment on bond market psychology and dynamics because it feels like Alice in Wonderland.

    I would have thought they were going to realize that rates can’t come down by much if at all.

    • Wolf Richter says:

      Yes, some of this stuff is baffling. But markets are not known to be rational. They can stay irrational for a long time.

      • AliceinWonderland says:

        The foreign investors **should** wake up sooner, but still not yet.

        Are there any upcoming events that would likely provide a catalyst for a wake up call?

        • longstreet says:

          ” foreign investors **should** wake up”

          I suspect that much of this money going into the stock market, and likely the bond market, may have been pulled from a wobbly Chinese financial environment.

        • Einhal says:

          Longstreet, that would make sense. The East Asians are known for buying at the top and being bagholders.

  49. AliceinWonderland says:


    Have you been following the options market for TLT and bond futures? Implied volatility has gone down significantly and I am seeing a lot of people holding short term treasuries and then taking a small percentage of their portfolio and buying options on futures.

    This allows people to get massive leverage with minimal risk and could set up even bigger swings moving forward.

    My guess is that this is also playing out with the crazy low VIX in the equity markets where a lot of people are mostly in cash and just buying call options to participate in equities.

    This trade makes more sense to me in explaining the behavior of the market, because people can participate in the upside without much risk, and then walk away if the whole thing blows up. Since the options action appears to be mostly call focused, and most of the bears have gotten flushed out, there wouldn’t be any natural buyers on the way down.

    If this trade unwinds it would likely be spectacular (like 1987 spectacular).

    What are you seeing in this space?

    • The Real Tony says:

      That’s another way of playing the market other than buying out of the money put options on the major indexes each month.

      • AliceinWonderland says:

        Depending on the implied volatility, buying a straddle might make sense.

        I think the bond market is the key to this whole thing– most traders have been losing money for about 4 years.

        Some are now switching to holding short term treasuries and trading calls or else straddles on futures options for longer duration.

        How are you thinking about this?

  50. Bobber says:

    Debt-to-GDP ratio has been rising, which is unsustainable.

    MoneySupply-to-GDP ratio has also been rising, which is necessary to artificially inflate asset prices.

    Deficit spending-to-GDP is on the rise as well, which is necessary to create the illusion of growth.

    How many balls do these idiots think they can juggle?

  51. spencer says:

    To appraise the effect of the Federal budget deficit on interest rates, it is necessary to compare the deficit, not to a debt to N-gDp-ratio (a contrived figure), but to the volume of current net private savings made available to the credit markets. Unprecedented large deficits “absorb” a disproportionately large share of N-gDp (as gov’t spending is a component / factor of N-gDp).

  52. Bruce Turton says:

    How about a new law from a no-new-laws Congress that says if the government shuts down, members of Congress do not get paid either!!!

  53. Bruce says:

    “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
    ― Alexis de Tocqueville

    This is the reason for US huge national debt.

    • Sledgehammer says:

      Congress has been doing that for quite some time yet we’re still here.

  54. Coil says:

    A huge component of US debt is entitlement payments – primarily SS, Medicare, defense, and interest on the debt. Can’t do much to reduce the last one, and how many on here are willing to give up some SS and medicare? Even defense spending is hard to reduce in the near term as so much of it is spent on wages and pensions.

    It would be fun to watch people run for congress with the campaign slogan
    “I will reduce your SS and Medicare if you elect me”!

  55. Debt-Free-Bubba says:

    Howdy Lone Wolf. I sure hope the Youngins read your articles and comments written by you. Especially when you explain inflation. It truly is possible the 70s 80s inflation cycle could return. Read up folks and prepare and pray it does not…..
    Bubba hates Disco too.

  56. Glen says:

    I’m not a conspiracy theorist except when things are plausible. That said, it seems like the government has every incentive to keep people/corporations pumping money into the markets and just enough into treasuries to fund what is needed while also keeping yields low. With much of the wealth so concentrated it isn’t being spent and the more that accumulates it just has to find a place to go. With no appetite to increase taxes on the wealthy it will grow and grow. Sure, at some point it comes crashing down but out of that is simply more wealth concentration. Feels like there is nothing to break this cycle and if it is bad enough then the government steps in and saves them for the “greater good.”
    On the positive side we have representative democracy!

    • John H. says:


      1. Is it possible that “wealth concentration” has always been with us?

      2. If the subset known as “the wealthy” changes from generation to generation ( i.e. wealth moves from owners to owner, family to family, profession to profession, and region to region), does that offset some of the “injustice” of wealth disparities?

      (Sincere questions, and I don’t claim to have the answers to my questions.)

  57. Desert Rat says:

    CNBS headline today “Sen. Elizabeth Warren pushes Fed Chair Powell to cut ‘astronomical’ rates, ease housing pressure”


    • Glen says:

      Scary to think career politicians don’t comprehend basic fundamentals. Oh wait, it’s an election year for her coming up!

      • jon says:

        These politicians are smarter than us and are in power to make big influential decisions.
        She is asking for rate cuts as she has been invested along with other politicians in assets.

    • WB says:

      I saw that. This isn’t the Senator Warren of old. If it were she would have demanded Hank Paulson and half of Wall street be arrested in 2009, and she would have had the Fed raising rates halfway through Obama’s term.

      Just more evidence that our representation is fully owned.

      Hedge accordingly.

    • Wolf Richter says:

      Warren wants her real estate investments to be worth more?

      But then there’s a long list of stuff she said.

  58. WB says:

    Everything I see, suggests some combination of a 1980ish and 2001 market…

    With exponentially more debt…

    Hedge accordingly.

  59. HR01 says:

    Thanks, Wolf.

    So over the last four years debt up 46%, GDP up 27% yet we’re supposed to believe that CPI was up only 20%.


  60. markymark says:

    Japan has debt to gdp clocking in at 3 times debt to gdp. And look, no problems.
    When does debt to gdp matter for japan?
    4 times, 5 times, 10 times? Its almost as if none of that matters, and the rules are being broken as we go.
    One thing I do know is when we in the USA were on the gold standard in 1800 One dollar then had the same purchasing power as fifty cents in 1900 do to technology, conversely, one dollar in 1913, has the same purchasing power as 30 dollars today, do to the fed. Let that soak in….

    • jon says:

      I firmly believe that the deficit does not matter as long as we can print our own currency and other nations can buy our debt.
      I don’t think the above two are going to change for next few decades.

      Of course, the debt is slowly/sometime suddenly inflated away. It’s like a frog in a slow warming pan. The frog is happy in warm water till the point it becomes fatal. We are far away from that.

  61. markymark says:

    And if deficits really do matter, then we should all be really pissed at all of our elected government for looting the social security trust fund since 1965 so we can give it away to all those country’s on the governmental teet throughout the planet since.

  62. eg says:

    Oh look — a statistic wholly without meaning.

Comments are closed.