America's Oncoming Financial and Economic Train Wreck

Today the National Debt is 125% of GDP, 25% larger than the entire size of the US Economy.

Typically even a Debt-to-GDP ratio of 60% is considered high. 80% is dangerously high. But developed Countries in Europe, North America, and especially Japan get away with higher levels of Debt because their Economies are more advanced and productive. For most of its History, the US had a very low National Debt — with periodic exceptions like World War II. The 1980s, the Debt-to-GDP ratio hovered at around 30%.

Older readers remember Businessman Ross Perot in 1992, and his Campaign was about eliminating the National Debt (then roughly 60% of GDP).

But by the end of the 90s, with the Economy booming and the Government actually running a small Budget surplus, America’s Debt-to-GDP ratio had dropped to around 50%. That didn’t last due Baby Bush's phony, obsessive, and blood soaked War on Terror which was extremely expensive, and by the end of Baby Bush’s debacle of a Term, Debt-to-GDP had spiked back to 65%.

The Debt then quickly reached 100% of GDP, much of that due to Bailouts and Benefits in the aftermath of the 2007-2008 Global Financial Crisis.
The Debt-to-GDP ratio hovered at around 100% during Barack Obama’s Term, and during Trump’s Term... until the Pandemic. The result of Economic Shutdowns and insane Government Spending, now 133% of GDP. The US Government Spending like a Drunken Sailor comes at a significant cost.

Let’s do some basic arithmetic shall we?! In order for the Debt-to-GDP ratio to remain the same, it means that both the National Debt and US Economy must grow at the same rate. If the US Economy grows by 5%, then the National Debt can also grow by 5%, and the ratio will stay the same. It’s not unusual for the US Economy to grow by 5% in a single year.

Bear in mind that this “nominal” GDP growth includes the impact of Inflation. If inflation is 4% in a single year, and real Economic productivity growth is just 1%, then overall GDP growth will be 5% for that year, i.e. 4% + 1%. On average from 1989 through 2019 (i.e. Pre-Covid), average GDP growth in the US was right around 5%— which includes the effects of Inflation, A reasonable assumption. Simultaneously, a 5% increase in the National Debt (which is roughly equivalent to that year’s Annual Budget Deficit) is a substantial number. The National Debt is $35+ Trillion. 5% of which is a whopping $1.75 Trillion.

As long as the size of the US Economy grows by 5% (whether through Inflation, or actual productivity growth), the Annual Budget Deficit could be $1.75 Trillion and the Debt-to-GDP ratio would not increase.

A $1.75 Trillion Deficit is an absurd sum of Money. You’d think that the US Government would be able to run Operations with a $1.75 Trillion Deficit. Unfortunately that’s not true; 2024-2025 they expect to be Over-budget by nearly $2 Trillion. They’ll have to cut $250 Billion from the Budget in order to achieve a Deficit of “only” $1.75 Trillion.

Where will they cut that money you ask? Well now remember, there are 3 main categories of Government Spending;

Interest on the Debt:
This cannot be cut without a US Government Default, which would undoubtedly spark an immense Global Financial Crisis. Mandatory spending i.e. the Entitlement System, No one has the courage to cut Mandatory Spending.

Descretionary Spending: Slashing Discretionary Spending isn't small potatoes either.

FY 2025, the President’s Budget is set at $1.8 Trillion, $800 Billion of which is Military spending, few Political Indentured Servants have the willingness to slash Defense. That leaves $1 Trillion for “Non-Defense Discretionary Spending”. NASA, the Department of Education, National Parks, etc. fall into this category They’ll be force to trim these Budgets by at least 25% to save $250 Billion and achieve a $1.75 Trillion Budget Deficit.

Those cuts would only freeze the Debt-to-GDP ratio at its current level. To maintain this freeze, similar Austerity measures would enforced year after year, no room for unforeseen Expenses, Emergencies, or Economic Downturns.

The irony is, slashing a significant portion of the US Government — would also liberate the Economy from excessive Regulation. Fewer Government Bureaucrats means a more productive Private Sector, precisely what’s needed to generate Economic growth. This, coupled with Technological advancements like AI would boost productivity, real GDP growth, and reduce Inflation.

It'll require difficult decisions, Those who understand the problem (and are willing to solve it) and a fair amount of fortunate experience that no Wars, Emergencies, or Pandemics occur.

This solution also means there's no Money to bail out Entitlement System especially when they run out of money within 10 years, all Retirees and Disabled take an immediate 20-30% cut in Benefits.

If the status quo US Government continues to spend like drunken Sailors, Debt levels will rise far more than the US Economy can think of growing. Within a few years there will finally be a Point Of No Return where it will be virtually impossible to service the Debt and salvage anything.

Bottom line, America cannot afford another 4 years of ignoring this problem, no matter how much “joy” Kamala Harris and her Ditto Heads intend to bring.


This is a reason why Others are emphasizing owning Real Assets, i.e. the most critical resources in the world, like Productive Technology, key Minerals, Energy, and Food. These Assets can’t be conjured out of thin air by Central Banks or Politicians.