“If the rule you followed brought you to this, of what use was the rule?” – No Country For Old Men
When I went to Ireland I met some shy people, which surprised me. No one expects the Irish inhibition.
I had noticed it some time ago a strange mathematical relationship – the National Debt (sort of) doubles about every eight years. Is it an exact mathematical relationship? Nope. It varies a bit based on which eight years that you pick. But the relationship is simple – the national debt is growing faster than yeast in AOC’s armpits, at about 9% per year.
It wasn’t always like that.
I also looked at the national debt between World War II and 1970 or so. During that time period, the national debt was as flat as Joe Biden’s brain activity scan. Hmm, whatever could have happened around 1970?
You’ll be happy to know that my search for “Richard Nixon bikini” came up empty.
The reason for most of our problems is that understanding the idea of exponential growth is difficult. Our minds are (mostly) made for understanding linear things, or things that happen slowly. No one really expects that, no matter how badly they eat, that they’d double in weight overnight, or even over the course of a month or year.
Yet, a lot of natural processes do follow exponentials, at least for a limited amount of time. Take a baby. Please. I really have no use for them anymore. Even the thought of a baby makes me exhausted.
Babies start with one cell, then two, then four, and then eight, and so on. The initial growth of a child is exponential. Thankfully, that levels off, or else there would be no way that I’d be able to afford to feed Pugsley. If that exponential growth rate had continued, he’d be the size of the Solar System and need to eat cheeseburgers the size of Saturn just to make it to lunch.
Want fries with that Saturn?
No. He’ll settle for the rings.
So, exponentials can’t continue on forever. Math proves that. If exponentials could continue forever, by the year 2032, the only blog left on the Internet would be this one, and everyone on Earth would have to spend 18 hours a day reading it.
Ahhh, I can dream.
But our national debt is following that trend. Here’s a graph I put together:
Actual conversation with The Mrs.: I said, “I promise I can make this [economic idea] interesting.” The Mrs. responded, “Bikini graphs aren’t interesting to me.”
One of the lines is the actual national debt. It’s the red one. I just picked actual national debt data every eight years going into the past from today. The other one? I extrapolated back into the past from today: I just assumed that the national debt doubled every eight years.
How accurate was I?
In 1973 the actual national debt was $466 billion. My backwards approximation? $438 billion. Close enough that a snake that was 3.14 feet long could be called a πthon.
Sure, in the middle, sometimes I was higher, sometimes lower. But in general, I stuck the landing.
That means that in 2029 (if the United States is made of math) that we’ll be seeing a national debt of $56 trillion. And in 2037? $112 trillion. Jeff Bezos sometimes works a whole year and doesn’t make that much money.
I heard he didn’t want to be CEO or president, just Prime® minister.
Does it make sense to anyone that the world will still keep accepting a doubling of debt every eight years and still keep sending us oil and steel and copper for the dollars that we print? Sure, it worked for a long time. Having an unmatched military and all the nukes gives a lot of room to dictate terms.
But how many people remember back to 1980 when the winner of the Cold War was in doubt? The United States couldn’t print all of the dollars it wanted to without inflation. The rule that the dollar followed changed, though, when the Soviet Union decided that it wanted to retire and spend the rest of eternity in Boca Raton in a retirement community gumming applesauce.
After that, the United States printing press could go wild. Inflation? Well, why bother with that? The United States could print all the money it wanted and ship it overseas. What else were people going to want? Rubles? Marks? Rupees?
No. The way that international trade was done was with the dollar. We could print them up, and the world would soak them up and then the inflation could be exported all over the world, since the demand for dollars was now the entire world. The United States could, in essence, tax the entire world to allow them to use the good old dollar.
I heard my chiropractor owes back taxes.
It was a good ride. Need oil? Print a few billion and send it to the Saudis. Need copper? Print a few million and send it to Chile. Need cars? Print a few billion and send it to Japan.
There are good things that happen when you win it all. You get a trophy. You get a party. You get oil and copper and cars. But if you have too much fun at the party?
There’s always the hangover.
Exponential growth can continue, and it can continue for quite a long time. Without it, life itself wouldn’t be possible. But life proves, again and again, that there is only so far that growth can go.
But, hey, it’s different this time, right? The national debt can go on forever, right?
The US Government is in exactly the same situation that Joe Homeowner was in during 2006 just before his Adjustable Rate Mortgage kicked in and caused him to get kicked out of his house through default when interest rates went up and his house payments skyrocketed. The Federal Reserve is Uncle Sam’s mortgage holder, and they are doing everything they can to hold Sam’s 10-Year T-Bill mortgage at its current 1.5% or lower by printing an ongoing blizzard of free money.
Here’s the Congressional Budget Office estimate of what happens if that rate goes up JUST 0.1% PER YEAR to “ONLY” 2.5% by 2030:
https://i.imgur.com/nfrBojx.jpg
The CBO is afraid to add a line to this chart that would show you what happens if that rate increase goes above 0.1% per year. Which it will. They buried the lede by putting this chart in the very back of this report, instead of trumpeting it up front in an executive summary…
https://www.cbo.gov/publication/56910#_idTextAnchor034
So a mere 2.5% rate in 2030 = Utter Chaos. Higher=Apocalypse. The Fed gotta keep that rate low FROM NOW ON, which means money printer go Brrrr.
This is what is known as a “debt trap”, and we are firmly in it. Be afraid, be very afraid. Unless you own gold.
Well, I’ve looked a little closer and see I did not represent the conclusions of the graphs correctly. The middle, dark “September 2020 baseline” in fact does include the 10 Yr T Bill going up to 3% by 2030, by this rate of increase…
https://i.imgur.com/PCP9KpN.jpg
…which is still burying the lede, since their “0.1% per year add-on curve” shows the REMARKABLE SENSITIVITY to our ultimate fate being hinged to TRIVIAL INCREASES in the interest rate. THAT’S the real story. Nobody is paying attention to how precarious our perch is on the ledge of the abyss…
Dude – you corrected yourself on the internet. Respect.
Ricky is awesome.
Nope. And no one will until the crisis is in full swing. “Be calm!”
Forever and ever.
Interesting that you posted this subject. I have made a couple of comments recently how no one is talking about the national debt much lately when that was in the news heavy when we were approaching the debt ceiling in the past. I still want to know what the payment per vaccine shot is, doubt we will hear it though.
No one in the public eye is talking about debt because the “experts” declared that government debt doesn’t matter any more. It’s called “Modern Monetary Theory.” It used to be called Keynesian economics but when that failed they needed a rebranding campaign, just like how “global cooling” became “global warming” became “global climate change” became “apply for your breathing permit.”
MMT might make sense if we didn’t have a private federal reserve. Since we do, it’s basically a way for whoever owns the federal reserve to steal X% of our taxes every year.
We’ve reached (not kidding) “who cares” level of government spending. No one really cares anymore. What could go wrong?
According to the many articles by K. Denninger and C. Martensen, the debt not only is doubling every 8-10 years, but at some point (we may be there now?) will accelerate and turn parabolic. I’m assuming nothing real good will occur after that scenario begins.
Mathematically, exponential growth will, almost always (if you want long enough) be faster than parabolic. Both are governed by parameters, so you can make them whatever you want for a while, but the rate of growth of a parabola is linear, while the rate of growth of an exponential is itself exponential. On a log-linear plot, parabolic growth almost flattens out, while exponential growth just keeps going up on the same trend-line.
A parabola describes ballistic motion: what goes up, comes back down (just as hard). Exponential increase moves faster and faster until something breaks (like yeast, which multiply until they exhaust the sugar, then all die at once. Immediately.)
I believe that is why they are holding foreclosures till the end of the year. Pull it all at once, world disaster. Better environment for the so called reset.
Welcome to the Cash Singularity.
The flip side of this is the inflation that no one is talking about, from wages to food to raw materials. It seems like the plan is to keep running up inflation, including wages, to try to stay ahead of the interest on the debt tsunami. I am sure that won’t come back to bite us later.
Nah.
What could go wrong????
No one wants to preside over the party’s aftermath. So every 4 or 8 years we get a new host in Washington, promising even MOAR booze, MOAR chips ‘n salsa, MOAR strip beer pong!
Presidents past did a lot of dumb-arse things during their tenures, but each one before Clinton at least gave an illusion of gravitas (yes, even Jimmuh Carter). Biden and Harris, by supreme contrast, appear to be smirking and barely controlling their laughter, as if to say, “ME? In the White House? I can’t believe it, either!”
We are truly in uncharted waters today. We aren’t going to spend (or save) our way out of this one. I wrote in a comment just two days ago here on WW&W, “The past, no matter how terrible and unfair, does not owe the future anything.” Well, I take that back. Unless something unprecedented happens, we’ve saddled our heirs for generations to come with crippling debt that cannot be settled without revolution. But as Thomas Jefferson famously said, “I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.”
Grab your galoshes, folks. It looks like rain.
Appreciate your doing the math for me . . . at a certain point the numbers are so large as to be effectively meaningless. That does provide the springboard for a solution though – make them meaningless in fact.
We are currently living in the first American republic. I believe that France is on their fifth republic. If the government – or the people – effectively dissolve the existing republic then voila the new entity is debt free!
Sure that leaves a lot of pissed off creditors (including China and the government employee pension funds) who hold bad paper. And there would be lots of talk about sanctions, reprisals, etc. which is why having nukes and drones (and drones with nukes) remains a good thing. Presumably, the anguish of having to exercise such an option would be complemented by the foresight to ensure that at least initially the path that led to this solution was blocked for use by future politicians. Otherwise this would lead to emulating the French on their way to their 6th republic.
On the third hand, the new sovereign nation would have exactly zero debt AND all the infrastructure is paid off. There would be no debt owed on the roads, bridges, parks, dams and other tangible assets owned and operated by the government. After a reasonable 90 day cooling off period, the reorganized entity could issue fresh bonds secured by the otherwise unencumbered national assets.
The associated social turmoil with this kind of adventure would (again) ideally encourage those forming the next version of the current republic to avoid duplicating the worst aspects of our existing social programs. If not, then stand by for round three. Not allowing government employees to unionize would help a lot . . .
There is no way to pay off the national debt / balance the budget without devaluing the currency. If you devalue it a little bit you just kick the can down the road. Replace the currency and disavow the existing debt then there is at least the opportunity for a fresh start.
It’s not just foreign banks and government-employee pension funds that would be disappointed to see US Bonds default. It would be every local bank, corporate finance office, insurance company, private pension fund, 401K bond fund, and individual saver who was told that Treasury debt paid the lowest rate of interest because it was “risk free”, and so parked their excess “cash” there.
On the other hand, if you have gold, all you need to fear is a gang of murderous thieves torturing members of your family until you turn it over to them just to bring the pain to a prompt and permanent conclusion.
China will be thrilled. With no competition, everyone will take their money, and then they can do the same thing.
Demnach ist das Mittel des US-Unternehmens Moderna am teuersten: Es würde 18 Dollar (etwa 14,70 Euro) pro Dosis kosten. Der US-Konzern Johnson & Johnson würde 8,50 Dollar (etwa 7 Euro) verlangen. Die Preise der anderen Anbieter waren in Euro angegeben: Der Impfstoff des Mainzer Unternehmens Biontech und seinem US-Partner Pfizer liegt demnach bei zwölf Euro pro Dosis, die Tübinger Firma Curevac verlangt zehn Euro, die Franzosen von Sanofi 7,56 Euro. Mit Abstand am günstigsten wäre das Mittel von Astrazeneca mit nur 1,78 Euro pro Dosis.
Okay, Biontech costs 12 Euro per dose. Astrazeneca 1.78 Euro per dose. Most of them need two doses. There is talk that Biontech will increase the price to 19 Euro per dose.
I don’t have any Euros. Also? No doses.
Johnson & Johnson and Moderna are given in dollars. Somebody was asking.
Gotcha! I was just trying to make my (as usual) lame jokes.
Sorry, John, but the event that got us the National Debt that we have was when Nixon took us off the gold standard. Your Nixon graphic showed it. That meant that .gov was no longer inhibited from printing simply because they didn’t have the gold in the vault to back up the new currency. And now, we have paper money that is really worth less than the paper it’s printed on.
I have a few $100 Trillion bills from some dump in Africa. They couldn’t even just lop off the last 6 zeros and start again, which is what a lot of countries do.
I agree that holding precious metals is a good insurance policy (not an investment) to help carry some of your wealth through the coming s-storm. I’ve also heard that holding coins in the current currency (pennies, nickles, dimes and quarters) is smart because when the dollar bills are devalued 10:1 or 100:1, the coins are generally left alone, so an old dime has a dime’s value in the new currency.
Yup. Honestly, I’m shocked that it lasted this long.
Tricky Dick took the money off of the gold standard and opened us up to China.
The globalists ordered it no doubt.
Regarding the no amendment is absolute comment from Comrade Chairman Xhou Bai Den (CCP/CPUSA) does that include the 16th amendment?
UBI/EBT economy will be mandatory after the long march burn it all down by any means necessary fundamental transformation.
The Trotsky/Alinsky comrades shouldn’t get too happy fun ball spiking in the end game zone as it couldn’t have been done without a fifth column of traitors.
Sadly a large portion of the unity (socialist misery) collective are happy with their stimmy check crumbs and they do go very far at the I’d buy that for a dollar store plus housing and cost of living are less in Red State.
Gas has come down a little bit but the main summer driving season is only a few weeks away and the good old refinery changed the formula scam.
All scams work all of the time in a Potemkin village society of world shopping mall comrade consumers.
Yup – amazing the number of people that can be bought with a stimulus check . . . .
I’m hoping we can repeal the 16th, 17th, and 19th Amendments any day now.
We’d be a republic again in four years.
One trillion seconds is about 32 years, so if you started counting now, one number per second, you would be done sometime in 2053. But we have 20 trillion or so in debt so your children, grandchildren, great grandchildren, etc would have to take over the counting from you when you died. They would be done counting, assuming no more debt, in 2640.
As far as paying it off, I still think it could be done but not politically. A 10% across the board cut to all departments as was done by the Republicans working with PBO. Eliminate pointless and un-Constitutional programs. Gradually raise the retirement age for SS to 70 (or higher). Means test SS. Reform health care to encourage private innovation (what the R should have done back before PBO and the Ds enacted Obamacare) which would reduce long term public costs.
Unfortunately there is no political advantage to doing any of that. You can’t get people to vote for you by promising that maybe, ten years hence, there will be less debt, assuming that all the other politicians do the same thing and that all future politicians continue what you’ve started. The public purse is set up to encourage small and vocal interest groups to get their spending, while large and diverse taxpayers pay little attention because there are so many of the small programs. IIRC the phrase is something along the lines of “concentrated benefits and diffused costs”. We each pay a few dollars for little benefit, not worth complaining over, while the beneficiaries get huge windfalls, worth lobbying for.
You are 100% correct.
And no one will try to bail out the Titanic . . . .