The Albatross of Debt: The Stock Market’s $67 Trillion
Nightmare, Part 1
The comments above & below is an edited and abridged synopsis of an article by David Stockman
In June 1970, the US federal debt held by the public was $275 billion. While that number wasn’t small, it had taken 188 years to accumulate—Uncle Sam had borrowed an average of $28,000 per week during the 9,776 weeks since Washington was sworn in as the nation’s first president.
Today, the US Treasury is selling $258 billion of government debt. Uncle Sam’s scheduled debt emission is nearly equal to the cumulative borrowing during the nation’s first 188 years and its first 37 presidents!
And there has been some considerable inflation since June 1970, not least because 13 months later Richard Nixon pulled the plug on Bretton Woods and the dollar’s anchor to a fixed weight of gold.
The financial discipline of gold-backed money during that interval would have triggered a recession and a lot of inconvenience for Nixon’s 1972 reelection prospects. As it happened, the American economy got inflation and destructive financialization over the next half century instead.
Accordingly, the price level today is 5 times higher as measured by the GDP deflator. So in today’s dollars of purchasing power, the 1970 debt figure would be about $1.2 trillion.
The US government’s current budget plan is to borrow as much money in apples-to-apples dollars during the year ahead as the first 37 presidents of the United States did.
The US has a monumental debt problem, and it is definitely not priced in. Stockman explains how that came to be, and why the current state of affairs is approaching its sell-by date.