US Federal Debt

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Another great email just came in, asking for a chart of the US Federal Debt.  I'm not sure what the US Debt numbers really mean… the data are so manipulated and massaged, and they leave out so much (state and local government debt, unfunded liabilities, and on and on)… but here is a stab at it.
 
This chart uses US Federal Debt data from US Federal Debt United States 1900-2016 – Federal State Local Data.  The gold prices used for conversion are annual averages for 1900 to 2011, and for 2012 to 2016 they are estimates based on my Half-Life of the USD curve.

 
Over the last decade, the government has inflated away more than half of the peak federal debt.  It is now back to late 1960s levels; if we continue to halve the debt every decade, it could be back to 1930s levels by the 2030s.  Of course, by that time, gold will be over $45,000/oz, gas will be $120/gal, a first class stamp will cost $13 (if the USPS is still in business – not likely!), and a McDonald's Happy Meal will probably set you back $90.
 
I find it sort of refreshing to see that the debt is being reduced in real terms in spite of its phenomenal growth in nominal terms; but the economic implications of this "inflationary depression" are downright scary.  The mis-allocations of capital caused by these policies will be horrendous, resulting in dramatically lower standards of living for the average family.  I wonder if they can really keep it up for two more decades before people catch on to what's happening? We'll see!
 
Cheers,
 
Sir Charles
 

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Comments on US Federal Debt Leave a Comment

August 31, 2012

Very interesting — shocking, actually, to see that the present debt is below the levels carried from WW II through the early 70s. Our present "low debt" is quite consoling until we realize that Federal tax revenues have surely taken a similar nosedive in terms of gold.

September 6, 2012

Dave @ 7:35 pm #

I predict that the debt will drop almost to zero and remain there for several decades. That solves the misallocation problem, because there will be no more profits for those who buy slum houses and rent them to Section 8 tenants, sell overpriced junk food in all-EBT neighborhoods, or lend tuition money to Womyn's Studies majors. Capital will have to find investments that generate real value instead.

September 23, 2012

Corey @ 7:18 am #

@Dave:
I surely hope you are being facetious, because that's a farfetched claim. (Again, pardon me for being so obtuse if you're kidding)
And if you truly think the government should have the kind of authority to tell a store they can't sell junk food at a price of their choosing just because they are in a lower-income section of town then you're just asking for the most intrusive nanny state in the world.
[I do agree with your statement on Women's Studies majors, Sandra Fluke is proof that it's a waste]

I'm crossing my fingers that you're just making a funny…

Corey @ 7:48 am #

To the author of this article, current US Unfunded Liabilites total $120,716,000,000,000, or roughly 8 times our current GDP. But our Gross Debt-to-GDP is at ~104.5%, so why does our government keep defecit spending? And I could maybe understand how they could justify it if the $16 trillion in Federal Debt was all we had to worry about, but with unfunded liabilities amounting to such a vast (and growing) number, how can they sleep at night?
College Student: "These Republicans are so mean, trying to take away Social Security, Medicare, and Income Securities. GOBAMA! ObamaCare is the greatest achievement of any president in history."
Critical Thinker: "Social Security, Medicare, Income Securities, and Obamacare are in the top 6 of the largest Federal Budget Items. The government has yet to come up with a plan to pay for the $120,000,000,000,000 in social welfare programs that we decided we could afford"

You can't sign leases for 10 houses for your friends because "they deserve" it if you can only pay for a month.

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