John Mauldin Thoughts from the Frontline June 10, 202 View PDF
- Predicting the Future with the CBO,
- Losing Balance,
- Less than Believable
- Scary Exit,
- Where We Go from Here,
Complaining about federal debt is a time-honored American tradition. Remember Ross Perot and his hockey-stick charts? Then there was Harry Figgie’s 1992 best-selling book, Bankruptcy 1995. It was quite a sensation at the time.
Not only did the US government not go bankrupt in 1995, but a few years later it achieved the unimaginable feat of a balanced budget. The 2001 recession, some unwise tax and especially spending choices plus a couple of wars ended that happy trend. The debt kept rising and is still doing so today.
Perot and Figgie weren’t wrong; they were early. Imposing debt on future generations is essentially a tax on future growth and prosperity. We are shifting consumption forward in time, which will mean lower consumption later. And with inflation, consumption at higher prices which means fewer goods and services per dollar spent as compared to earlier years, unless wages and income keep up with costs and inflation, which they don’t.
Pandemic-driven fiscal and monetary policies have changed the debt situation considerably, and for the worse. At some point this becomes unsustainable, and we will have a painful reckoning, which I call the Great Reset.
For the last six years, I have done occasional analyses of the debt situation. I gave you an update on the numbers back in September 2020. Today we’ll review them again, with the benefit of the Congressional Budget Office’s latest forecast.
Before we start, I recommend you reread that 2020 letter, or at least skim through it. You may want to open it in another browser tab. Below I’ll show you refreshed versions of that same data and you will want to look back at how it’s changed.
A lot has happened since then............A Trillion Here, a Trillion There…
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