The Only Thing Americans Should Care About

April 9, 2016by Hoy Grimm0

Debt is a cruel master. In three years all Americans will learn how cruel. 

This year the Federal budget deficit will exceed half a trillion dollars. This deficit will add to the nations total debt which is nearing 20 trillion dollars today. US GDP is only 19 trillion so American citizens owe more than our economy generates each year. By 2019, Federal entitlements, interest on the debt and defense spending will absorb every penny of revenue that the government collects from US taxpayers. 

In 2019, growth in Medicare and Social Security spending alone will push the annual spending deficit from 500 billion to 750 billion dollars. If the government wants to spend money on anything other than entitlements, debt and defense in 2019 they will be forced to borrow the money. 

Created by The Concord Coalition

According the the St Louis Fed, “Since August 2008 the Fed has tripled the monetary base from about $0.8 trillion to $2.7 trillion.” This emergency expansion of dollars was arguably a temporary increase to counteract the recession. This “temporary” increase will become permanent and look like a drop in the bucket after 2019 when the Fed has no choice but to further monetize the debt. This looming debt disaster will be a crisis for the history books. Courageous political leadership may minimize the problem but it cant be avoided.

Looking at the immediate picture makes matters worse. The Atlanta Branch of the Federal Reserve says that our current economic output has almost ground to a standstill.

Root Mean Square Forecast Error of GDP Growth (SAAR) for GDPNow Model

Even the Feds economic measures acknowledge a slowdown is building. Imagine for a minute how bad the debt problem will get if we face an economic crisis or recession and the Fed accelerates the debt and monetization timetable. What else will matter at that point? Do you know how to position your investments to weather this? Contact us if you need help.

Hoy Grimm

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