WSJ: America Can’t Escape the Debt Vortex: Total obligations ... hit 370% of GDP

Author: Eamonn Sheridan | Category: News

The Wall Street Journal on 'credit bubbles':

  • Credit bubbles usually pop at some point and the consequences aren't pretty
  • The stock-market crash of 1929 followed a credit boom, and so did the crash of 2008
  • In both cases, Washington overreacted, producing a 10-year depression in the 1930s and a weak recovery after the 2009 recession
The piece goes on (this is a summary, link to the full piece below), bolding mine:
Lacy Hunt, an economist with Hoisington Investment, estimated at a recent conference held by Grant's Interest Rate Observer that debt of all kinds in the U.S. now totals more than $69 trillion. That's more than double the $30 trillion recorded by Fed statisticians as recently as 2000. If the Hunt figure is correct, then total debt is now about 370% of GDP, up from 294% in 2000.

The article concludes:
  • There isn't much the Fed can do about this except make it worse
  • Nor is there much that Mr. Trump can do except make it worse. But he seems intent on that-threatening trade wars against America's biggest trading partners. If the president blocks their ability to earn dollars, he diminishes their ability to bail us, and themselves, out of the global debt slough. The past decade of government and Fed profligacy is not his fault, but that still isn't an argument for recklessness. If this ends in tears, Mr. Trump will get the blame.

(ps. If you are just heading off to bed, sweet dreams!).