The Devastating Global Debt Trend

It’s no secret that our Federal debt has more than doubled since the onset of the last recession in late 2007. It’s gone from $10.1 trillion to $23.6 trillion. That’s a 134% increase in just 11 years!

And now Trump’s business tax cuts are pushing that debt higher still. It’s now at 114% of GDP. It was only 69% of GDP in late 2007.

In fact, government debt has been roughly doubling every eight years or two administrations. It was $11.7 trillion at the end of the Bush era (early 2009); $21.4 trillion at the end of the Obama era (early 2017).

At a similar, near-doubling rate, it could be as high as $39 trillion at the beginning of 2025, when Trump would be out of office if he serves two terms, which I think is unlikely.

Doesn’t seem possible, does it? $39 trillion!?

But when you consider the impacts of the large corporate tax cuts in the deep depression I expect we’ll see between 2020 and 2023/2024, that dizzying figure doesn’t seem all that impossible after all.

What if deficits start running $2.0 trillion to $2.5 trillion a year?

And there’s a lot of off-balance sheet debt that comes in. Debt has always gone up faster than the cumulative deficits. Consumer debt has only come back to slight new highs at $14.2 trillion and the financial sector debt has declined $2.1 trillion since its peak in 2008.

Corporate debt has gone up the fastest – 49% – in the Fed-engineered, low-rate environment. It’s gone from $10.1 trillion, or 68% of GDP, to $15 trillion, or 73% GDP. $7.35 trillion of that is loans. $7.65 trillion is corporate bonds.

But the big factor has been the corporate bonds stimulated by massive QE and lower than market rates…

Up more than government debt…

Most people aren’t aware that these have gone up more than government debt. They’ve gone from $2.95 trillion at the beginning of 2008 to $7.65 trillion in late 2018, heading towards $8.0 trillion-plus. That’s 159% as of now, greater than the growth of the Federal debt.

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