{"id":425714,"date":"2010-03-13T15:59:00","date_gmt":"2010-03-13T19:59:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/henry-blodget-a-quick-reminder-heres-the-real-problem-2010-3"},"modified":"2010-03-13T15:59:00","modified_gmt":"2010-03-13T19:59:00","slug":"a-quick-reminder-heres-the-real-problem","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/425714","title":{"rendered":"A Quick Reminder: Here&#8217;s The Real Problem"},"content":{"rendered":"<p>Here&#8217;s one of the only economic charts that really matters: Total U.S. debt to GDP (from <a href=\"http:\/\/www.businessinsider.com\/john-mauldin-the-implications-of-velocity-2010-3\">John Mauldin<\/a>).<\/p>\n<p>This chart shows the trend from the end of the Civil War until now.&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/static.businessinsider.com\/image\/4b9bee5f7f8b9a2f74bb0000-609-371\/us-debt-to-gdp.jpg\" border=\"0\" alt=\"US Debt To GDP\" width=\"609\" height=\"371\" \/><\/p>\n<p>Note two things:<\/p>\n<ul>\n<li>There may be a general upward trend, but there are two clear aberrations: One in the 1920s and early 1930s, and one now.<\/li>\n<li>The aberration now is vastly higher than the one in the 1920s and early 1930s, which preceded the Great Depression.<\/li>\n<\/ul>\n<p>Unless &#8220;it&#8217;s different this time&#8221; (unlikely), the second aberration is going to end up the way the first one did&#8211;by returning to the mean.<\/p>\n<p>How will it return to the mean?<\/p>\n<p>One of two ways.&nbsp;<\/p>\n<p>Either we&#8217;ll have hyper-inflation with relatively little new borrowing, which will rapidly increase the size of GDP while holding the debt load steady.&nbsp; OR we&#8217;ll have gradual growth of GDP combined with a gradual reduction in debt.<\/p>\n<p>Neither will be a particularly happy outcome, though the level of unhappiness in each scenario will vary depending on your circumstances.&nbsp;<\/p>\n<p>If you have a job and owe a boatload of money, root for hyperinflation: It will make your salary go up fast (in nominal dollars) while your debt load stays the same.<\/p>\n<p>If you&#8217;ve saved a bunch of money, root for slow growth of GDP and gradual debt deduction: This will preserve the value of your hard-earned savings.<\/p>\n<p>In either scenario, though, don&#8217;t expect a strong recovery of REAL GDP (inflation adjusted).&nbsp; What has fueled the rapid GDP growth of the past 25 years has been the borrowing binge that began in the early 1980s (it&#8217;s easy to spend and produce more when you borrow more).&nbsp; It&#8217;s unlikely that debt-to-GDP can increase forever, especially from this level.&nbsp; So that particularly GDP driver is going away.<\/p>\n<p>Unless it&#8217;s different this time.&nbsp; (Pray hard.)<\/p>\n<p><a href=\"http:\/\/www.businessinsider.com\/henry-blodget-a-quick-reminder-heres-the-real-problem-2010-3#comments\">Join the conversation about this story &#187;<\/a><\/p>\n<p><b>See Also:<\/b><\/p>\n<ul>\n<li><a href=\"http:\/\/www.businessinsider.com\/john-mauldin-the-implications-of-velocity-2010-3\">The Implications Of Velocity <\/a><\/li>\n<li><a href=\"http:\/\/www.businessinsider.com\/we-are-so-screwed-2010-1\">We Are So Screwed<\/a><\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/TheMoneyGame\/~4\/cYm5lRbcKCU\" height=\"1\" width=\"1\"\/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here&#8217;s one of the only economic charts that really matters: Total U.S. debt to GDP (from John Mauldin). This chart shows the trend from the end of the Civil War until now.&nbsp; Note two things: There may be a general upward trend, but there are two clear aberrations: One in the 1920s and early 1930s, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-425714","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/425714","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=425714"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/425714\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=425714"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=425714"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=425714"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}