Mogambo on debt

Imagine my surprise when I find it is Bill Buckler calling me! And he tells me that my wife says that I would love it, just love it, if he would call me up and finish talking about the increase in debt. I look at the doctor. I think about what he said. I look at the phone. And then I say to Bill, “Sure! I’d love to hear about it!” And so he goes on to say, “Since the beginning of 1998, total US borrowings have climbed from about 255% of US GDP to 302%!”

302% of GDP! My puny little brain is kicked into action, as I think to myself “This is a new record!” Amazingly, I think I know why he ended the sentence with an exclamation point! And look! I’m doing it, too!

And since there must be some reason why those exclamation points are suddenly everywhere, I will remark that this is higher than the 260% of GDP recorded at the height of the market in 1929, and we all know how well THAT turned out!

It’s probably worth pointing out that cumulative US mortgage debt is now $9.618 trillion, which represents 99.298 percent of cumulative US personal income, at $9.686 trillion. I don’t know if the banks can manage to push this number up beyond 100 percent, but considering that the government is deeply underwater itself, it’s pretty clear that the nation is essentially bankrupt.

“But we owe it to ourselves!” some might protest. Except that we don’t. We owe it to China, Japan, and the private bank that is the Federal Reserve. The question is this: who is worse off when the debt gets can no longer be sustained by continued borrowing or quiet inflation, the foreign investors, the bank or the indebted public?

It’s hard to disagree with Buckler’s conclusion:

As I am too busy wailing and cramming boxes of ammunition into a backpack to continue right now, I will leave it to the clever Mr. Buckley to come up with a simile to beautifully sum it all up. Rising to the challenge, he writes, “There is no ‘solution’ to this dilemma, just as there is no ‘solution’ for a man who finds himself in a barrel on the lip of Niagara Falls.”

Enjoy the silence….