Even Jerome Powell, the chair of the Federal Reserve, has acknowledged this unsettling truth: by definition, the growing gap between debt and GDP is unsustainable. As in, someday the entire system will break down if it is not first self-corrected by brave and noble leaders willing to speak truth to the populace.
Here’s the chart:
On the lower dotted line, you’re looking at US GDP, a measure of our collective economic growth and health. On the upper solid line, is total credit market debt (TCMDO in Fed geek), which has been compounding at more than twice the rate of GDP. This isn’t just federal debt, which is often the focal point of public concern, but a comprehensive look at all credit market debt. It’s a trajectory that can’t continue indefinitely without serious repercussions.
As the late Charlie Munger wisely said, “Show me the incentives and I’ll show you the outcome.” We’ve heavily incentivized the debt-laden path to growth, which has always had a built-in math problem, and now we’re starting to see the cracks in this foundation. Grant Williams takes us through his interpretation of all this as only he can.
On a deeper level, our collective leadership has revealed themselves to be an astonishing group of midwits, unable to even conceptualize what the problem is let alone proffer any solutions. Tune in to an incredible conversation about this and many other related subjects.
by wotthecurtains