Guest post from John Wilder at Wilder Wealthy Wise.
“If the rule you followed brought you to this, of what use was the rule?” – No Country For Old Men
When I went to Ireland I met some shy people, which surprised me. No one expects the Irish inhibition.
I had noticed it some time ago a strange mathematical relationship – the National Debt (sort of) doubles about every eight years. Is it an exact mathematical relationship? Nope. It varies a bit based on which eight years that you pick. But the relationship is simple – the national debt is growing faster than yeast in AOC’s armpits, at about 9% per year.
It wasn’t always like that.
I also looked at the national debt between World War II and 1970 or so. During that time period, the national debt was as flat as Joe Biden’s brain activity scan. Hmm, whatever could have happened around 1970?
You’ll be happy to know that my search for “Richard Nixon bikini” came up empty.
The reason for most of our problems is that understanding the idea of exponential growth is difficult. Our minds are (mostly) made for understanding linear things, or things that happen slowly. No one really expects that, no matter how badly they eat, that they’d double in weight overnight, or even over the course of a month or year.
Yet, a lot of natural processes do follow exponentials, at least for a limited amount of time. Take a baby. Please. I really have no use for them anymore. Even the thought of a baby makes me exhausted.
Babies start with one cell, then two, then four, and then eight, and so on. The initial growth of a child is exponential. Thankfully, that levels off, or else there would be no way that I’d be able to afford to feed Pugsley. If that exponential growth rate had continued, he’d be the size of the Solar System and need to eat cheeseburgers the size of Saturn just to make it to lunch.
Want fries with that Saturn?
No. He’ll settle for the rings.
So, exponentials can’t continue on forever. Math proves that. If exponentials could continue forever, by the year 2032, the only blog left on the Internet would be this one, and everyone on Earth would have to spend 18 hours a day reading it.
Ahhh, I can dream.
But our national debt is following that trend. Here’s a graph I put together:
Actual conversation with The Mrs.: I said, “I promise I can make this [economic idea] interesting.” The Mrs. responded, “Bikini graphs aren’t interesting to me.”
One of the lines is the actual national debt. It’s the red one. I just picked actual national debt data every eight years going into the past from today. The other one? I extrapolated back into the past from today: I just assumed that the national debt doubled every eight years.
How accurate was I?
In 1973 the actual national debt was $466 billion. My backwards approximation? $438 billion. Close enough that a snake that was 3.14 feet long could be called a πthon.
Sure, in the middle, sometimes I was higher, sometimes lower. But in general, I stuck the landing.
That means that in 2029 (if the United States is made of math) that we’ll be seeing a national debt of $56 trillion. And in 2037? $112 trillion. Jeff Bezos sometimes works a whole year and doesn’t make that much money.
I heard he didn’t want to be CEO or president, just Prime® minister.
Does it make sense to anyone that the world will still keep accepting a doubling of debt every eight years and still keep sending us oil and steel and copper for the dollars that we print? Sure, it worked for a long time. Having an unmatched military and all the nukes gives a lot of room to dictate terms.
But how many people remember back to 1980 when the winner of the Cold War was in doubt? The United States couldn’t print all of the dollars it wanted to without inflation. The rule that the dollar followed changed, though, when the Soviet Union decided that it wanted to retire and spend the rest of eternity in Boca Raton in a retirement community gumming applesauce.
After that, the United States printing press could go wild. Inflation? Well, why bother with that? The United States could print all the money it wanted and ship it overseas. What else were people going to want? Rubles? Marks? Rupees?
No. The way that international trade was done was with the dollar. We could print them up, and the world would soak them up and then the inflation could be exported all over the world, since the demand for dollars was now the entire world. The United States could, in essence, tax the entire world to allow them to use the good old dollar.
I heard my chiropractor owes back taxes.
It was a good ride. Need oil? Print a few billion and send it to the Saudis. Need copper? Print a few million and send it to Chile. Need cars? Print a few billion and send it to Japan.
There are good things that happen when you win it all. You get a trophy. You get a party. You get oil and copper and cars. But if you have too much fun at the party?
There’s always the hangover.
Exponential growth can continue, and it can continue for quite a long time. Without it, life itself wouldn’t be possible. But life proves, again and again, that there is only so far that growth can go.
But, hey, it’s different this time, right? The national debt can go on forever, right?
Hmmm. I’d say the debt can continue as long as the loans are never called. Or maybe it depends on to whom they are owed….and their ability to collect. Could we just say NO?
I hate to fact check a meme, but the punchline is “Ireland’s capital is always Dublin”
It’s all fun and games until the global MMT musical chairs music stops.
No petrodollar and no reserve currency status? Things would be getting quite sporty in the USSA with those rearrangements.
We’re never going to pay our IOUs, period. For those of you youngsters, I bought a commercial property at age 26 in early 1979. Prime+2, around 8-9%. By ’81, the note was 18%+, monthly went from $900 to $1900 or so. Negative cash flow of $1100/mo, which equals $6K today. It almost bankrupted me. My older cousin bailed me out.
The USA cannot abide the high interest rates necessary to curb inflation. It would trash the RE market.
I bailed on a property in late 1979 just before, modest gain and no pain. Did not go back into the real estate market until 1986.
as usual john,a very good article–
hard not to be pessimistic-
Funny how 2032 lines up with another pie guy’s forecasts.
armstrong economics?
It’s all fun and games until a real alternative to the US dollar is instituted.
If things continue as they are all it will take is one short, painful war started and lost by the EO hires running the dementia-ridden Biden Administration. One, big massive fuckup of international proportions that turns the petro dollar into toast along with the credit worthiness of the US government to trash.
Central banks are still buying and hoarding gold while suppressing the prices on the spot market. The Arabs fought for gold when Lawrence was around and things haven’t changed since then.
As a little kid seeing “Lawrence” when it came out in’62 or whenever, I recall being horrified at the Arabs, led by Anthony Quinn’s character, throwing away piles of paper currency while searching for all the “money” which they were promised in Aqaba, which to them meant GOLD!
I seriously encourage everyone to attempt to hold at least 20% of their financial assets in Gold and Silver. Always remembering that if you can’t stand in front of it with a gun, it isn’t yours.
At the end of Obama’s 8 years, I was concerned about where the debt level would be in the next 8 years of Hillary. Thank goodness she lost, but I came up with the same basic math. Regardless of president and party, the debt doubled about every 8 years as shown. My estimate was 32 million by end of 2024. Now I’m concerned we will get to 32M much sooner. Graphically, after doubling again, the graph will be vertical – straight up.
Bwahahahaha! Is this guy FRIGGEN AWESOME, or what!
The best graphs on the internet!
Exponential?!
Say, anyone remember when Covid deaths were going to grow exponentially? Doubling every couple of weeks?