Tom Woods on the U.S. government debt crisis

By now you probably know my opinion on all this: the debt problem is not going to be solved.  Almost nobody cares about it, and even people who profess to care are not nearly prepared to take the kinds of steps that need to be taken. 

It will eventually resolve itself in the form of a severe crisis.  Until then, nothing is going to be done. 

I am not normally a pessimist, as I think is obvious enough from my tone on the Tom Woods Show, but on this I know I'm right.

That doesn't make politics entirely useless: there are issues other than debt, and there's been positive movement on a handful of those.  But the spending problem will not be brought under control before the crisis.  That should be obvious.

~ Tom Woods, June 3, 2025

Ray Dalio on the U.S. debt problem

Ray Dalio: I think the first thing is the debt issue.  We have a very severe supply-demand problem so that they have to sell a quantity of debt that the world is not going to want to buy.  And that's a set of circumstances that is imminent.  That's of paramount importance.  The deficit must go from what will be projected now to be about 7.2% of GDP to 3% of GDP, otherwise there will be a supply-demand problem.  That's a big deal.  You are going to see shocking developments in terms of how that's going to be dealt with, things that may not have happened in our lifetimes, but things that have happened throughout history...

Sara Eisen: What do you mean, austerity?

Ray Dalio: There may be restructurings of debt.  There may be exerting pressures on countries who own the debt, to buy the debt, political pressures on countries.  There may be cutting the payments to some creditor countries for political reasons and so on.  So there may be monetizations of debt.  If you look at history and see the repeating of "What do countries do when they're in this situation?"  There are lessons from history that repeat.  It's correct

~ Ray Dalio, "Ray Dalio and Salesforce’s Benioff on AI, trade wars and new world order," CNBC International Live, 12:00 mark, March 14, 2025

Fitch on downgrading long-term U.S. government debt from AAA to AA+

The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to 'AA' and 'AAA' rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions. 

Erosion of Governance: In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025. The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management. 

[...]

Tighter credit conditions, weakening business investment, and a slowdown in consumption will push the U.S. economy into a mild recession in 4Q23 and 1Q24, according to Fitch projections. The agency sees U.S. annual real GDP growth slowing to 1.2% this year from 2.1% in 2022 and overall growth of just 0.5% in 2024.

~ Fitch Ratings, "Fitch Downgrades the United States' Long-Term Ratings to 'AA+' from 'AAA'; Outlook Stable," August 1, 2023

Reuters: "U.S. household debt jumped to a record $16.90 trillion"

U.S. household debt jumped to a record $16.90 trillion from October through December last year, the largest quarterly increase in 20 years, as mortgage and credit card balances surged amid high inflation and rising interest rates, a Federal Reserve report showed on Thursday. 

Household debt, which rose by $394 billion last quarter, is now $2.75 trillion higher than just before the COVID-19 pandemic began while the increase in credit card balances last December from one year prior was the largest since records began in 1999, the New York Fed's quarterly household debt report also said.

~ Reuters, "U.S. household debt jumps to $16.90 trillion," February 16, 2023

Howard Marks: Do the debt and deficit still matter?

Q: Do you think that the debt and deficit still matter?

A: I find it hard to believe they don't.  It's like saying that we have a credit card - the United States has a credit card - with an infinite balance capability and you never have to pay it off.  It sounds too good to be true.  And if someone offered me that credit card, I would be looking for the catch.

~ Howard Marks, "Oaktree's Marks Says This Is the Time to Try to Be Resourceful," 8:45 mark, Bloomberg TV, April 5, 2021

Egon von Greyerz on the global debt bubble

As I have stated many times, it is absolutely guaranteed that the global sand castle resting on worthless debt will crumble. Timing is always tricky and central banks have performed the most outstanding act of wizardry since 2006.

By increasing global debt from $125t in 2006 to $270t today, they have drowned the world in so much worthless money that virtually nobody has understood that it is all fake money and fake wealth that has been created.

~ Egon von Greyerz, "Financial System - A Hubristic Swindle," Gold Switzerland, July 24, 2020

Tavi Costa on the importance of the Treasury bond market

I think the Treasury [bond] market is the most important market.  The U.S. and the whole world can not sustain these debt levels with higher interest rates...  When that happens, there's no bailout anymore.  I think that's the most important message here.

~ Tavi Costa, Interview on Real Investment Show with Lance Roberts Show, 18:45 mark

Irving Fisher on main causes of boom and bust: over-indebtedness and deflation

19. I venture the opinion, subject to future evidence, that, in the great booms and depressions, each of the above-named factors has played a subordinate role as compared with two dominant factors, namely over-indebtedness to start with and deflation following soon after; also that where any of the other factors do become conspicuous, they are often merely effects or symptoms of these two. In short, the big bad actors are debt disturbances and price level disturbances.

While quite ready to change my opinion, I have, at present, a strong conviction that these two economic maladies, the debt disease and the price-level disease (or dollar disease), are, in the great booms and depressions, more important causes than all others put together.

Irving Fisher on debt, deflation and the business cycle

29. When over-indebtedness stands alone, that is, does not lead to a fall of prices, in other words, when its tendency to do so is counteracted by inflationary forces (whether by accident or design), the resulting "cycle" will be far milder and far more regular.

30. Likewise, when a deflation occurs from other than debt causes and without any great volume of debt, the resulting evils are much less. It is the combination of both—the debt disease coming first, then precipitating the dollar disease—which works the greatest havoc.

~ Irving Fisher, "The Debt-Deflation Theory of Great Depressions," September 1933

Kevin Duffy on the legacy of the 2008 financial bailouts

In his recent interview in Barron's (“Hank Paulson Says the Financial Crisis Could Have Been 'Much Worse’,” September 17, 2018), former Treasury Secretary Henry Paulson claimed, “The timing, cause, and severity of the next financial crisis are impossible to predict.  Of course someone will get it right and will be credited with doing so, but he or she won’t spot the next one.”  Having warned about the late ‘80s Japan bubble, late ’90s tech bubble and mid ‘00s credit bubble (“For Whom Do the Bells Toll?,” June 18, 2007), I’ll take that as a challenge.  The root cause is always artificially low rates set by central banks.  Since this period of low rates was longer (7 years vs. 2 ½ from 2002-04), deeper and more global, the next crisis will be more widespread and prolonged.  As for timing, it’s anyone’s guess but with rising rates, narrowing leadership (just 5 of 35 country stock markets up on the year), investor euphoria (record low cash levels at Schwab), and wild speculation (first cryptocurrencies, now cannabis stocks), the lights are flashing red.

There are plenty of areas of fragility.  Within the U.S., since the end of 2008 student loan debt is up 127%, auto loan debt 57%, corporate debt 76%, public debt 98%.  Margin debt has more than tripled.  Outside the U.S., Canada and Australia are experiencing housing bubbles while emerging market debt has gone from 110% of GDP to 194% according to the Bank for International Settlements.  Other potential landmines: Chinese corporate debt has increased by 64% of GDP, Italian government debt by 40% of GDP, and Japanese government debt by 61% of GDP.

Unlike the tech and credit bubbles, which were sector-specific, the bubble today is in “everything.”  This is the true legacy of Paulson, Geithner, Bernanke, Frank & Co.

~ Kevin Duffy, September 21, 2018

Scott Black on U.S. national debt

The U.S. has $19.2 trillion of debt, equal to 105% of GDP, not including entitlement programs. With few exceptions, no one seems to care. This is the highest debt-to-GDP ratio since the Truman administration, but President Truman inherited high debt levels after the U.S. fought two world wars. If interest rates go up by two percentage points, that is another $380 billion a year in interest payments, which the country can’t afford.

~ Scott Black, "Barron’s 2016 Midyear Roundtable: 24 Investment Ideas," Barron's, June 12, 2016

Morgan Stanley strategist Adam Parker: "I don't think 15.5 times earnings for the S&P 500 is in bubble territory"

I think we all romanticize that we're going to sniff out the bubble the day before everyone else and get rich and famous for it, but at the end of the day I don't think 15.5 times earnings for the S&P 500 is in bubble territory. 

I think that there's been some real changes to the market because of the quantitative easing.  And the number one important thing is that basically companies have all pushed out their financial obligations for 2 or 3 years so the balance sheets are in great shape and the risk of bankruptcy is very low.  That's been a big change over the last few years.

If we're about to head into a bubble, then you'll want to be long for a while.  I think everyone wants to call in and talk about it. If you want to call the top of the cycle, two things would be in place. One is hubris. And the other is debt. Hubris meaning some form of management arrogance gone awry. ... I don't think we're very frothy on that point.

~ Adam Parker, Morgan Stanley market strategist, as appeared on CNBC's Squawk on the Street, March 11, 2014

John Adams on debt

There are two ways to conquer and enslave a country. One is by the sword. The other is by debt.

~ John Adams (1735-1826)

John Adams
1797-1801

Nassim Taleb on responses to the credit crisis and the buildup of public debt

We are now in a situation in which a patient discovered he had cancer a year and a half ago and all we've been giving him is painkillers. The tumor is worse today, and it's getting worse because we're transforming private debt into public debt, and public debt is not manageable.

~ Nassim Taleb, NYU professor and author of The Black Swan, "Interview by Tom Keene," Bloomberg Markets, August 2010

David Galland on the debt crisis

[T]his [debt] crisis is not going to go quietly to its dirt nap. Instead, the end will almost certainly be akin to a Viking funeral with the political equivalent of rape followed by a raging fire on a sinking ship. Riots in the street and a serious degradation in the quality of life of the majority of the citizenry are all but inevitable, followed by a sea change in the political landscape.

~ David Galland, managing editor of Casey Research, "Why Won't You Die, Damn it!,"June 22, 2010

Bill Bonner on debt

For much of history, failing to repay debt was regarded as not merely a breach of contract, but a crime. People who failed to repay their debts in timely fashion were thought to have stolen from their lenders; they were put in prison. In the Middle Ages even a dead debtor's children could be sent to prison.

Now, bankruptcy laws allow individuals and businesses to go to rehab. Then, they can stiff creditors again. Neither sin nor crime, debt is now just a cost of doing business.

~ Bill Bonner, "Paying Off Debt Is Like Dying…," LewRockwell.com, October 21, 2009

Professor Steven Keen debating Peter Schiff about the decoupling theory

I wish Peter [Schiff] were right that the rest of the world had its act in order. The rest of the OECD doesn't. It isn't just America that been borrowing more money than it's been earning - the whole of the OECD bar one country, which has France, has been having an increase in ratio of its debt to GDP for the last 30 years. So we're all in the borrowing game. We've all made the mistake of confusing money generated by real production with money you can borrow from a bank. And that's kept on going for so long that it's reached the point now where that game is over. If you like, it's the old "greater fool" philosophy. You make money if you find a greater fool who borrows more money than you did to buy the same asset off you and you get away rich and they end up with even more.

~ Professor Steven Keen, "Schiff, Keen on dateline," News Kontent, September 12, 2008

Cicero on public debt

The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if Rome doesn't want to become bankrupt.

Cicero, 63 BC

Lew Rockwell on credit expansion and personal debt

The entire welfare-warfare empire is based on expanding credit, so it is threatened by the return to economic reality. One role for us as individuals, in addition to learning and speaking the truth about the regime and all its crimes, is to get out of debt, and certainly to avoid all new debt: mortgages, home equity loans, student loans, credit card, and even corporate. Credit is an important market institution distorted beyond all recognition by the Fed. Everyone's circumstances are different, but in general you bug the regime, and help yourself, by not borrowing in a central-banking crisis.

~ Lew Rockwell, "A Loan? No Thanks," LewRockwell.com Blog, August 9, 2008

Alexander Hamilton on public debt

A national debt, if it is not excessive, will be to us a national blessing.

~ Alexander Hamilton

Alexander Hamilton
1954-1968