Debt train

During the past year, the United States passed an important fiscal milestone that went largely unnoticed by the media. The United States now has a debt to GDP ratio of over 100%. That means that the sum off all goods and services produced in the United States in a year is not enough to pay off our debt. As of today, the debt stands at 105% of GDP. Here is the chart for the last 50 years:

Why is this significant? Greece has a debt that is 150% of GDP. The only time in US history when the debt was higher was at the end of World War II. Of course, once the war was over, we stopped spending and managed to pay down the debt. That was also before the US was taken off the gold standard in 1972, which allowed the government to create money out of thin air, and spend like, well, like they could print their way out of debt.

Look at the spending versus median household income income:

 
Historically, countries that exceed 90% GDP to debt cannot experience economic growth. It seems as if the US is past the tipping point. From here on out, the problems will escalate. Here is a campaign ad from the presidential campaign of 1992.

 

The good 'ol days, when the debt was less than what the government spends in a single year.