You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. Is This How High Will The National Debt Go By 2035?The numbers are pretty staggering... if things really break...
Dear Fellow Traveler: Yesterday, I talked about the Congressional Budget Office’s latest “look at that squirrel” moment. The group in charge of forecasting (not that well) said that tariffs are driving inflation higher. (But ignored the real driver… all the damn money…) I got a little curious yesterday… and I looked into their track record. In 2015, the U.S. national debt hit $18.8 trillion. in Mid-December. The CBO predicted… get this… that over the next 10 years, the U.S. debt figure would reach… $27.3 trillion… Of that figure, they stated that debt held by the public would reach $21.6 trillion, equivalent to 78.7% of GDP. Now, they were only $10 trillion off… We’re at $37 trillion today… The total debt held by the public to GDP is approximately 100% at $27 trillion. If you were a home builder… and you built roofs that were that mathematically off? You’d be in jail… On to 2035We just keep printing money. We don’t stop. And it’s not like the CBO admits we’re gonna stop. The current projection calls for the U.S. debt to reach $59.2 trillion in 2035, which is approximately 134% of the country's GDP. But here’s the thing… If they were that off last time? What could we be looking at in 10 years? Scenarios, Coming Through Your StereoThe current CBO number assumes “current law.” That means no major new spending programs, no significant tax cuts, steady economic growth, and interest rates stabilizing. Okay… so that’s their scenario where gross federal debt reaches about $59.2 trillion (or about 135% of GDP). And debt held by the public: ≈ $52.1T (≈ 118% of GDP) Now, what if you just do what we’re doing right now… Where are you adding $1 trillion in debt every four to five months? That’s about $2.4 trillion. Here’s the thing… it has to carry forward a pace - and that’s about 7% to 8% a year. If we don’t slow it down, and we add $1 trillion every 57 days on average (adding $ 6.4 trillion per year), and deal with the surge of challenges around Social Security and Medicare around 2032, then total debt could easily breach $75 trillion by 2035. But what if you shift the model just a little bit? What if you model debt growth as an exponential function? This means the bigger the debt, the faster it grows (because deficits and interest payments grow with the size of the debt). If you tighten the pace due to the aggressive moves higher and the inability to get rates under control in time (meaning the bond vigilantes return), and we start adding $1 trillion a month on average, what would happen? Then we’re over $100 trillion by 2035. To be honest… it all comes down to the inputs and outputs of your model… But it also comes down to reality… which comes fast… People will look at me and say - “That can’t happen.” Yeah? No one thought we’d be at $30 trillion a few years ago. And here we are… Don’t Listen to ThemThe reality? The forecasters are terrible at this… The Fed? Got inflation wrong to the downside and upside for 17 years… The CBO might as well cut the head off a chicken and let it run around while they play banjo… And anyone else who tells you that something is going to happen - well… be skeptical. It’s best to react, rather than buy into forecasting, and instead pay attention to what is right in front of you in the markets. Momentum, liquidity, policy, and insider buying… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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