On The Imminent US Debt To GDP Parity

Tyler Durden's picture

One of the most recurring and troubling topics on Zero Hedge is the imminent US Debt to GDP parity: even as the US economy is starting to roll over from a temporary sugar high into a double dip, the hangover effect of $2.1 trillion in debt incurred since March 2009 will linger for a long, long time. Total US debt is currently just under $13.1 trillion, and is rising at a rate of about $150-200 billion per month, meaning that US GDP of about $14.4 trillion will soon hit parity with the Federal debt, likely in under one year. Luckily, this critical topic is starting to get far more greater prominence: Bloomberg's chart of the day focuses precisely on this issue. Garfield Reynolds and Wes Goodman note: "President Barack Obama is poised to
increase the U.S. debt to a level that exceeds the value of the
nation’s annual economic output,
a step toward what Bill Gross
called a “debt super cycle." We hope the president will finally address this untenable collision course during one of his daily TV appearances in the upcoming weeks, instead of ruminating on last week's terrific(ally bad) NFP report.

From Bloomberg:

The CHART OF THE DAY tracks U.S. gross domestic product and the government’s total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world’s largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.

“Over the long term, interest rates on government debt will likely have to rise to attract investors,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan’s third-largest publicly traded bank. “That will be a big burden on the government and the people.”

Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June outlook report that “the debt super cycle trend” suggests U.S. economic growth won’t be enough to support the borrowings “if real interest rates were ever to go up instead of down.”

Dan Fuss, who manages the Loomis Sayles Bond Fund, which beat 94 percent of competitors the past year, said last week that he sold all of his Treasury bonds because of prospects interest rates will rise as the U.S. borrows unprecedented amounts. Obama is borrowing record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s.

“The incremental borrower of funds in the U.S. capital markets is rapidly becoming the U.S. Treasury,” Boston-based Fuss said. “Do you really want to buy the debt of the biggest issuer?”

The answer to the latter is of course no, yet once a majority of the investing public realizes that this is the correct response, the Ponzi is over, and the days of the Wall Street-DC kleptocracy are numbered. However, just like a thought experiment which puts every rat in the world in the same corner with the knowledge that the only outcome is extinction leads to some amusing visuals, look for the approaching final Ponzi battle to be fierce. After all, at stake is nearly one quadrillion in imaginary shadow debt, also known to those on Wall Street as "wealth."


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DoChenRollingBearing's picture

It has always been my contention that government spending has been the single biggest problem here.

Yes, the FED, the Wall St. frauds, the bankers with FANNIE & FREDDIE are all to blame as well.

But, the Big Enchilada has been the overspending by those whom WE sent to Washington.

docj's picture

We get the government we deserve (and vote for) - and now we're getting it good and hard.

Currently Smoking Cannabis's picture

Nonsense.  We get to vote for the gangster in the red bandana or the gangster in the blue bandana.  That doesn't mean the people deserved to be ruled by gangsters.  But not voting is frowned upon.  So I suppose it's endorse a gangster or you have no right to bitch about the system, right?


What would a better, more deserving people do?  Violent revolt?  Or would they run for a local office, then work their way to the top, then change the system from within?  Haha...dream on.  Or just stay asleep.

akak's picture

While the Republicans and Democrats alternately switch roles every few years as "Good Cop/Bad Cop", we all know that in the end, in such a ploy BOTH are always "bad cops".  Endorsing the lesser of two evils is still condoning evil!  No matter which wing of the single Demopublican Pro-Establishment Party is in power, our freedoms and wealth continue to be ratcheted downward, and I am sick of it.

Most Americans refuse to accept or acknowledge the fact that our political system is one of the most closed and least free in the world today.  Any meaningful challengers to the status-quo, even within the two corrupt establishment parties (such as Republican Ron Paul in 2007/2008), are effectively shut out from making any significant challenges to the system.  And third parties?  We may as well be asking for a free vote in Stalinist Russia.

docj's picture

Absolutely, akak.  They both suck.  I mean, I'm a registered Republican (I guess that makes me part of the problem, right?) and nominally support the "red bandanna" morons because I think they suck nominally 5% less than the other guys - but we're still talking about a metric crapton of suck, savvy?

Such as been the case since (at least) the late-20's.  We are a society based entirely on the antithesis of the notion that there ain't no such thing as a free lunch.  So we keep voting for the criminals who will "do something" - which usually means screwing someone else so you can get something for nothing.

So, in that climate you get the sort of government we have now.  It's precisely what we deserve, frankly.  Why anyone expects we should get anything different is a total mystery to me an just reeks of the sort of pre-adolescent "can't we all just get along" mentality that is all so common in well, my pre-adolescents for example.

DoChenRollingBearing's picture

10-4 guys.  A sorry state that we as a people have gotten ourselves into.


A Betrayed Republican

SecretGoldfish's picture

yep.  formerly ex-republican, currently ex-democrat . . . which makes me DOUBLY to blame

dark pools of soros's picture

Rodney King nailed his 15 mins of infamy - forever putting a caption on the world's toils

DosZap's picture


Agreed, but I still think if the Sheeple would awaken( enough seem to be), and stop feeiling sorry for themselves...we ( 38 states) should have called a Con Con, a year ago........

We could have wiped this friggin slate clean, I mean the entire enchhilada............why NO group of citizens, have not neutered their Governors over this, and their legislatures is BEYOND me.

Congress would have to call it(no choice) ,and WE would get to select our own Delegates................NOT THEM.

Ignore Amos's picture

The Sheeple are stumpbroke.  They accept this is the natural state of affairs because they have been trained so.

"Nobody ever went broke underestimating the intelligence of the American public" - H.L. Mencken

docj's picture

We can change that any time we want.  But we're totally addicted to free lunches - even if they're poop sandwiches.

Or are you suggesting this is not precisely the government this electorate wants?

Edit: I owe you an answer for this, as it's a legit question...

What would a better, more deserving people do?

Stop demanding free stuff from Uncle Sugar would be a decent start.  Most of the rest would follow from that, methinks.

Currently Smoking Cannabis's picture

I agree that would be a decent start.

I would prefer to see people demand accountability of those 'above' them.  It seems to me we've come to accept that certain rules and laws should not apply to certain groups and organizations.  Instead we're resigned to, "That's just the way it is."  So we tolerate lying and stealing from our rulers while demanding ethics and morality from our peers.

At the same time, we tolerate and publicly respect our abusers in the name of Patriotism and good citizenship, and they take that and run with it.  Before we turn on each other, I'd like to see us all realize who's really screwing who here.

If it sounds like I'm speaking of class warfare, it's because i think there was a war started long ago.  Those within the losing classes are starting to realize it, but they're being led to believe that the teams are other than they are.

docj's picture

Good points.  Stop demanding "free stuff", hold people to account, end "That's just the way it is".  All good.

As to "who's really screwing who", I'm starting to come to terms with the notion that "The Banks Never Lose".  I find that anything that doesn't make sense at first blush starts to make nearly perfect sense when viewed through that prism.  Lots follow from that.  But that's just me, YMMV.

Currently Smoking Cannabis's picture

Agreed.  We're just hitting two ends of the same corrupt, jacked system.

If we win, I'll see ya in the middle.

DosZap's picture


WHY do you think the Founders were AGAINST Centralized Banking?.....

We're living it.

lost in the usa's picture

Account or no accountability as sone as you can vote yourself money for whatever purpous you no matter how moral or for how many children you end up with class welfare, If I can take money out of your pocket for what I think is good then you can do the same to me.

The only one's that win are the middle men Read politicians who play one group aginst another and skim off the top the more groups the more skimming. Wola American politics in a nutshell. And almost all politics in general.

dark pools of soros's picture

just as bookies only care to split the bet & live off the juice.   Thats the politics we have

Gully Foyle's picture



I saw her today at the reception 
A glass of wine in her hand 
I knew she was gonna meet her connection 
At her feet was footloose man 

You can't always get what you want 
You can't always get what you want 
You can't always get what you want 
But if you try sometimes you might find 
You get what you need 

I went down to the demonstration 
To get my fair share of abuse 
Singing, "We're gonna vent our frustration 
If we don't we're gonna blow a 50-amp fuse" 

You can't always get what you want 
You can't always get what you want 
You can't always get what you want 
But if you try sometimes well you just might find 
You get what you need 

I went down to the Chelsea drugstore 
To get your prescription filled 
I was standing in line with Mr. Jimmy 
And man, did he look pretty ill 
We decided that we would have a soda 
My favorite flavor, cherry red 
I sung my song to Mr. Jimmy 
Yeah, and he said one word to me, and that was "dead" 
I said to him 

You can't always get what you want 
You can't always get what you want 
You can't always get what you want 
But if you try sometimes you just might find 
You get what you need 

You get what you need--yeah, oh baby 

I saw her today at the reception 
In her glass was a bleeding man 
She was practiced at the art of deception 
Well I could tell by her blood-stained hands 

You can't always get what you want 
You can't always get what you want 
You can't always get what you want 
But if you try sometimes you just might find 
You just might find 
You get what you need 

You can't always get what you want 
You can't always get what you want 
You can't always get what you want 
But if you try sometimes you just might find 
You just might find 
You get what you need 

Blue Fairy's picture

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

Tennessee Ernie Ford 

docj's picture

Uh, sure.  Whatever.

nmewn's picture

"The government I live under has been my enemy all my active life. When it has not been engaged in silencing me it has been engaged in robbing me. So far as I can recall I have never had any contact with it that was not an outrage on my dignity and an attack on my security."
HL Mencken


docj's picture

So far as I can recall I have never had any contact with it that was not an outrage on my dignity and an attack on my security.

Mencken's quote seems pretty spot-on to me.  Every time I have to deal with government at any level (local, state, fed), which is unfortunately almost weekly in my case, I feel like I need to take a shower afterward.

An "outrage on my dignity" is a much nicer way of putting that.  Thanks, and cheers.

nmewn's picture

Unfortunately, our best and brightest do not reside there, with some notable exceptions of course. It was not always this way, perhaps someday it will become the servant instead of the master again.

Hope springs eternal ;-)



Rusty_Shackleford's picture


Although sometimes I try to think of of government as a huge, blind, rabid, foaming at the mouth pit-bull wandering our neighborhoods.  The best option is to try and stay as far away from it as you possibly can.  But, you never really know when it's going to jump out from behind a tree and bite you on the ass.  And when it does, no one is going to help you and there ain't a damn thing you can do about it.

dark pools of soros's picture

docj - all this talk here and you are still not seeing it.  You forgot to mention that dealing with big biz is the same ridicule of humanity as dealing with the government.  


just let it sink in that even with all the taxpayer and soldier's expense to allow the big 4 Oil back into Iraq for unlimited gains, one of them felt no need to regard higher safety precautions when encountering new unknown risks.  But when someone is used to getting whatever they want, why bother with common courtesy?

docj's picture

Well, I "forgot" to mention that dealing with Big.Biz is every bit as degrading because it wasn't really the subject at hand.  But sure, yeah, you're right.  Anyone who's ever had to deal with, for example, a health insurance company knows that all too well.

The difference is that you often (or at least sometimes) have the option to not deal with a big biz.  I've not yet been able to afford that luxury with Big.Gov - but maybe I'm just not enough skilled.

Mr Lennon Hendrix's picture

Vote for?  I think you meant that Diebold votes for.

Oh regional Indian's picture

Die Bold.... now there is a telling name if there ever was one.

I say Die Boldly.


Mr Lennon Hendrix's picture

Thus why I have not voted in the last two Presidential elections.  I spit on this machine!

SofaPapa's picture

I've never thought of Fannie and Freddie as separate from the government.  Any "private" quality to them has always been a myth.

MarketTruth's picture

Agreed, though the US Gov refuses to put the liability of Fred/Fan on the debt books. So simply more (normally expected) fraud by the US Gov.

Got gold?

EscapeKey's picture

Absolutely - there's no way any Labour supporter here in the UK would ever conceed the conmen they voted in brought the country to its knees financially. It's much easier to point the finger of blame at the rich bankers who represent a much smaller problem.

It's systemic failure to take responsibility.

Neo-zero's picture

I guess people are the same all over.  They've fallen into the my side/my guy's great yours sucks.  

That being said I was just at a BBQ here in NY and alot of people regreting pulling the lever for the Obama/Goldman Sacks ticket.  Way more then I would have expected to say so out loud.

dark pools of soros's picture

you knew it was pointless when both obama and mccain ran down to D.C. to support the TARP...  they should replay all those video clips of the hurried overnight meetings that both of them faked reading the damn thing 

New_Meat's picture

Well, the choice was between a Liberal and a Socialist (or more than). - Ned

Noah Vail's picture

We surpassed the 1:1 ratio a long time ago.

GDP itself is a bad joke as it includes government spending of borrowed money. Real GDP is probably closer to $10T than $14T. Same goes for goverment debt where official debt is far less than real debt.

Ragnar D's picture

Just like adding government "workers" to the job count instead of subtracting them.

I'm about ready to start my own financial news service.


Private economic activity MINUS gov't spending = productive economy size

Private employment MINUS gov't overhead = productive jobs count

masterinchancery's picture

Absolutely right--the G only got into GDP because most economists work for the government.  Indeed, many govt employees are actively subtracting from GDP--think EPA and FTC and SEC, amongst others.

Ragnar D's picture

Departments of:

Interior, Agriculture, Commerce, Labor, Health and Human Services, Housing and Urban Development, Energy, Education...

Then the FCC, FDA, NEA, "Labor Relations Authority", etc.


The best of these are money pits, the worst are money pits that actively destroy additional productivity.

dark pools of soros's picture

all this talk of private biz being so holy is jackass.  Don't you fucking realize that the oligarchy you worship are the ones behind the government that you despise????!!!!!  yet you kiss its feet regardless


big business CREATES big government.. how else can it outfund and squash at will?  Just as they know to divide and pit us against ourselves, slicing up big business would in turn divide the government...   at that point the states can have more say vs the federal gov and america would be on its way back to what made it strong

New_Meat's picture

but ~70% US is small business that is getting crushed - Ned

dark pools of soros's picture

right and i doubt any have any money left over for lobbyists, etc


we need the states to take power back.. i dont see any other way to make a dent

lost in the usa's picture

8.6 trill on the books and 4.5 from ss fund the problem is they can not steal 200 bil a year or so from ss fund it went neg minus intrest payment this year. If rates

We have added about 3.6 trill to the debt in two years from about 5 trill and ss went neg so as sone as intrest rates hit 5 in a half to maybe 7 percent without big cuts they will be paying an extra bill or two a day in intrest and lost stolen funds from ss. I think the debt bloweout hits 3 to 6 months after intrest rates hit that level. Faster if they can keep things going for a while longer, extend and pretend keep rates at 3.2 percent and shorten up the maturaty for another 2 years and make the debt 11 trill and see the SHTF at 5 or 4 percent avg rate.

Heavy's picture

I'd say: that the moneyis funny is a bigger problem than the spending of funny money.

RagnarDanneskjold's picture

Most of these analyses assume GDP is going up. If there's a double dip, the party gets started next year. 

rubearish10's picture

+1 RD, especially if inventory builds have topped out, it'll happen faster! Good, the sooner the better since we must end this thing before we go to war!

A Man without Qualities's picture

It also assumes the current GDP is accurate and not grossly overstated as the consequence of years of minor tweaking to imply the economy was growing faster than it really was and therefore that the increase in borrowing was less of an issue.