Charting US Debt And Deficit Since Inception

Tyler Durden's picture

In the recent aftermath of the US just concluding its fourth consecutive fiscal year with a $1 trillion+ deficit, we have been flooded with requests to show how the current fiscal situation stacks up in a big picture context. Very big picture context. For all those requests, we present the following chart showing total US Federal debt/GDP as well as Deficit/(Surplus)/GDP since inception, or in this case as close as feasible, or 1792, which appears to be the first recorded year of historical fiscal data. We can see why readers have been so eager to see the "real big picture" - the chart is nothing short of stunning.

Some observations:

  • Beginning with the Anglo-American war of 1812, and continuing through the US civil war, World War I and World War II, the major military shocks to the US fiscal system are clearly obvious.
  • Just as obvious is the impact of not only The Great Moderation which started in the early 1980s just before the 1987 arrival of Alan Greenspan at the helm of the Fed, which allowed the US to exchange fiscal prudence for ever cheaper debt which could and would be used to fund an ever greater budget deficit, and lead to a surge in the Federal debt.
  • The increasingly more unstable system, which saw the additional layering of another $23 trillion in shadow banking debt at its peak in 2008, as well as countless trillions in household, corporate and financial debt, as well as hundreds of trillions in underfunded welfare liabilities, led first to the Internet bubble, then the Housing and Credit bubble, and finally, to the Great Financial Crisis of 2008 which climaxed with the failure of Lehman brothers, and resulted in the central bank bailout of every developed bank, and shortly thereafter, the backstop of every peripheral country in Europe.
  • The gravity and impact of the Great Financial Crisis on the US economy is stark, very visible, and can only be compared to previous instances of destructive military conflict in terms of lost output and impact on the US economy.
  • Total US Debt/GDP is currently just over 103%. This number is expected to rise to 125% by the end of 2016, which will eclipse the peak debt/GDP seen in World War II, and be the highest in US history.
  • Whereas in the past episodes of fiscal catastrophe were accompanied not only by a surge in debt (black line), but by a parallel explosion in fiscal deficits (red bars), this time the deficit spike has been more modest (peaking at about 10% of GDP), but more protracted, with even the CBO expecting deficits of around $1 trillion to last for the next several years.
  • One possible interpretation is that due to the Fed's relentless interest rates intervention, the polarized US government feels no burning desire to promptly balance its budget, and even overshoot, and through a combination of aggressive spending cuts and/or revenue increases, result in a much needed surplus which would be used to reduce the sovereign debt. This is graphically seen in the ongoing Fiscal Cliff debate, when any proposal for substantial spending cuts - the true problem at the core of America's deficit habituation and welfare statism - is greeted with shrieks of Mutual Assured Destruction.
  • This is not a political issue: politicians on both sides of the aisle are perfectly aware that setting the US on a sustainable fiscal course would mean massive pain for the common citizen, and an immediate termination of all existing political careers: after all the myth of the welfare state is at stake. It is in everyone's interest - both GOP and Democrat - to perpetuate the unsustainable deficit status quo indefinitely. Any theatrics out of the GOP demanding fiscal conservatism are therefore just that - theatrics.
  • There is no question that it is unsustainable: US GDP is currently growing at a pace of 1.5%-2.5% at best. Total 2012 US debt will have risen at a rate of 8%, and will continue rising in the 6%-8% range.  
  • More disturbing is the influence of the Fed, whose policy of ZIRP and outright debt monetization (recall even JPM has now admitted the Fed will monetize all US debt issuance in 2013) is the only permissive factor that has allowed the US to delay the inevitable moment of reckoning as long it has.
  • Indicatively, a modest rise in the average US interest rate, which is currently at all time blended lows, to just 5%, would mean that in 3 years the US would spend, pro forma, $1 trillion in cash interest each year. At that point the US will approach Japan status, where the government needs to borrow just to fund interest outlays. Actually, instead of Japan, Weimar would be a better analogy.
  • Finally, on all previous historical occasions, there was at least one backstop of last reserve, a central bank, standing ready to step in and provide the necessary liquidity, and monetize the needed debt to keep the show running. Since 2009, all the central banks have also gone all in on the Keynesian endgame: at this point the next shock to the status quo system will be the last, as there is no more backstops. 
  • At that point the only two options will be outright monetary devaluation, though not relative in the closed monetary loop of modern monetarism, but absolute, where every currency is concurrently devalued against a hard asset (potentially with the forceful concurrent confiscation of said hard asset by the host government, think Executive Order 6102), in order to generate a terminal currency and debt debasement, or outright global debt moratoria, and the end of the modern financial system as we know it (but not before the financial "leaders" of our time have converted enough of their paper wealth into hard asset format and transferred it to more peaceful, more "gun-controlled", non-extradition territories).

And there you have it.

Oh, and whoever said the advent of the Federal Reserve, or the end of "hard money" standard courtesy of Richard Nixon, made catastrophic or systematically shocking events less frequent, probably should have their head examined.

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Insideher Trading's picture

Japan has a debt to gdp of 200% (double that of the U.S) and they still manage to buy UST's (3rd largest foreign holder)

Mr Lennon Hendrix's picture

Because the domestic ownship of JGBs is high.

Tyler Durden's picture

In 3 years the Fed will own about 60% of marketable US debt with duration risk (i.e. with a maturity over 3 years) and will remit all interest back to the Treasury. Does that count as "domestic"?

Mr Lennon Hendrix's picture

If I am wrong then please correct me but from what I understand the domestic holdings of Japan (and it could be Japanese pensions) is high.  I think something like 90% of JGBs are owned by Japanese people.

Domestic demand should have a much stronger role in buying bonds than a Central Bank would for the domestic demand has a vested interest in the outcome of the Nation-State.

flacon's picture

Debt divided by GDP..... isn't government spending (debt) = GDP when you boil down Keynes' equation? I guess I'm just unsure that debt/GDP is a real metric just like GDP is a real metric. 

SafelyGraze's picture

what we need is High Value Notes

hey -- that was last thursday. Dec 13 2012 from 9:30 to 10:00 am at the Banknote 2012 Exhibition Hall!

anyone go? anyone take notes?

get it? "take notes"? hahahahaha

no, seriously. give us a full report.

Tom Ferguson, Former Director, US Bureau of Engraving and Printing 
Genie Foster, Former Cash Manager, Board of Governors of the Federal Reserve

Genie Foster, former "cash manager" Board of Governors of the Federal Reserve --- we know you read ZH. how about uploading a video of your talk?

scroll down, click to reveal Dec 13

who went

economics9698's picture

Everyone notice how Ronald Reagan and Bush I got this NWO bull shit going.

GetZeeGold's picture



Slick points out the obvious.


And of course screw Reagan.....cause dead men can't fight back. Big props go out to Clinton for that NAFTA crap.

Mr Lennon Hendrix's picture  Where Bush accepts voodoo economics and Reagen is blamed for WWIII.

GetZeeGold's picture



Time to own it bitchez - Nancy Pelosi

GMadScientist's picture

"Go shopping!"

"I am not worried about the deficit, it's big enough to take care of itself."

ISEEIT's picture

I would appreciate a credible source pinning this crap on a knowing Reagan. The bush cretins are obviously all over it. My understanding is that Reagan was essentially forced to take HW as VP. Don't misunderstand...Reagan is no hero of mine but I do think he was more of a dupe than anything and may have sincerely desired to work for the good of our country.

No question about it though that from HW to the fraud in chief pretending to be president today, a plan has been and is being carried out. The final act ain't gunnu be pretty either.

Snidley Whipsnae's picture

Safelygraze... Interesting link, thanks. Below is a paragraph from the conference 'overview'... I have a question: What per cent of sales at big box retailers are made in cash? I'm guessing that it's a low per centage. Therefore, I suspect this conference was more about credit cards than cash useage... though that could change as fewer shoppers have access to credit cards.

"As the definitive forum on the emerging trends in the banknote industry, Banknote 2012 provides an unparalleled opportunity to engage in interactive discussions with peers, from both government and industry, on the state of the banknote industry today. With presentations ranging from counterfeit deterrent technologies, to banknote design, to production, issue, and cash handling, Banknote 2012 offers immense value and invaluable opportunities for delegates attending this dynamic event."

JKearney3153's picture

All the more reason to print money for our debt to ourselves. Well, are we even "printing" money anymore? Or just adding a bunch of zeroes to the balance sheets...

GetZeeGold's picture



Of course we don't actually print.....that would cost way too much money....or something like that.

Disenchanted's picture



"In 3 years the Fed will own about 60% of marketable US debt with duration risk (i.e. with a maturity over 3 years) and will remit all interest back to the Treasury."


They never lie at the FED or at Treasury.


SWRichmond's picture

In 3 years the Fed will own about 60% of marketable US debt with duration risk...

Clearly, then, and factoring in the obvious conclusions from anyone looking at the chart, in order for the Fed to complete its work of total debt enslavement, we need more war.  Libertarians are very fond of saying "war is the health of the state", and for a very good reason.  Confirmation only requires a glance at the chart.

philipat's picture

@Because the domestic ownship of JGBs is high"".

For now. But with an ageing population cashing out JGB's to live on (Especially with ZIRP) that will change quickly.

Dr Benway's picture

Yeah, like any ponzi, when cash redemption requests exceed new sucker cash inflows, the game is up

ball-and-chain's picture

America is the new Japan.

The big collapse is over and done with.

Now comes the hard part.

We stagger along like a gut-shot bear for the next twenty years till the baby boomers die off.

Happy days are here again.

AldousHuxley's picture

unlike Japan, US has illegal aliens slaves and slaves in China and slaves in Middle East.



GMadScientist's picture

You think Japanese companies don't manufacture anything they aren't worried about being lifted in China too?

The US has slaves in Fontana, CA loading Wal-Mart trucks, slick.

philipat's picture

America is following the "Japanese Model"of Zombie Banks so can also look forward to wasted decades, unless the USD collapses before. That is unlikely though because of the Global race to the bottom.

Iceland/Sweden would have been a better approach IMHO. Temporarilt take over the Banks, fire ALL the Managements, wipe out the shareholders and bondholders but protect depositors. Writr off the bad stuff, recapitalize and IPO with the proceeds going to the taxpayer. As opposed to the Banksters.

Dr Benway's picture

Sweden did that? Must have missed it. But you're right in that banksters don't manage to steal quite as much loot in Sweden (or Germany), just several average annual salaries, not hundreds of times the average worker salary like in the US.

GMadScientist's picture

In the future, all these asshole will be forced to put up convertible bonds and have capitalism decide if they live or die.

falak pema's picture

this is what the french government should do in the coming year, if the french banks do a Jamie Dimon/Hank Paulson on it when the shit hits the fans as it eventually will. 

But it has to be in concertation with all EURozone, as its ONE currency. I guess that decision belongs to Mutti. 

punxsutawney phil's picture

TRAVEL: $3,629,622

The biggest expense is President Barack Obama’s round trip flight to Hawaii via Air Force One.

A Congressional Research Service report released in May 2012 said the plane typically used by the President, a Boeing 747, costs $179,750 per hour to operate. The U.S. Air Force has listed the cost of travel as high as $181,757 per flight hour.

Travel time for Air Force One direct from Washington D.C. to Hawaii is about 9 hours or as high as $1,635,813 each way for a total of $3,271,622 for the round trip to Hawaii and back.

-1Delta's picture

but... add domestic, household, business, and other liablitlties in the Z report... 800% of GDP


gov't is the smallest piece in reality


to wit:


just saying......

Alcoholic Native American's picture

Private interest have been cheering on an infinate growth model of economics as public debt skyrocketed for a while now.  Why exactly are we in a crisis again? I was born in 1984 and this has ALWAYS been the status quo.  Behind every private fortune is publically pooled debt.   Ask any billionaire you know.

This aint socialism.

H E D G E H O G's picture

"(but not before the financial "leaders" of our time have converted enough of their paper wealth in hard asset format and transferred it to more peaceful, non-extradition territories)." THIS is key, these "leaders", bankers, politicians, TPTB, et al, have and continue to fleece the sheep.  When the shearing is over, they'll be high and dry with gold and silver, you'll just be another dumbass naked sheep. Baaaaah...........

disabledvet's picture

the idea of "Government no longer existing thus causing a massive stock market rally" is actually not new. In other words "the only person Wall Street has to worry about under this scenario is Chairman Bernanke of the Federal Reserve." if true that streamlines...ahem..."decision making" ahem...A LOT.

illyia's picture

Again - this is why I read ZH.

sgorem's picture

wall street = federal reserve = wall street. no worry here

Dr. Engali's picture

With each progressive war we ran the deficit to GDP up to new highs. I wonder how far we can push that sucker with the mother of all wars coming up. Seeing as how we are flat ass broke and no real economy I'm going to guess we run it up to 75% deficit to GDP.

PhattyBuoy's picture

Easy to see a parabola there ... so 75% or more is a reasonable estimate.

Big war coming ...

newengland's picture

ZH, simply the best, nobody does it better.

Tommy Gunner's picture

I pop onto the MSM finance sites from time to time for a laugh...  read their rah rah shit... then I go to ZH and I find out the real story...

Best example was the great vehicle sales - not a mention of subprime car loans and channel stuffing anywhere - except ZH

This is by FAR the best finance site in existence.

Seer's picture

I think that the "Great Fiscal Crisis" label doesn't fit in with the rest.  Only wars seem to do these sorts of things, so let's use the label "War on Terror."  We were told that this war would last our lifetimes... (didn't say that we'd live to a ripe old age- the exponential curve can only go so far before the wheels blow up).

Stuck on Zero's picture

Note that from World War II to the present the U.S. has been in a state of continual warfare and armament. That's pretty much reflected in the chart.  The chart does not indicate the unfunded liabilities such as Medicare and Social Security.



Big Slick's picture

Good point about endless war.  And though the chart wouldn't ever really show unfunded liabilities (only liabilities added in on a per year basis) your comment makes me wonder what the chart will extend to as the $100 Trillion + of unfunded get worked in year after year. 

There is a new currency regime coming.  I cannot remember the name of the guest, but Martenson had a December interview with a guy (Bob W.?) who hypothesized that this is all occurring to usher in the new regime ASAP.  Does anyone really think the Fed doesn't know what they are doing??  The endgame cannot come soon enough for these guys.

Its like being in a poker tournament and you are short stacked and approaching the end of the buy-in period. You start shoving all-in so you can either make it back or bust and re-buy.  ONLY OPTION FOR US IS RE-BUY!

BUY Au!  BUY Ag!  BUY Pb!

i_fly_me's picture

Looks like it's about time for some moar war.  Mr Bass has this nailed.

tooriskytoinvest's picture

22 Stats That Prove That There Is Something Seriously Wrong With Young Men In America. We Have Raised An Entire Generation Of Young Males That Don't Know How To Be Men, And Many Of Them Feel Completely Lost.

Flakmeister's picture

 No shortage of symptons, that is the easy part...

What went wrong?

Can it be fixed in time?

JKearney3153's picture

Being 23 years old, I hope that I'm not defined with this "Peter Pan Generation". I don't play video games and I don't have a TV, now all I need for success is to get rid of this damn laptop so I stop wasting time with you old geezers on this damn website, haha

SanOvaBeach's picture

Young vs old.  I win, why?  Cause your stuck paying for it all!  Ha, Ha!  Next payck u get, check out the SS deduction.  Thanks for helping my retirement income.  You lose, dude!  U can always leave the country.

GMadScientist's picture

Enjoy your limp dick, liver failure, and inevitable painful death.

GetZeeGold's picture



Being 23 years old, I hope that I'm not defined with this "Peter Pan Generation".


Just sign you can go.