America's Tragic Future In One Parabolic Chart

Tyler Durden's picture

When it comes to forecasting the long-term trajectory of the US economy, things usually get very fuzzy some time after 2020 because, as even the most hardened optimists, the "impartial" Congressional Budget Office have recently admitted, America has at best 3-4 years before everything falls apart due to the unsustainable demographic crunch that will wallop the US entitlement state as demographics suddenly becomes a four letter word. Beyond that, not even the CBO dares to plot a straight line as to what happens should America not get its fiscal house in order.

Which is why were were very surprised to see none other than Morgan Stanley's David Greenlaw and Deutsche Bank's David Hooper release a paper (whose views do "not necessarily reflect those of the institutions with which they are affiliated") titled "Crunch Time: Fiscal Crises and the Role of Monetary Policy" which is a must read for everyone interested in what very likely will happen to the US as ever more power is handed over by the country's now terminally malfunctioning fiscal and legislative apparatus to the monetary policy vehicle controlled by the US financial oligarchy.

Since we know that most readers are pressed for time, we will cut to the chase: the following chart shows what according to the authors' own simulation of the US economy, and not that of the CBO, rates on the 10 Year will look like through 2037. The second chart shows what US debt-to-GDP will be for the next two and a half decades.

The charts need no commentary. Parabola #1 showing the yield on the 10 Year under the authors' simulation:

And Parabola #2 showing total US debt/GDP:

For those who request at least a little commentary, here it is:

[W]e have assumed the U.S. current account deficit holds at 2.5% of GDP-- a level that matches the best result seen in the past decade and is slightly narrower than the 2.7% of GDP recorded in 2012. If, instead, we assume that the current account deficit reverted to the 3.7% of GDP average seen over the prior five years, then the projected debt burden would reach 180% of GDP in 2037.


We can also examine a scenario in which policy actions and economic outcomes produce a less favorable path for the primary budget deficit (using our baseline current account deficit assumption of 2.5% of GDP). For example, suppose that the looming budget sequester scheduled to occur on March 1 is cancelled and that the steady-state unemployment rate is assumed to be 6% (as opposed to the 5.25% as assumed by CBO). In this case (which we refer to as Simulation II), the budget deficit would be quite a bit higher than in the initial scenario. The debt/GDP ratio would rise much more rapidly, hitting 304% of GDP by 2037 (Figure 3.13) and bond yields would skyrocket, eventually getting above 25% (see Figure 3.14).


We should emphasize that we are not presenting these alternative simulations as more realistic forecasts of what the U.S. experience will actually be. In a country like the United States, the debt premium presumably would arise from inflation fears rather than concerns about outright default. And if we are talking about a higher inflation rate, forecasts of nominal GDP should be adjusted as well. Instead, we view these simulations as illustrating the extent to which the path implied by baseline CBO projections could quickly become much more difficult to manage than some policy-makers may be assuming-- something dramatic will need to change well before U.S. interest rates reach double-digit rates


Our main conclusion is that higher debt levels can have a significant impact on the interest rate path and that feedback effects of higher rates on the level of indebtedness can lead to a more dramatic deterioration in long-run debt sustainability in the United States than is captured in official baseline estimates. Figure

Putting some numbers to the forecast by Greenlaw and Hooper, and assuming a 1.5% CAGR for GDP, which in the new structurally slower normal is quite generous, we get $23 trillion in US GDP by 2037, $70 trillion in debt, and a blended cash interest expense that is over 75% of total GDP.

We also get the Fed monetizing all of it.

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Ralph Spoilsport's picture

You're asking inappropriate questions and they probably think you work for the guvmint. They probably took down your license plate number too. Heh heh.

tenpanhandle's picture

Who has hit lists? I just have a wish list.  Just bought a pair of assault scissors.  They have 12 inch blades.  Gonna cut the top three names off that wish list and then get a beer and watch a wreck on nascar.

CH1's picture

why don't the sheeple understand this yet!?

Generally, they feel vulnerable, afraid and confused. They realize that accepting this as true means that they have been wrong, and they don't want to admit it.

Being wrong means re-examining things and taking responsibility for their errors. They feel too weak to face tha, and they deeply fear what people (and authorities) would then say of them. 

And, honestly, we haven't done the best job of explaining.

Totentänzerlied's picture

The Fear of Freedom is more than that. It involves a compulsion to displace responsibility onto someone or something else. Not just for the past but for everything. It's the authoritarian personality; and yes, the entire personality is involved. Trying to change such people is simply stupid. It comes down to a difference in values. They value security and structure more than anything, definitely including freedom, liberty, property, and happiness.

Even if you forced them to be free tomorrow, they would be serving a new totalitarian despot next week. It's what their personality seeks and, one could argue, needs.

Miffed Microbiologist's picture

Made me sick to up arrow you but, what can I say, you're right. Just as a horse will run back into a burning barn, people will seek security in the most irrational circumstances. Funny thing though. You can lead a horse out of a burning barn if his eyes are covered. Perhaps this the only way. Some people will lead and hopefully enough will wake up and follow before its too late.


DanDaley's picture

Trying to change such people is simply stupid. It comes down to a difference in values.


This is why I had to just stop talking to my Obamabot neighbors about anything but the weather and what day it is. Cognitive dissonance and normalcy bias on steroids. Not that I have all the answers, but hey, let's try not to be willfully blind to what's happening.

StychoKiller's picture

You're projecting/rationalizing your hopes and beliefs onto others, the reds should clue you in.

No one had to explain anything to me, but I DID have to go looking for the Truth.

theprofromdover's picture

.... because people want security more than they want liberty .....

Whoever promises the masses security (however much a lie), will get their support; they will be told to hand in their guns, and they will be looked after by a benevolent gummint. Since then has that ever worked out well.

They are scared enough folks will withhold their taxes, or load up their magazines.


Bingfa's picture

+ 1000 ...If every patriot/gun owner went in Monday and changed their W4 to 10 dependants.....



Oldwood's picture

Most patriot gun owners are still operating within the law.

tenpanhandle's picture

I see what the govt is spending my money on - I really do have 10 dependants.

CH1's picture

Most patriot gun owners are still operating within the law.

And haven't the guts to do otherwise.

Tough-guy talk is cheap. Stepping outside the gate isn't.

de3de8's picture

bee, because by definition the Sheeple are clueless.

therover's picture

"No quarter for traitors! No quarter for the enemy!"


I disagree Chup...I say QUARTER the traitors and QUARTER the enemy. The old fashioned way...with horses. 

zerozulu's picture

Blood sucking parasites will stick to till the last drop of blood.

All Risk No Reward's picture

The word "Establishment" is a general term for the power elite in international finance, business, the professions and government, largely from the northeast, who wield most of the power regardless of who is in the White House.
Most people are unaware of the existence of this "legitimate Mafia." Yet the power of the Establishment makes itself felt from the professor who seeks a foundation grant, to the candidate for a cabinet post or State Department job. It affects the nation's policies in almost every area.
~Columnist Edith Kermit Roosevelt, granddaughter of President Theodore Roosevelt, described the Establishment

"Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.

Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite."
~Dwight Eisenhower, Fairwell Address

>>Their economic Ponzi scheme is about to collapse and the main mechanism of their control will be gone.<<

That's why they will restrict the money supply in order to bust the debtors, as opposed to hyperinflate.  They may bump that fluorisilicic acid amount up to 4PPM for extra brain damage and they might even put lithium in the water - and not tell the Muppets.

Their plan is to trade in their cash for ownership in *your* reality.

The average Muppet will probably burn down a furniture store like they did in Britain. 

That is, unless people spread the word in their community.

Debt Money Tyranny

mirac's picture

please remember that there are billions of us and only thousands of them...and they won't be safe in their little bunkers either-they're psychopaths and they have blind spots about reality

BigJim's picture

Excellent post... right up until:

Just one big problem for them, 200,000,000 guns in the hands of free Americans who hate their guts, and are hell bent of restoring this Republic to Constitutional legitimacy.

What is this, like 20,000 Americans with 10,000 guns each? Cause if you think there's 200,000,000 'free' Americans, why is it our elections keep delivering fascists like Bush and Obama?

rbg81's picture

I really don't see the problem.  The Federal Reserve just keep on doing what its been doing:  buying the debt with imaginary $$ and, thus, keeping interest rates near zero.  And, as long as we're dealing with play $$, they can buy ALL kinds of debt (municipal, corporate, etc) to keep real interest rates near zero.  Or even less than zero, which would constitute a wealth tax.  So, in effect, the FED becomes the Bond Market.  Those with something to lose can be bullied into compliance by the Gubermint.  Those without anything to lose won't give a shit anyway.  The low information voters in between won't pay attention.  For the sliver of us that are well informed and can't be bought off....well, that''s what concentration camps are for.

JustObserving's picture

US debt and unfunded liabilities are $138.44 trillion today.  Since Medicare and Social Security cannot be cut (politically impossible), US debt to GDP is 895% now.  The future that the article talks about (debt to GDP of 304% in 2037) was 15 years ago. Our tragic future is 15 years old today.

Back to the future.

tenpanhandle's picture

Move the graph back 15 years and see where that leaves us.

Fiat Fantasy's picture

Your talking unfunded libilities - debt/GDP reflects current spending. Who says that after the dam breaks we will support those unfunded liabilities? Look at Greece today - only a few short years after their bailout - people are fighting each other to get the charity food off the trucks. Do you think their gov't sponsored retirement checks and gov't paid healthcare is still there?

Tirion's picture

Yes, and dollar index at 6!

deKevelioc's picture

And gold, $60,000, with no offers.

flacon's picture

"Since we know that most readers are pressed for time"


They say that time is money, but money is running out of time. 

GMadScientist's picture

What the world needs now is some accountability,
We can't buy more time because time won't accept our money,
If your soul needs love you can always have my pity,
But it looks as though faith alone won't sustain us no more

Bingfa's picture

+1......Build a barter community around you, If anybody thinks they're going it alone they are mistaken.


DaveyJones's picture

say it again. the barter strengthens us and weakens them. So do gardens and sharing - things and clothes and tools and knowledge

a couple years back I suggested a break into four groups. each group takes a week and tries to buy nothing or the bare minimum to get through.   

Bingfa's picture

Seek out Amish (the original preppers) and farming families.....I barter with them everyday and they are salt of the earth.

Amish people are the best humans I ever met.

Ralph Spoilsport's picture

The Amish salt of the earth? Maybe if they stopped polluting waterways, depleting the soil, inbreeding, beating their wives, abusing their animals, etc. Sounds like you don't know them very well yet.

Bingfa's picture

I've never seen of what you speak. Both of my closest neighbors (40+ years) are Amish and they would take a bullet for me?

I know 100's of Amish.

I dunno?

Miss Expectations's picture

Apparently the fake Amish TV shows have succeeded.

overmedicatedundersexed's picture

cannibal economics, and savers are on the menu. next up property owners, then ...

Calmyourself's picture

Exactly this type of entertainment is about creating division, it is its purpose.  Trash everyone and everything ut your sacred liberal cows and sow mistrust and the inability to form coalitions to foment change.  Where is Freddy on this??

DaveyJones's picture

23 years in the criminal justice system and I'd say the Amish do not have a monopoly on your claims

Amish squeamish

tango's picture

I have property in a Mennonite community.  Every farm (10-15 acres) looks like a painting - rolling hills, large ponds, free range animals.  One man with a German accent told me they use "natural" fertilizer. lol  They are industrious, kind and trustworthy and can do practically anything.  They call me "city boy" and offer help all the time. 

I also have land in rural communities in West Tn populated bgy "old geezers" who have lived there all their lives, ride half a million dollar tractors and would give you the shirt off their back.  If something did happen these folks would be the ones to lay the foundation for a new productive society. 

Jugdish's picture

I live next to a bunch of niggers.

CH1's picture

And the purpose of this comment was what?

jerry_theking_lawler's picture

it appears to 'contrast' the two groups.


what is the purpose of your comment? is it to try and 'put him in his place'?? look up the etymology of the word nigger and report back.

brettd's picture

Good friends will be a great asset.


e-recep's picture

economic depression causes psychological depression. even close relatives or friends get more distant. sad, isn't it?

tango's picture

As a land buyer I meet numerous "preppers".  The idiots yap about guns and violence; the smart ones say that community is the key.  At least the energy future looks promising. At current rates, solar will soon (5 yrs) be half the cost and twice as efficient.  And the CHP systems (also a TN product!) now installed in large high rises are heading into homes making it possible to live off the grid.  Sustainability, enterprise and responsibility go hand in hand.

DaveyJones's picture

passive solar is the oldest managed energy system in the word. Insulate the home with thick walls. South facing windows. Thick cover at night. Big warm colored stone to absorb the day energy. Rocket stoves. 150 years ago they were growing a lot of vegetables in the winter outside Paris. They were using horseshit to warm the soil and planting over it. 

Given where MOnsanto and oil and Modern Ag is taking us we will have no choice but these methods...but these methods have worked for a long long time  

Totentänzerlied's picture

Gardens for horticulture are great, but cannot really sustain you. You need to either gather or practice agriculture. Horticulture + hunting/gathering, in 95% of all groups which have developed it, was a temporary stage between pure hunting/gathering and agriculture. Agriculture in 100% of groups always results in 1 of 2 outcomes: emergence of powerful centralized state, or collapse back to at most horticulture.

You cannot change human nature in a single generation. It has not changed in 2 million years. 98% of our existence as a species was spent as hunter/gatherer bands. It is the absolutely ultimate in sustainability, and it is our nature. And just as certainly, virtually no one in any society which has at the moment transcended that level of subsistence ever wants to go back.

It is absolutely correct that our nature does not allow us to thrive, nor even to suvive, alone. It is also every bit as true that human history is clear on what happens when an argicultural society collapses. Our culture would not survive it. None ever has. And the people mired in our culture, I think we can say with some certainty, would not handle the transition well. The differences between a society such as ours, and its culture, and the society and culture of pre-/non-agricultural groups is simply enormous. You can hardly name anything that isn't significantly different and in a way most modern people would find quite intolerable.

The transition from individualist/centralized to communitarian/egalitarian is a bitch. If you think it's just a matter of planting gardens and making friends with your neighbors you are dangerously mistaken.

DaveyJones's picture

permaculture is the synthesis of the two and people(s) have been using these techniques for quite a bit. When modern man came to the continent and looked he didn't realize that he was looking at a sophisticated and managed food system of perennials (a lot of trees and bushes and bubs) He cut most of them down for the modern one crop methods and destroyed the natural systems that will always be more porductive and self sustaining. WHy shouldn't they be. They're the natural systems.

francis_sawyer's picture

Might need the basic workings of something one day


Agrarian Law, 111 BC

Babylonian Law--The Code of Hammurabi


Bingfa's picture

80% of Americans would never survive a SHTF scenario first off....

It's not going to be an event for the weak of mind that's for sure.

It's mental, you have to prepare yourself mentally.



eclectic syncretist's picture

I can envision a time when the people via our government tell the central banks to fuck off, burn all the FRNs, and go back to a monetary system as described by the founding fathers in the US constitution.

CH1's picture

I can envision a time when the people via our government tell....

I appreciate the sentiment, and I'm not trying to be snarky, but...

The Fed and the US government are partners in crime. The government is your enemy, and will remain your enemy. They will not become anything better than what they are.

What great men like Jefferson believed was expelled from DC a LONG time ago.