• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

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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Sun, 02/24/2013 - 04:21 | 3271133 Totentänzerlied
Totentänzerlied's picture

Jefferson believed in an agricultural aristocracy which would use the Republic to make sure society was run "correctly", namely that the aristocracy stayed on top. The fact that he had no positive socialist program and sang the praises of liberty (for some) doesn't make him any less of a statist.

There's nothing particularly wrong with that, but it bears being laid out. If you think, for example, that "all men" actually refers to ALL humans, Jefferson ain't your guy, and would have had quite a laugh at you. 

Sun, 02/24/2013 - 12:21 | 3271516 CH1
CH1's picture

Jefferson was not perfect, and he bore some marks of his earlier and more ignorant era, but these accusations you supply are false.

I've read the man's correspondence and I stand by my remark calling him a re great man.

Sat, 02/23/2013 - 22:52 | 3270834 CH1
CH1's picture

also friendship, art, community, mutual respect, and ultimately freedom - ultimately a codifying cultural component vector emerging from this superabundant dataset the way consciousness emerges as a "strange loop"

Comment of the day. +10

Sun, 02/24/2013 - 03:31 | 3271105 tenpanhandle
tenpanhandle's picture

Damn, a monkey just flew out of my ass.

Sat, 02/23/2013 - 20:42 | 3270582 Buckaroo Banzai
Buckaroo Banzai's picture

Speaking of Ag, I just noticed that Tulving is completely sold out of ALL junk silver coins-- even 40% Kennedy halves, which are the red-headed stepchildren of junk silver.

Now, I haven't been paying much attention to what's been in stock over the past year or so, but I found that startling, and I wonder how long this has been the case.

And in general, looking at what Tulving has on offer, it seems like the variety of products for sale has narrowed.

Thoughts?

Sat, 02/23/2013 - 21:28 | 3270656 Al Gorerhythm
Al Gorerhythm's picture

When bullion banks pull their bids, bullion suppliers pull their stocks. Give it a while and stocks will magically reappear. 

Sat, 02/23/2013 - 22:50 | 3270831 Pool Shark
Pool Shark's picture

 

 

Not to worry, plenty of silver still out there at very reasonable prices:

http://comparesilverprices.com/

 

Sat, 02/23/2013 - 22:56 | 3270844 akak
akak's picture

The word "plenty" is meaningless when discussing a possible trend, that trend being declining silver supplies.

I hear the captain of the Titanic tried to reassure the doomed passengers as the ship sank that there was still "plenty" of ship above the waterline at any given moment, too --- until there was none left at all.

Sun, 02/24/2013 - 00:28 | 3270990 GMadScientist
GMadScientist's picture

How about 'marginal'? Is that meaningless too?

Sun, 02/24/2013 - 11:10 | 3271370 StarTedStackin'
StarTedStackin''s picture

I have to wonder why Merit is not on that list when their 10oz bars are the same price as the "lowest" on your link........Merit offers free shipping no most orders too.

Sat, 02/23/2013 - 21:56 | 3270694 The Miser
The Miser's picture

When I checked Provident, they are out of "junk silver" too.

Sat, 02/23/2013 - 21:59 | 3270704 akak
akak's picture

I guess it's not so "junky" after all.

Sat, 02/23/2013 - 22:55 | 3270842 francis_sawyer
francis_sawyer's picture

The best [local] coin shop was completely out of junk silver back in January... But last week they had about $100 - $200 [face] of some various things up to HALVES...

Sun, 02/24/2013 - 03:36 | 3271107 tenpanhandle
tenpanhandle's picture

Junk Ag on ebay going for minimum of $33 per oz and very commonly up to $37 and more.

Sat, 02/23/2013 - 22:22 | 3270728 Shell Game
Shell Game's picture

My Seattle area shop had plenty of 90% coins but were all out of new ASEs. Best I could do was get tubes of 2007 ASEs or come back next week when the 2013s arrived, most of which had been reserved in advance by customers. Very brisk buying while I was there. 

Here, we BTFDYI...

Sat, 02/23/2013 - 22:23 | 3270763 Midas
Midas's picture

Just curious, but is there a good reason people pay extra for the current year ASE?  If a rose is a rose, isn't an ASE an ASE?

Sat, 02/23/2013 - 22:25 | 3270769 akak
akak's picture

Tradition

Sat, 02/23/2013 - 22:50 | 3270830 CompassionateFascist
CompassionateFascist's picture

Yes, I "pay" extra...in debtbux. Because I want the real thing, not a paper derivative. 

Sun, 02/24/2013 - 20:56 | 3272648 BigJim
BigJim's picture

LOL... I thought that was gold?

Sat, 02/23/2013 - 22:51 | 3270832 Stuck on Zero
Stuck on Zero's picture

People want to get in on the last batch of silver coins to ever be issued by the mint.

 

Sun, 02/24/2013 - 00:06 | 3270910 Shell Game
Shell Game's picture

Funny, isn't it...   BTW, no 'extra' premium for 2013. Your guy screwin' ya much?  ;)

Sun, 02/24/2013 - 01:10 | 3271020 Midas
Midas's picture

Nobody is screwing me since I don't buy ASE.  I stick to 100oz bars and junk silver.  What is the best deal you can find on 2013 ASEs?

 

Another question.  Who was the first hipster who started putting much at the end of a question?  I thought it was silly the first time I heard it. 

It isn't getting any more clever. 

 

P.S.  I may be wrong about there being a premium.  My guy (Tulving) doesn't appear to have anything other than the new stuff.  Surprise.

Sun, 02/24/2013 - 04:49 | 3271145 Vlad Tepid
Vlad Tepid's picture

Ace Ventura ended sentences with "much" and he was no hipster...it probably goes back even further than that.

Sun, 02/24/2013 - 14:51 | 3271878 Shell Game
Shell Game's picture

Fuck off and die, much?  You're a fragile faggot, aren't ya?

Sun, 02/24/2013 - 23:45 | 3272999 Midas
Midas's picture

Sorry if I offended you, I wasn't trying to, I am just trying to gauge why people differentiate between current year ASE, and I have already admitted I may be out to lunch.  I can't really prove or disprove my claim since I can't find anyone selling both.

Sorry if I am sensitive to the use of much, it's not really you, it's the teenagers I know that use it non-stop.  Cheers.

Sat, 02/23/2013 - 22:50 | 3270825 CompassionateFascist
CompassionateFascist's picture

The waiting line for SE's in any substantial amount at NW Terr Mint is "8-10 weeks". I believe that is their own "moving" estimate of time interval before PonziCollapse.  

Sat, 02/23/2013 - 23:15 | 3270876 disabledvet
disabledvet's picture

did you mean the money is going to collapse....or the debt? i'm easily confused and when in doubt "reach for yield."

Sun, 02/24/2013 - 00:09 | 3270964 CompassionateFascist
CompassionateFascist's picture

dollarcollapse. Never mind "yield". First reach for water and food. Then weapon(s) + ammo. Then silver by the ounce. I hope I am wrong - since my own preps are far from complete - but I do not think there is much time left. The guywires that hold up the debt-pyramid are straining and whipping about and TPTB know it even better than we do...that's why the sudden, frantic gun-grab. When the ZOGsters can no longer buy consent with debtbux, they intend to coerce it. With extreme violence.  

Sun, 02/24/2013 - 08:19 | 3271227 samcontrol
samcontrol's picture

not personal but general....
don't over prepare dood. Live life and stop being scared.

IS this a
purely preper site?
i mean 100 s of trillions in debt has nothing to do with asssault weapons , ,,,,you guys think it does ... just your opinions on a unparcial site. THE US is violent , Hollywood probably more to blame than any lame government...i was a big fan of rambo action flicks,,,'20 years back' ...now the good guys fighting and winning is getting boring... evolve already.

it is easy....IF and a big fucking IF the financial system collapses ...it would be 1929 again, with a few tanks in the streets.

who really wants to survive with no new car to buy??? Planting seeds... i don't even have a consumer mind like most first world citizens and i could not live without basic comforts for me or my family ..family suicide is much better than all your bull shit prepping ....

my only worries right now are how much snow do i get this winter and who do i sell my junk silver and gold watches to...
:)

Sun, 02/24/2013 - 10:43 | 3271337 Calmyourself
Calmyourself's picture

"i mean 100 s of trillions in debt has nothing to do with asssault weapons , ,,,,you guys think it does ... "

Your not real good at thinking past the original thought are you?  This is sarc right?

Sun, 02/24/2013 - 12:20 | 3271512 samcontrol
samcontrol's picture

not sarc, you had a couple revolutions, people don't care about derivatives, they only care about mortgage and atms.

Sun, 02/24/2013 - 13:04 | 3271614 Calmyourself
Calmyourself's picture

Okay, I'll try..  Just think what happens when EBT cards buy nothing, supply lines stretch and billions and billions of dollars comes flooding into America trying to avenge themselves on our assets..  If you have not thought this far, you need to get back to Yahoo finance.

Sun, 02/24/2013 - 13:14 | 3271644 samcontrol
samcontrol's picture

well , you tried. ...

Here in
patagonia, we see things differently.
don,t know what zillions of dollars you are talking about,flooding back to America if the system fails,,,, if it fails it fails, sorry don,t se your logic

Please play again.

Sun, 02/24/2013 - 12:54 | 3271599 Bad Attitude
Bad Attitude's picture

"...it would be 1929 again, with a few tanks in the streets."

In 1929, one-sixth of the US population was not on Food Stamps (SNAP). In 1929, half of the households in the US were not receiving some form of government assistance.

What do you think will happen when the SNAP cards stop working, when the Obama phones stop working, and when the government checks stop coming? Do you honestly believe most people will just sit in their homes and peacefully wait for the government to fix itself?

Within a few days, the entitlement class will be rioting and looting stores. If we are lucky, they will wear themselves out and sanity will be restored. But, if the violence continues, it will soon become too dangerous for the people who keep our life-supporting infrastructure (water, sewer, electricity - talk about the unsung heroes of our society) operating to keep doing their jobs, and everything will irreversibly collapse. 

Ultimately, it is all about economics. Many preppers just look at what might happen if the economy fails.

Sun, 02/24/2013 - 13:10 | 3271627 samcontrol
samcontrol's picture

no need to be a preper where i live. i'll give it a shot once/ big IF it starts ....i have my hit list, they have plenty of weapons and amo, those don,t work when you go to sleep..
i will probably jump off a cliff after short time..

a good plan is way better than a thousand bullets. i'll go with my courage and brains instead of beans..until it is not worth it anymore..

Sat, 02/23/2013 - 20:54 | 3270603 Stock Tips Inve...
Stock Tips Investment's picture

I think there are many variables at play. Making these projections involves taking a very specific assumptions regarding these variables. If any of these variables change, so will these projections.

Sat, 02/23/2013 - 21:45 | 3270680 hooligan2009
hooligan2009's picture

ahhh.. a stock tipper...PhD in the bleeding obvious? heh, sorry my bad, couldn't resist..

Sun, 02/24/2013 - 03:59 | 3271121 bunnyswanson
bunnyswanson's picture

No-Fall Out Shampoo and Secret's Stress Response

 

Secret Stress Response - Because the sweat of stress is the stink of fear . (We need 4 x the protection to prevent from being a human repellant)

When you've got the kemo look but are not on chemo - it's time for Fall Fight Fortifying Shampoo by Garnier bitchez.

Sun, 02/24/2013 - 09:21 | 3271274 Svendblaaskaeg
Svendblaaskaeg's picture

Long Parabellum

Sun, 02/24/2013 - 23:59 | 3273033 prains
prains's picture

This sounds exactly like a problem Mitt Romney could have fixed what a shame

 

 

/sarc

Sat, 02/23/2013 - 20:33 | 3270563 Long-John-Silver
Long-John-Silver's picture

I just purchased 500 rounds of 7.62X39 and 1280 rounds of 7.62X25 Tokarev. Happy to see ammo starting to flow again.

Sat, 02/23/2013 - 20:49 | 3270595 Buckaroo Banzai
Buckaroo Banzai's picture

Really? Because virtually every online merchant is completely sold out of just about all types of rifle ammo. 5.56 seems available at 80¢ a round, and 7.62 is going for a buck a round. Pistol ammo seems slightly more available, FMJ hard to find, HP available but starting around 65¢/round.

However I did see some 5.56 on the shelves at Cabelas for 50¢ a round today, although it was limit 200 rounds/customer.

Sat, 02/23/2013 - 20:52 | 3270601 Long-John-Silver
Long-John-Silver's picture

I signed up with Ammunition to go and received an e-mail they had just received a shipment. I jumped on it. Perhaps it's sold out again?

Sat, 02/23/2013 - 21:07 | 3270629 Buckaroo Banzai
Buckaroo Banzai's picture

Their website shows nothing in stock. They must have sold the entire load to their email subscriber list.

Sat, 02/23/2013 - 21:23 | 3270647 exsanguine
exsanguine's picture

The Fleet Farm near me had some .45acp in stock this morning.

Blazer steel: 50rd for $20.

Lots of JHP 45 for .60-90c per round

They also had a shipment of surplus 7.62x54r spam cans, 640 for $109

 

 

Sat, 02/23/2013 - 21:45 | 3270682 Buckaroo Banzai
Buckaroo Banzai's picture

I remember when the spam cans were $40 apiece. Still, can't complain about rifle ammo at 15¢/round, even if it is corrosive.

Sat, 02/23/2013 - 22:51 | 3270833 HoofHearted
HoofHearted's picture

The one I can't find anywhere is 22LR. Luckily I was stacking before all the craziness. In fact I sold some of the 500 value packs at $60 apiece on a gun selling website.  

Sun, 02/24/2013 - 00:38 | 3270998 Fedaykinx
Fedaykinx's picture

i can't find any either and it's starting to piss me off.

Sun, 02/24/2013 - 08:12 | 3271224 Rusty Trombone
Rusty Trombone's picture

http://www.gunbot.net/ - but you've gotta be ready to pull the trigger immediately - which in many cases mean having an account already set up with the sellers - ammo is flying out faster than greased owl shit.

And stay away from Natchez Shooters - they are fucking plenty of people.

Best I've nailed so far is .223 at Cabela's for .53 a round for 55gr FMJ

What you really want is the XM855 62gr. steel core - snatch it up if you can find it.

Sun, 02/24/2013 - 10:55 | 3271349 dtwn
dtwn's picture

7.62 36 cpr @ Wideners: http://www.wideners.com/itemdetail.cfm?item_id=7011&dir=18|830|852

They've had it in stock repeatedly, the panic is slowing.  Ammo is available if you're quick when certain sites get it in stock.  Follow the ammo threads at Arfcom:

http://www.ar15.com/forums/t_3_16/590111_CONSOLIDATED_THREAD_FOR_THE_DIS...

 

http://www.ar15.com/forums/t_4_54/118386_PLEASE_POST_ALL_CURRENT_AMMO_DE...

Do NOT follow this link or you will be banned from the site!