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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ThorAss's picture

Can't quite work out what future you are planning for that you need so much ammunition. Who are you going to be shooting? Members of the US military? Foreign invaders? Either way you'll lose and end up dead. Or perhaps you're planning on a total breakdown of society in which you'll all be shooting each other. Once again, in the long run, you'll all lose and probably end up dead no matter how well prepared you are. So are you just playing out some sci-fi fantasy world, one that has you as the good guy? You'll only need a few bullets, for your family because when the barbarians are at the door, you're done for. Better to give up this fantasy of surviving the dark ages and instead focus on improving the lot of everyone in the end game.

GMadScientist's picture

You might want to consider changing the question to, "what will you be shooting?"

Maybe they find starting with their own lot to be the most efficient means of "improving the lot of everyone".


Oldwood's picture

Hording is a response to a threat of limiting supply. It may not be completely rational but gaged against the "rational" acts of our government might  not be so insane. People are feeling threatened by our economy, our government, religious extremism, organized and random crime and a full laundry list of issues. The constant threat of our government to limit the only pphysical means of self defense should be pretty  obvious. As to quantity of ammo, speaking for myself, it is a self gratifying response. Kind of a rebellion against TPTB. 

GMadScientist's picture

How does engaging in an irrational response help one deal with real and present dangers?

Sounds very much like satisfaction at having done "something", even if that something is of little to no consequence.

akak's picture


Sounds very much like satisfaction at having done "something", even if that something is of little to no consequence.

And THAT sounds exactly like the typical response by typical statists to real world problems that are usually of their own creation --- with the caveat that "that something" virtually always has strongly negative consequences, for freedom at the very least.

GMadScientist's picture

As opposed to your approach to dealing with problems of your own making, which is to do nothing, deny there's a problem at all, then post fairytales about invisible hands, but what else would one expect from a group of people who are clamoring for the freedom to be poisoned and cheated.


Vlad Tepid's picture

Sheep to English Google translate is getting better these even remembered to delete the extra Baaaaa's from the inside of words!

Rusty Trombone's picture

No silly, I have all the brass,lead and contempory arms for when I come with my band of like minded raiders - to take your shit and rape your women. It's mindless cunts like you who'll be the prey one way or another. Quisling pieces of shit will be exterminated.

GMadScientist's picture

If they're minds are like yours, I have absolutely nothing to fear.


JR's picture

Projections from international bankers are more like proposals: proposals where the future is laid out to fit what the bankers can use for their advantage.

Rather than a prediction, it is a plan. And the reason it’s put together is to help the central bank follow a road map from which in the end the financial sector profits from the developments. It would be almost laughable that these bankers could predict what will happen over the next two quarters, let alone the next quarter of a century.

Who can possibly pay any attention to this other than believers in central bank propaganda?

The U.S. economy and the Fed can no longer continue to co-exist. As Gary North says: “Keynesian economics is unsound, fiat money is unsound, massive federal debt is unsound, and there will be a day of reckoning. On that day, the existing establishments will go on the defensive. More than this: they are already on the defensive. That is something new. The crisis of 2008/9 was the tipping point.”

And if Keynesianism is theoretically inaccurate? Says North: “Then the power elite has created an economic system which is like a kind of bomb with a lit fuse. If the Keynesian system is analytically accurate, the rigged game of wealth-redistribution to the largest banks can go on indefinitely.” But, says North, “the Keynesian system is inaccurate.

“There is going to be a day of reckoning. On that day of reckoning, the entire system of leverage that the conspirators have used to benefit themselves will be shaken to the core.”

GMadScientist's picture

Hold on; I'm still waiting for the laughter from his "Y2K is going to cause an economic collapse" prediction to die down.


JR's picture

 Maybe the economy's sobered him up. Anyway, who can disagree that what’s transpiring is “unsound”?

The word unsound means that it doesn’t last; it means it fails. North, in his paper “Reversal of Fortune: Why the Power Elite Will Lose Power,” did a good job proving that their worldview and use of Keynesianism is unsound. These power elites have lost their leverage; they are at that point where they can’t make it happen anymore. Look at the EU today under Stanley Fischer’s other Keynesian trainee, European Central Bank President Mario Draghi.

We’re dealing with sums that are beyond their comprehension. When you factor in all these derivatives, mixed up like spaghetti with figures beyond even the value of the entire nation and the earth, it’s make believe. And make believe always comes to naught.

“The centralized levers of federal government power over the economy offer tremendous opportunities for insiders to get very rich. They can extend their private power through government privilege. They can and do leverage the existing political and regulatory system, which is a centralized economic system, and in doing so, they maintain their position.”

North again. But, as he says, they are now leveraged out -- financially, intellectually, politically and institutionally; while at the same time they have “little understanding of economic theory” and most of all almost no understanding of “social cause-and-effect.”

And two of those social cause-and-effects are that Main Street's in total economic disrepair and there’s an American buying a gun every 1.5 seconds.

Rusty Trombone's picture

Having intimate knowledge of the absolutely frantic rush to remedy that situation behind the scenes - let be the one to tell you that you really have no fucking clue as to the bullet that was narrowly dodged.


css1971's picture

I've found the best course of action is to say "look we found this problem, it's a doozie".

Then just let it happen. It clears out all the dead wood.


GMadScientist's picture

I made a pretty penny fixing old Cobol wasn't that big a deal.


ebworthen's picture

Utter corruption in the Legislative branch, Judicial branch, Executive branch.

Rigged markets, corrupt banks and corporations, time to tear the fucker down.

the grateful unemployed's picture

i've lived long enough to see the leadership of this country breaking laws out in the open that they would have gone to jail for twenty years ago. i see the POTUS murdering children with his drones, taking financial kickbacks, making racially charged suggestions. his attorney general who is really nothing more than the gangsters lawyer. and the justification for this is that he is less corrupt and venal than the last president. he presents a false view of the world, with enthusiasm and moral authority, and his adoring public supports him. that of course is just one branch.

Atomizer's picture



"You have had all that money can give you, but that wasn't

enough. You became a thrill-seeker. Kill for the thrill.

(assassin) This thrill-seeking became the one great thing in

your life, planning one thrill on another until the murder. Kill

for the love of killing. (guilty) Kill for the thrill. The

thrill-seeker comes from all walks of life. He comes from the

home, a home where the parents are to busy to treat their children

with respect."


"Kill for the thrill. (assassin) Some people think newspapers
exaggerate juvenile crime. All that is defined mostly to the
large cities, juvenile delinquency is underlined. Thus parents
think something is going wrong with the environment. Adults
create the world, children live it. Juvenile delinquency is
always rooted in adult delinquency. And in this process, parents
play the key role when children grow up among adults who refuse
to recognize anything that is fine and good, or worthy of


So What

alatnar's picture

Uh, that was two parabolic charts, just sayin'

q99x2's picture

Is this what getting old means?

Atomizer's picture

Me too. Just had a ZeroHedge Fight Club birthday. Never knew Chuck Palahniuk & I had something in common. Looking back, cannot believe how lucky to apart of this ZH community.  Seems like only yesterday when Atomizer was climbing a chain link fence and diving back into the crowd.  


Ministry - The Land of Rape and Honey - (LIVE) 

I’ll never stop being a asshole to some members, but at least you know that I look out for you. :)


Good night!

Paracelsus's picture

Before Hemingway made his fortune as a novelist,he was a journalist with the Toronto Star among other publications.He wrote of crossing over the border into Germany during the roaring hyper-inflation,and his ability if he wanted to"purchase the entire contents of a sporting goods store for 5 bucks". Hemingway was a world-class bullshitter but this episode  rings true.

There is an interesting behavioral condition known as cognitive dissonance (tunnel vision,being in a state of denial,etc.). It should be interesting when the shelves are bare,the power and phone are shut off,and the Atms won't work. Greece here we come..... 

Darth Mul's picture


The USA in 1999 is under that same degree of Jewish domination that Weimar Germany was under in 1929.


For those of you who are amenable to evidence, why not look into just who heads/chairs pretty much all of the federal agencies pertaining to banking/finance - cbo, fdic, the fed, sec, formerly and often the ira, cftc, treasury, office of management and budget, council of economic advisors, national economic council, bureau of economic analysis and on and on...

This is leaving aside the breathtaking over-representation of Likudnik, neocon Jews in the Bush Pentagon, DHS and Whitehouse


Then look into just who it was supporting a young, unaccomplished senator from Illinois.

Or don't - and hope for the very best when Rahm Emanuel runs for President.  Anyone thinking he's loyal to Israel and the bankers first is just an "anti-semite," right, trolls?


Sometimes it's a struggle to see what is right in front of one's eyes.

Joseph Jones's picture

Next you'll be telling me there's something wrong with a "race" of people who grew up being taught from their holiest of all holy books the Talmud, they came from golden sperm that is the only magic fairy dust sperm in the world that god loves, and that all other races of people are mongrels (goyim). 

Or some crazy crap like the jews made shite loads of money from black slaves and white slaves in the usa.  Or that they ran the mafia through jew Meyer Lansky. 


sarc off

pfairley's picture

Respected analyst Meredith Whitney made an armageddon forecast on Muni bonds too...and that proved to be very wrong.....States govt's proved not to be so mindless....and made adjustments when markets put pressure on them. Ms. Whitney mostly hurried the markets pressure on the govts.

pfairley's picture

They say "the debt premium presumably would arise from inflation fears rather than concerns about outright default"  ?  

 I don't get go overseas at cheap labor rates....we have stubborn unemployment....excess do they figure inflation fears skyrocket interest rates?

hooligan2009's picture

its called stagflation...negative growth with inflation..everybody beats any US manufacturer, throwing people out of work, there is no growth, the dollar falls substantially, but prices compete with overseas prices and hence as the dollar falls, prices go up...= inflation.

all we have is the "race to debase" and the classical hostage situation where each country (hostage) tells the kidnapper (inflation gunman) to shoot the other hostage. this is international politics and how shitfer brains morons like the imf's lagarde run around telling the kindappers and hostages to keep calm, because they are bringing sandwiches (robbed from a hostages back pack).

resurger's picture

IR Fubar Chart +5

falak pema's picture

RESET : WHAT it will look like after the fight.


The whole dichotomy about "values" and wanting to "live in the instance"; 'cos our current civilization is all about the latter at the expense of the former, as the consumerist culture has developed and pervaded all.

It is this that feeds the mindset of the "ferocious beast of capitalism gone mad".

And its proponents, part of the INTRICATE Matrix in government and private circles; a two headed crony elite that develops in ALL imperial constructs, whose ideological posturings animate the sterile debate in society reflected in this thread; aka "statism" vs "free enterprise".  (Remember Populares vs Optimates in the demise of Republican ROme).

ZH does give us sometimes a look back into the past from where we're coming and who the movers and shakers were who made the 20 th century come about, like in this thread : The Men Who Built America: Remembering The Gilded Age Part 1 | Zero Hedge

This is just one instance that stirred up a debate about what the trade offs are between living "successfully" and living "honestly" and we all feel at ZH something is really wrong with first world about our root values and how easy it is in today's world to forget them; notwithstanding that as a generation we have been programmed to celebrate "Woodstockian here and now pop culture and all that goes with it!" These charts show  that momentum built over 45 years of PAx Americana rule.

Just to reverberate on this theme :  here is an article that tries to define the time line about how US culture morphed in post WWI from a culture of "NEEDS" to a culture of "DESIRES" and how the second was fanned by the corporate culture of those "who built America! "

Birth Of Consumer Culture - Business Insider

Interesting reading and IMO a time line flag to what needs to be put right, by the coming generations in terms of values and mindsets. 'Cos this trajectory is unsustainable now that the whole world has bought into this, in materialist LUST and third world dust. We are now constrained by physical asymptotes that this debt frenzy has exacerbated : oil, water, food, population, RMs, ecologocial decay; you name it and there's no getting away. 

Living frugally will be very "in". We always learn our lessons the hard way. 

But before that we have to face the upcoming tsunami of structural debt adjustment and consequences; one way or another, in first world and its surrogate outposts.

The next Copernician revolution is under way; tipping times and decadent chimes.

And its all about values. 

Arkadaba's picture

Thanks for the link to the Birth of Consumer Culture piece. I had heard of Bernays in relation to politics but didn't realize he played such a large role in the growth of the advertising industry.

Troy Ounce's picture




That's 2 charts

css1971's picture

Been there done that already. This is what the late 70s looked like.

Of course the implicit assumption in the chart is that bond holders are as dumb as bricks.

trebuchet's picture

good job you put the commentary because their current account assumption is crap and reality is goign the other way: 

US Current accout declining - shale oil and gas  


Goldman wants it so. 

mind_imminst's picture

I find it hard to believe that 10 year rates will soar. The FED, in coordination with other CBs will print money and buy every bond in the world in order to keep rates low. The rates will not rise (except for whatever the FED deems as a "manageable" rise). Of course, printing and buying trilllions and trillions will cuase all kinds of terrible side effects (and the bond/stock mmarkets will break) but that will not stop the FED. I wouldn't bet on the 10 year reates rising very far. Not only does the FED (and other CBs) believe they can direct "the markets" (which is dangerous), they are acting with enough coordination and volume (of fiat), with governments of the world cooperating (because politicians always take the easy way out), that they are running "the markets". Bond vigilantes are irrelevant.

Tao 4 the Show's picture

Not sure why your point is discussed so infrequently. Jim Sinclair has been saying this for some time. If rates rise, the govt is immediately and obviously insolvent, resulting in a massive loss of confidence. Housing crashes and all sorts of other problems arise. Essentially, the whole system crashes.

Do people really think the Fed will lose control? Will they do it deliberately? The scenario seems half baked without a description of the context.

hooligan2009's picture

no no don't get it...the government is already "insolvent" and the Fed is working through the equivalent of Chapter 11.

we are in a transition to a "right sizing" of the government when some guru will surface who will cut spending will cut spending across all welfare by 40% from 3.6 trillion to 2.2 trillion, raise taxes by 20% from 2.3 trillion to 2.7 trillion and repay the 16 trillion of debt over the next 32 years, before accumulating the surpluses required to (once again) increase the benefits to voters from accumulated capital, rather than accumulated debt.

if you believe that we have seen a fiscal cliff or austerity or that sequestration is in any way "tough", you are dreaming.

TPTB can either "manage" the transition to a "fully funded by assets generating the free cash flow that pays for government spending" model, or they can oversee total collapse and houses being burned for firewood in winter and a huge increase in meat and vegetable "rustling". 

Tao 4 the Show's picture

Was taliking about perceptions and confidence. Right now, all still functions in govt and all can still be purchased with dollars. The name of the game is perception.. USD are already losing standing worldwide. If rates go up through the roof, the tax base will not be enough to pay the interest.

Any gradualism like shown in the above charts is, IMO, unrealistic. Debt is being piled on like there is no tomorrow, probably because there is no tomorrow for the current system. A sudden change to an alternative system is more likely because smooth transitions out of the current system are becoming less and less possible as debt is piled higher.

andrewp111's picture

The Fed can hold long rates to a particular level. They pegged rates at 2% during WW II to finance the war. Of course this required war rationing and wage and price controls, but hey - they did it.

The war cycle should peak again in about 10 years, and we may be in a world war again. The next global war is likely to be very long lasting.

smacker's picture



The two charts are pointless at predicting any sort of future for American finances. They reflect "Simulation II" of the authors' report which is essentially a worst-case scenario if all things remain equal.

But this scenario will not happen because it is impossible to sustain and therefore won't happen. Collapse of the Federal Govt would happen long before this scenario materialised.

Action will be taken, or will occur, to prevent it. Whether that is a governmental move towards a complete totalitarian command economy (in which peoples' wages are diverted and paid via the IRS and what's left after taxation is forwarded to the employee to live on) or the govt will default on its debts (with unknown consequences) ...or whatever. Many options exist. The point is that something will prevent this scenario from happening. That makes the charts nothing more than a scare story showing a financial trajectory if all things continue along the current path. But they won't.


Weisbrot's picture



wouldnt the blue line scenario cause the planed marxist collapse of the corrupt late stage capitalist society that is scheduled to occur in order to eliminate the consititution?


smacker's picture



I'm sure there are various scenarios that might arise, given the projected trajectory portrayed in those charts.

But that blue (purple?) trajectory will not happen because it is unsustainable even for a short period. I mean, can anyone honestly imagine US 10yr yields ever rising to 25%? No. The federal govt would have collapsed long before that happened, not least because of the implications to other domestic interest rates.

One of the alternative actions will arise _or_ will be forced. A useful debate, given the projected trajectory of those charts, is about *what* actions will be taken to prevent it.

My (tongue-in-cheek) suggestion of a totalitarian command economy is one possibility and it isn't unlike your idea of a planned Marxist collapse of capitalism and dumping of the constitution. WWIII (or something close to it) used as a smokescreen to default on US sovereign debt is another and more likely IMHO. Although a mixture of both is probably more likely.

andrewp111's picture

The easiest solution for the Government is to change the system to a pure MMT one. This can be done either by funding the government with seigniorage (trillion dollar coins), or by eliminating government borrowing and having US $ come into existence by the very act of deficit spending. Private banks would have to be abolished (except as Gov't contractors) as well under a MMT system, but we are already almost there today, with 95% of all mortgages made by FHA, Fannie, and Freddie.

smacker's picture



Given the apparent reluctance by governments to reduce deficit spending and accumulation of ever higher sovereign debts, despite the obvious crises, something in my water tells me that a new something is already being worked on to replace the current system, but isn't yet ready to implement. What that something is, is open to speculation. Perhaps it's MMT, perhaps it's WWIII or perhaps it's China becoming the global reserve currency etc. Either way, it will probably involve a Big Reset of current sovereign debts which we all know are both unsustainable and unrepayable. And IMHO it will probably include a shift towards a much more socialist command economy.

andrewp111's picture

Or the Government could change the financial system to a pure MMT one, starting by minting trillion dollar coins.  Government "debt" requiring interest payments would not exist at all under this option.

smacker's picture

There you go. That's another option :-)

hooligan2009's picture

i don't think this is anything like worst case...just saying..

smacker's picture



You may be right. But even this scenario is more than enough to ensure that it will never happen. Somewhere along that blue line the whole political/financial systems will implode _or_ pre-emptive actions will be taken to head it off. Since political elites have their own survival as No.1 priority, the latter course is my guess.

Sufiy's picture

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