In a year of startling statistics, here’s one that may be overlooked- total national debt is projected to exceed 100 percent of GDP early in 2021, at the latest. While it is important to note that some debt has accumulated as a result of needed pandemic relief, the growing normalcy of extreme deficit spending has steadily risen for most of the last twenty years. For perspective, the national debt last exceeded 100 percent of GDP just after World War II and reached a post-war low below 25 percent in 1974.
Viewed another way, in 1993, the national debt was about $5 trillion; today it is over $27 trillion and $5 trillion was added just this year!
Adding fuel to the (deficit) fire, governments around the world are embracing Modern Monetary Theory (MMT), which proposes that sovereign governments that control their own currency can spend freely and then just print money to pay off their debts. If embraced here, what effect will MMT have on the status of the U.S. dollar as the reserve currency of the world? Watch out if it loses that status.
An interesting take on MMT from John H. Cochrane, as published in the Chicago Booth Review- Debt still matters: When the government borrows, someone—eventually—will have to pay it back
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