Visitors to an air show may have had the opportunity to witness the vertical take off power of an F18 fighter jet. Flying horizontally to the ground, the jet makes an almost 90° turn and shoots up into the sky, a breathtaking show of power for spectators. Welcome to the airshow of the last three decades. Below is a Federal Reserve graph of household debt. (Click on any graph to enlarge)
Aren’t you impressed with the sheer power of consumer borrowing? Next in our air show is state and local government borrowing.
Not to be outdone, Fannie and Freddie, the government sponsored mortgage companies, show off their impressive borrowing power.
And lastly, our federal government turns on the after burners and shoots up into the debt stratosphere. This chart does not include the almost $5 trillion of debt the federal government owes its agencies, like the Social Security trust funds, or the Federal Reserve.
Together, we – after all, it’s our governments – are the Blue Angels of debt – or perhaps we should be called the Red Angels of debt. Together, we have piled up over $31 trillion in debt, more than twice the national GDP.
Even if we devoted 10% of a $14 trillion GDP to paying down all this debt, it would take over twenty years. As any one of us knows, debt is a serious drag on savings and investment. We can expect that the drag of this debt will be with us for many years to come.