The "real value of the US Gov't Debt" is a different way of looking at our situation through rose-colored glasses, but it is a fair analysis.
If we "adjust the debt level for inflation" as measured by the CPI Index (All Urban Consumers Index) from the beginning of the series back in 1966, you will have a line that is grinding SIDEWAYS since October 2020 at a reading of $105.9 Billion. The latest number was the July reading at $105.1 Billion which is a slight decline.
All of this sounds like "hocus-pocus" but it is a fact that inflation makes it easier for the Gov't to pay off its debt in the new "cheaper valued" dollars. The dollar is the same, only there are far more of them floating around in the system so each of them is worth less.
If we analyze how the US debt has increased relative to other countries' debt, we could also see how we are doing. The financial market's are open for analysts to find discrepancies between the value of various currencies and over time, the market adjusts for the amount of currency being created in an economy.
We can look at the TVC:DXY or US Dollar Index to see how the US economy has fared versus its trading partners. The Dollar Index is weighted for the amount of trading between the various currencies.
I can follow up on that analysis in the next chart.
For now, we can at least see an optimistic chart about the actual "REAL" amount of debt that the US Gov't (which is US, the taxpayers) has over the last 3 years. Covid spending and lockdown payments to keep the economy afloat certainly launched us up into the stratosphere FIRST but since 2020 that debt has been in a sideways pattern.
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Here is an update to the previous chart with a longer view
10/16/2023 10:15AM EST
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Sorry to say this, but oddly when Gov't Debt is rising, it can imply that there is dynamic growth that needs to be supported with infrastructure and social services. 1960-1980 was a terrible time for the stock market and the economy and you can see this ratio was going sideways at that time.
I am not a pro-Gov't spending liberal and I am trying to display what the data is telling us. Rising debt along with a rising economy is a good thing historically.
We can see the rise up in debt to fight the war on coronavirus which shut down the economy and caused substantial damage to supply chains that will take many more years to repair.
This was a valuable insight, gives you a new perspective to the way things work. Would love to see a follow up.
TransitMan
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@TracksuitTrader, A follow up and a longer term chart but yeah this is a fascinating read from Mr. Wizard West as always :) !
timwest
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@TransitMan, I added a long term chart yesterday. I hope that provides some additional perspective
abail
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If were are going through a similiar period 60s to 80s, which instruments will give bigger returns?
timwest
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@abail, The 1960's-1980's were inflationary with demographics pointing up. This time we have excess global supplies and weakening demographics. So it could be very different this time. Ideally the best way to invest is in companies with growing and innovative products that are serving customers who can charge ever higher prices and maintain market share. Those stocks will go up 10-30x over the next 10-20 years.