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____ Friday November 6, 2015 ____

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Chart of the Week

Onwards & Upwards

Forbes reported the U.S. government has raised the debt ceiling 74 times since March 1962. The latest increase – number 75 – should help fund the government until March 2017 or so. U.S. government debt has grown six-fold since 1990, or twice as fast as the U.S. economy. Government debt as a percentage of gross domestic product (GDP) is now 101%. That’s its highest level since World War II.

Last month, Forbes said the U.S. government owes nearly one-third of all the world’s outstanding government debt. The U.S. is easily the largest debtor nation in the world...the total debt of all countries in the world is slightly over $61.2 trillion. The United States has 4.4% of the world’s population, generates 23.2% of global GDP, and owes nearly 30% of the total global debt. With a debt of $18.3 trillion, the U.S. is the most indebted nation in the history of the world.

All very interesting but does it matter? It doesn't seem to anymore (did you read any news about the debt ceiling debate this time around?). We have a new monetary system where we simply print more money to pay both the interest on this debt and if need be, to monetize it (i.e. buy it up like Japan does every day as there are not enough natural buyers for the debt anymore). What worries me is the moral hazard. What sort of example is the government setting for the people? If outstanding debt doesn't matter to the government, why should it matter to the people? How does this end? I honestly don't know. We all sink deeper and deeper into debt until there is some sort of massive monetary reset. Until then, enjoy living beyond our means, our grandchildren will have to figure out how to deal with it.

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