Five Big Numbers

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JMJ

There are five numbers to consider amongst the Canada / US  and World / US trade war.

1. US Revenue: $4.9 Trillion
2. US Deficit: $840 Billion
3. US Debt: $36.22 Trillion
4. US Debt Payment: $392 Billion (16% of US Gov spending)
5. US Debt vs US GDP: 123%

So ... what does this mean?

Here's a quote from a 2023 paper posted by the Penn Wharton University of Pennsylvania:

Summary: PWBM estimates that---even under myopic expectations---financial markets cannot sustain more than the next 20 years of accumulated deficits projected under current U.S. fiscal policy. Forward-looking financial markets are, therefore, effectively betting that future fiscal policy will provide substantial corrective measures ahead of time. If financial markets started to believe otherwise, debt dynamics would “unravel” and become unsustainable much sooner.

Key Points

• The U.S. “public debt outstanding” of $33.2 trillion often cited by media is largely misleading, as it includes $6.8 trillion that the federal government “owes itself” due to trust fund and other accounting. The economics profession has long focused on “debt held by the public”, currently equal to about 98 percent of GDP at $26.3 trillion, for assessing its effects on the economy.
• We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today’s generally favorable market conditions. Larger ratios in countries like Japan, for example, are not relevant for the United States, because Japan has a much larger household saving rate, which more-than absorbs the larger government debt.
• Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation). Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies.
• This time frame is the “best case” scenario for the United States, under markets conditions where participants believe that corrective fiscal actions will happen ahead of time. If, instead, they started to believe otherwise, debt dynamics would make the time window for corrective action even shorter.

Source: When Does Federal Debt Reach Unsustainable Levels? — Penn Wharton Budget Model

So maybe that's why Trump is looking for ways to assess tariffs violating (IMHO) agreements that he signed using drugs and illegal immigration as an excuse.

In short, the US has dug a very deep hole through its own policies and the result is that the bill is going to come due within our lifetime.

If that doesn't have them scared, we should be scared. 

So from that point of view President Trump is actually doing us a favour. 

He is forcing us to cut ties (economically decouple) with a ship that is taking on water and going to sink.

This is probably going to shakeup the whole world and I don't think blaming others for your problems is the right way to go about it.

Oh well.

In the grand scheme of things, this is just a blip in world history.

P^3