It’s the magic number, the line that’s not supposed to be crossed; when a nation’s public debt finally exceeds its GDP. Historically speaking, it’s not a sign of doom like many economists suggest. Numerous countries have sustained for decades with a ratio of well over 100% and many other factors have to be considered before it’s officially time to panic. Of course, there are some cautionary tales.
Greece and Argentina are two examples. A number of developing countries started to decline precipitously after they hit the 100% mark as well. In the case of the U.S., having access to the global reserve currency changes the dynamic completely. Debt does not act like debt in an environment where global trade and investment is mostly is priced in dollars and you control the ability to print those dollars at will.
That said, the recent historic milestone has many people suddenly worried about the state of the U.S. system and the precarious nature of the geopolitical landscape going into the future.
Gross national debt for the U.S. crossed the 100% mark back in 2012. The public debt touched 101% last month. This factor combined with the inflation of the Biden era and the geopolitical uncertainty of the Trump era has the media talking out loud about the kind of crisis alternative economists like myself have been warning about for quite some time.
It’s certainly a change; alternative economists are no longer the voice in the wilderness. But let’s consider for a moment why the mainstream has decided to adopt a cautionary message after so many years of ignoring the obvious.
It’s okay to talk about a crash (if it can be blamed on Trump)
Critics (myself included) have long argued that economic coverage in the corporate media often shifts depending on which administration is in power. Regardless of one’s opinion of Trump’s presidency so far, many outlets have framed his economic policies primarily through a negative lens.
The tariffs are a perfect example. Many analysts warned that tariffs could trigger significant inflation or supply shocks, though the impact so far has been more muted than those predictions suggested. They claimed consumers would pay the cost of the taxes on international corporations. This didn’t happen either. In reality, the CPI barely budged. Why? Because companies are eating the higher costs.
The retail markups on goods made overseas are substantial. International conglomerates have plenty of room to take the hit while avoiding raising prices on the shelf. Trump know this, and anyone who has studies export markets knows this. Yet, the campaign against tariffs was absolutely frantic.
Compare this to life under Biden when every major platform was scrambling to deny that stagflation was exploding on his watch. When it comes to economic decisions by Trump, everything is the end of the world. Under Biden, every problem was “transitory.”
The Committee for a Responsible Federal Budget (CRFB), a Washington-based fiscal watchdog whose board includes former senators, cabinet secretaries, and governors from both parties, has released a sweeping new report warning policymakers are “woefully underprepared” to handle the next recession or financial shock.
They assert that the national debt crossing the 100% benchmark is one signal among many that the U.S. cannot handle a surprise destabilization event, though they note that interest payments on that debt are the greater concern. By 2036, according to Congressional Budget Office projections, debt is on track to reach 120% of GDP with interest swallowing $0.26 of every dollar the government takes in.
The report also warned about rising inflation dangers associated with monetary policy. Similar warnings were given during the Biden Administration but under Trump, the media has decided it’s okay to latch onto the more dire conclusions and amplify them across platforms.
Fortune tied threats of inflation to the Iran war, and Bloomberg has published articles lamenting an inevitable “wave of global inflation” due to the conflict. I find this fascinating given the media’s refusal to accept that inflation existed after the 2020 election. Bloomberg even asserted that rising inflation was a “mirage” and Fortune reprinted those claims.
Tariffs actually offer a path to escape the debt cycle by making corporations that benefit from outsourcing U.S. jobs pay for that privilege. The process would take years and would eventually require spending cuts in tandem, but it’s the only plan that I have seen so far that is proactive. Yet, the media still asserts that tariffs herald Armageddon.
Geopolitical black swan or minor blip on the radar?
In the past I have warned extensively about war with Iran, specifically in relation to the Strait of Hormuz and the 20% of global oil shipments that travel through it every year. The war itself is superfluous; I have little doubt that the U.S. can and will destroy the majority of Iranian military infrastructure within a couple months (if it is not done already). The greater concern is how easy it will be for insurgent elements to keep the strait closed using simple guerrilla tactics.
It doesn’t take much to block up the narrow strait and threaten global oil prices. Securing it would have to be a top priority of the Trump Administration, which seems to be the case given Trump’s latest statements.
It is true that IF the Hormuz remains contested for more than a couple months, the economic effects could cascade into the markets and cause serious instability. However, as we just witnessed with the nearly 7% plunge in Brent crude prices, the hysteria over an impending energy crisis are currently based on speculation and not legitimate shortages.
When an actual crisis occurs, we’ll know it. When shale oil drillers in the U.S. ramp up production because they KNOW the high prices can sustain them, then it’s time to worry. When we see sustained weekly gas price spikes of 10%-20%, then it’s time to worry. When foreign countries start dumping the dollar as the petro currency, then it’s time to worry (I track this regularly. It’s not happening…not yet anyway).
The expectation among many on the political left (and among libertarians) is that the war in Iran will carry on for years because that’s what happened in Iraq and Afghanistan. I have to ask this question, though: Has anyone considered the possibility that those wars lasted for decades because they were DESIGNED to go on for decades?
Who decided the objectives? Who decided the parameters for success? Who decided that occupation was necessary? It was establishment Neo-cons and Democrats that created the necessity of occupation out of thin air. “Defeating the enemy” became a secondary concern.
The length of the Iran war will not be decided by the current Iranian regime, it will be decided by Trump. If the only objective is to destroy Iran’s ability to project military power and to secure the Hormuz (and avoid occupation of the greater territory), then the war will be short and there will be no energy crisis.
This is not my endorsement of the war in general, just the facts. There are much bigger threats to the U.S. economy and the global economy than Iran right now.
Where was all this talk of economic doom when NATO was on the verge of world war with Russia over Ukraine? Where was the political left? They were calling for Russian blood with no regard for the systemic economic collapse that would result should such a war actually ignite.
The BRICS coup – has their time already passed?
Another danger which has been looming in the minds of alternative economists is the possibility of a BRICS led coup against the U.S. dollar as the world reserve currency. Ten years ago, the BRICS held significant sway over geopolitical trends and economic policies. China’s currency was even inducted into the IMF’s Special Drawing Rights system, leading to open discussion by IMF elites about the ideo of a new world reserve system; a new basket currency to replace the dollar.
This agenda still exists. The IMF and the BIS have been working on a global Central Bank Digital Currency plan for quite some time and they have even test run CBDCs in countries like Australia. That said, I believe something has changed in the past couple years.
The globalists have gone strangely quiet. Talk of CBDCs has diminished dramatically. Pressure for national adoption has been fading. Furthermore, the BRICS were supposed to take the lead on integrating CBDCs as an alternative to the dollar, but they have lost considerable influence.
China is facing an internal collapse, driven by a dismal property market and sky high unemployment among youth workers. Their gleaming facade of LED encrusted skyscrapers is falling apart; a problem which is now exacerbated by tariffs.
And, the more I think about it, the more it seems that most of Trump’s foreign policy initiatives revolve around China. His tariffs have been implemented across the board, but the countries hit hardest by them are China and any nations closely working with China.
Trump’s capture of Nicolas Maduro took place right after a Chinese envoy met with him to confirm bilateral trade and oil exports. Trump’s pressure on Panama is related directly to China’s attempts to control the canal. Trump’s actions against Iran disrupt a major oil supply for China. Trump’s tariffs on China have also led to increased tariffs on China from other western nations.
Trump specifically threatened to raise tariffs to 100% on Canadians goods if they finalized a potential trade deal with China that would have made Canada a back door “drop off port” for Chinese goods. Trump is, in my opinion, focused on containing China more than Iran.
China’s ability to project economic power is waning. A dump of U.S. federal debt by China 5-10 years ago could have been devastating to U.S. markets. Today, not so much. China’s U.S. federal debt holdings have dropped by 50% from their peak in 2015. China’s dollar holdings have dropped by 40% since 2025. Times have changed and the BRICS have less momentum (and less leverage) than before.
The real danger
I continue to believe that the most significant danger to the global economy and the U.S. economy is the European elites and their push for war with Russia. A secondary hazard is the domestic movements to burn the country to the ground in the name of “deconstruction.” Domestic political unrest and activist movements could also pose greater risks to the U.S. than Iran closing the Hormuz.
That’s exactly why today is the time to ensure you have diversified your savings with assets outside the debt-based financial system: Physical gold and silver. There’s a reason they’ve served as safe-haven stores of value for centuries.
There are always going to be possible Black Swans and all it takes is the right one to hit at the right time, but, I think we need to temper the rhetoric over every single incident as if it is the catalyst without taking into account the circumstances. There is a fine line between vigilance and hysteria. Let’s be careful not to black-pill ourselves into oblivion.