The image below shows the national debt history of the US as a credit card statement.

The Congressional Budget Office said this week (via Bloomberg) publicly held debt will zoom to $20.3 trillion, amounting to 90% of GDP, by 2020. By then, interest payments on the debt will have quadrupled to more than $900 billion annually.

Referring to the debt situation, Richard Russell (Dow Theory Letters) said: “If the Treasury and the Fed just stare at this figure and don’t do anything the compounding interest on $12 trillion will ‘eat us up alive’. With $12 trillion in national debt, the US must try to inflate the debt away or renege on it. Reneging on the debt is unthinkable, which leaves the inflation strategy. The problem must be addressed, since if it is not, the compounding factor will simply make the problem that much more intractable.”

What a predicament!


Source: (hat tip: The Daily Reckoning).

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