* This post was written before Mr. Roche founded Monetary Realism, which was formed due to several disagreements Mr. Roche and many other former MMT proponents had with the school of thought.  For more info on the difference in views please see here.  For more on MR’s views please see here.

It’s nice to see some mainstream economists making logical arguments with regards to America’s financial position.  In a recent research piece Credit Suisse shows that America is far from being broke.  Of course, anyone who understands MMT and the actual workings of a modern fiat monetary system knows this is a preposterous notion to begin with, but CS is using a traditional framework and their evidence counters much of what we so often hear from fear mongerers and politicians:

“Some of our senior politicians and market pundits say it every day: “America is broke.”

We wonder if this is meant to be a joke. America is not even close to being broke. Household net worth is $57T. Public government debt – including the state and local sector – is about $12T. If we consolidate balance sheets to reflect the fact that the household sector is ultimately responsible for repaying this debt we arrive at a household net worth of $45T or 303% of GDP. This is at the high-end of the historical norm of 250- to 300% since the data began in 1952. The current level was surpassed only in the recent tech stock and housing bubbles.

No doubt policymakers have a lot of work to do in terms of agreeing on a politically palatable way to adjust current laws to reduce the unprecedented intergenerational transfer of wealth associated with old entitlement programs and a wave of new retirees. But, ultimately, the resources are there and as we are increasingly finding out, so too is the political will.”

Source: Credit Suisse

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. Brilliant stuff. If a company were able to turn its ‘liabilities’ into that kind of ROE’ I would cash out my 401k, borrow from neighbors, and collateralize my children to buy it.

  2. One may assume what happens in a consumption driven economy when and if “household net worth” is transferred to cover government liabilities, this is even more insane argument in case of Japan.

    Net worth is reflated by ZIRP, estimating earnings by extrapolating credit/deficit expansion of last 30 years and discounting it by ZIRP (well, risk premia is high, which appears to be natural in case of ZIRP and “digital nature” of outcomes).

    However, to consume from “net worth” one should sell that “worth” …

    • Even more crazy in this analysis is that the HH net worth is matched to public debt, but private sector debt, which has also a huge claim against this net worth, is not considered. And the last time I saw private sector debt is > 300% GDP, so the US may indeed be broke by the logic of this type of analysis…


      • yup. household and corp debt/loans adds another ~$25bil.

        the “unfunded liabilities” are, of course, also not considered…

      • Doesn’t household net worth mean household worth after private sector claims against total household worth have been subtracted? What is the definition of household net worth? I also wonder what the actual market value of household net worth would be if we had to start liquidating it to pay our collective government debt. Would that be an all correlations go to one scenario? It reminds me of the housing/financial crisis: Houses bought during the boom were thought to be worth a whole lot more than they turned out to be.

  3. Does anyone really argue this point–being broke. The debate is about the next 30 years and trying to ascertain what the total is or will be as regards unfunded liabilities and the tax levels that will be required.

    But no worries, nothing will be done. Carry on, as you were.

  4. Cullen,

    Technically speaking, America can’t go broke. But the amount of money its creating and it needs to create to meet its future obligations seem to be stupendously high. US debt clock shows the total liabilities to be 113 Trillion … 113 TRILLION!!! More than 1 Million per tax payer.

    I am not an economist, but one thing obvious to me is that US needs to spend the money to meet its obligations. That is it needs to either tax to meet the obligations, or according to MMT, they can create the money they need to spend if not now then in future. Lets say its an expenditure for next 50 years, still it comes close to 3 Trillion a year.

    Do you think this kind of expenditure is sustainable? I am not against spending but this kind of expenditure seem to be a sure shot recipe for disaster.

    • And my question concerning that future which is related to the control engineering term “Lag Time” If the gov is spending that kinda money in the future will it not increase the money supply at that time and will we not have inflation at that time? Granted the money supply is not being increased now.

      The only mitigating factor against future inflation MIGHT be the boomer demographics. Wage pressure may go up because fewer people are working, but fewer people will be spending as the boomers retire with less. Right? This sounds like a shrinking economy unless we open the immigration floodgates. Maybe I’m looking to far ahead, but for me it helps with understanding MMT.

  5. I am in agreement with other posts here, as I don’t believe there are many serious arguments about the country being broke. Because some notion of the term “broke” is understood across the class structures, elected officials generally use it as a scare tactic to quickly and effectively describe their levels of “concern”. I don’t believe they actually believe it to be true, but they do like the reaction elicited from the use of the phrase. It is unfortunate that more time is not spent on discussing the inflationary impact of servicing the escalating levels of debt, rather than continuing to polarize the electorate into the “they who spend” and “we who do not” camps.

  6. Isn’t it funny how “fiscal conservatives” who complain about the so-called debt burden want the Fed to raise interest rates? It’s all politics in the end…class warfare disguised as economics.

    • I want to earn the Max on my passbook saving account…The current APR is .10%….

      According to the Central Bank all is well, but they continue to keep rates at zero…

      Why is that? Oh, Max, are you suggesting that liberals are not savers?

      When a conservative voice (or others) states that America is broke, it means that the government is

      spending irresponsibly, which is no different than the disjointed lexicon use by the Central Bank and many


      • If the govt spending irresponsibly is the problem, then why not concentrate on that? Why do we need to cut programs that have the support of majority of voters because supposedly “we’re out of money”? If the govt spending were debated on merits as opposed to solvency that would have been a dream come true.
        MMT says: we can always afford what we can produce – our only constraint is real resources.

        • “If the govt spending irresponsibly is the problem, then why not concentrate on that? Why do we need to cut programs that have the support of majority of voters because supposedly “we’re out of money”?’

          Today, we have plenty of examples of ruthless and wasteful government spending, whether on the parochial or state level..

          The consequences are quite undeniable, unless of course, one is myopic…

          Peter, the majority of freeloaders watch daytime TV, while producers are out working.

          It is called the tyranny of the majority…The barometer is the Dollar as well as gold which are non-bias


          BTW, my vehicle is 16 years old and it still drives but looks like cr@p…Yes, it is not broken, nevertheless,

          it is a piece of rolling junk…

          Now read the provide link, of which I hold the government complex responsible for…

          • Today, we have plenty of examples of ruthless and wasteful government spending, whether on the parochial or state level..

            REally? And I thought states were cutting spending like crazy, laying off workers, neglecting to fix infrastructure, cutting education budget (about the LAT thing one should cut EVER!) What is this ruthless and wasteful spending, please tell me?

            Peter, the majority of freeloaders watch daytime TV, while producers are out working.

            Ha! So, about 5% of the population just decided to become freeloaders exactly at the same time as the worst financial crisis in decades hit the country (what a coincidence!) and live of the oh, so generous UI? What are you smoking?

            The barometer is the Dollar as well as gold which are non-bias indicators..

            Really? Speculation and bubbles doesn’t exist? And what about the dollar, huh?

            • “REally? And I thought states were cutting spending like crazy, laying off workers, neglecting to fix infrastructure, cutting education budget (about the LAT thing one should cut EVER!) What is this ruthless and wasteful spending, please tell me?” (Quote – Peter)

              The ever increasing proportion of government, that would be my first clue of poor government “investments.” Hear in, Moaistsota, with a looming $6 billion red hole, our Duma wishes to build a pleasure palace for the Minnesota Vikings. And Peter, is you do not think their is WASTE (but in taste) in our education budget, them we went to different schools….

              “Ha! So, about 5% of the population just decided to become freeloaders exactly at the same time as the worst financial crisis in decades hit the country (what a coincidence!) and live of the oh, so generous UI? What are you smoking?” (quote – Peter)

              The dependency class has been nurtured for the last sixty years, Peter…California Gold, a better buzz than my First Sargent had in basic training…

              “Really? Speculation and bubbles doesn’t exist? And what about the dollar, huh?” (quote – Perter)

              The rise in PMs only happens, when the general public losses confidence in the overseers…

              As for the Dollar, Peter, it is one half, yes one half of its strength from the early 80′s…Sorry, but no bubble nor speculation, only the general direction of the weather vane…

  7. Cullen,

    Another pointless distinction – no one ever argues that America is technically insolvent or broke (when you can print your own currency). But effectively, it is BROKE. That figure of liabilities that CS states does not include future entitlements. And that household net worth that CS also cites is the most BS number – inflated housing and inflated stocks!

    I think you (and the MMT’ers) should rise above this very narrow definition of insolvency and agree that there is too much debt in the system, period! And that too much debt is supported by inflated asset values too.

    Harping on this “narrow technical” definition of insolvency gets you nowhere except scoring some brownie points against stupid politicians and fear mongers.

    If inflating away our debts is the way to get out, that is also defaulting for all practical purposes. Printing more $ is no panacea to over leverage!

    • Are you conflating private and govt debt here? Because private sector is over-leveraged and most MMTer will not disagree with you here. But govt debt is a very different creature. Govt debt is the offset of non-govt cumulative NFAs.
      Regarding future entitlement. SS entitlement is about shifting of 1 to 2 % of GDP to the seniors – nothing to get worked up about. Medicare is worse, but the problem is emphatically NOT the program itself but our broken healthcare system. This needs to be taken on, but that’s a totally separate issue from govt. debt!

      • I am arguing that this technical definition of America is not insolvent because it owed its debt in its own currency is largely pointless. Either we let the current stock of debt liquidate or pay back the debts in inflated $. Its a default either way (whether or not it is technically a default is a meaningless and useless point to debate except in very strict legal definitions).

        W/o creating “true value”, fiscal deficit spending is a useless exercise, it gets channeled away into huge inefficiencies and asset bubbles that cannot be supported in future.

        Bottom line, either you liquidate unwanted debt in the system or inflate it away (because it is too much to grow into now!) and either is “default” whether it is technically a default or not. Utter nonsense in mainstream media over this and surprisingly too much harping on “US cannot technically default on its debt on this site too” – that is stating the obvious, move on.

        • Inflation will occur when your economy cannot grow anymore to accommodate the increased demand – in which case you should decrease the deficit (and other types of inflation are not controllable by either fiscal or monetary policies).
          For spending which doesn’t have ROI – such as social security and other transfers and other public purpose programs – yes, the electorate that approves of the programs should be ready to be taxed, if needed, to remove the inflationary effect, IF ANY. But this can always be done ex post.

        • Haris,

          There is no such thing as “paying back the debt”. We’ve been accumulating debt since the day our nation began. Just look at the history of debt ceiling votes. There have been 40 of them or so and they were always higher. That’s because, as a nation, our debt has always grown as our needs have grown. We don’t pay it back because we owe it to ourselves. You’re still conflating the household vs govt issue.

          This comment is very good:

          W/o creating “true value”, fiscal deficit spending is a useless exercise, it gets channeled away into huge inefficiencies and asset bubbles that cannot be supported in future.

          Right. Govt spending must be targeted on productive output so as to maintain the value of the dollar. A country that just spends to spend will create inflation. It’s a form of corruption and mismanagement. That could result in hyperinflation, but it will never result in a default or an inability to pay our debts.

          Do you see hyperinflation in our future?

          • “There is no such thing as “paying back the debt”

            Actually, that’s not true. Andrew Jackson did it in 1835. (Of course, some argue this lead to a depression.)

            • Yes, check the few times we’ve run surpluses or “paid back the debt”. They were all followed by depressions. The 1800′s were filled with politicians who were hell bent on fiscal prudence and “paying back the debt”. Then every time they drove the economy into the ground they had to spend money to get it out of the hole….review my sectoral balances work. It will help resolve this myth for you.


              • Hey, Cullen. Honestly, I wasn’t trying to stick it in your eye, just correcting a factual error.

                That said, your graph only goes back to 1961. Things were different in 1835, as I’m sure you know. I don’t want to harp on this point, but this period (the 19th) century was also a period of great, real economic expansion for the US. There are many reasons for this that go beyond this discussion. There were also many challenges to be sure. Again, I wasn’t trying to open a whole can of worms, just add what little I can to the edification of the readers.

                • The 1800′s were a nightmare. We experienced FIVE depressions. I don’t know why everyone wants to go back and live in the 1800′s. Sure, we were an emerging market and growth was higher, but that’s not the country we live in. The 1800′s had a banking crisis, depression or panic every 20 years. Where do people get this notion that the 1800′s were some period of great prosperity and stability? There were FIVE depressions in the 1800′s….1819, 1837, 1857, 1873, 1893….Do you really want to live thru that gain?

              • Consolidation from excess borrowing and driving an economy into the ground is not the same. The first is a cure and it does temporarily slow down the economy the second is a disease and thats when you maintain growth artificially via more debts every time there is a slow down until the ratio reaches what we have now.

                Debt is good when it’s issued against expected growth.
                Debt is bad when it’s issued against expected dreams.
                Even if a currency is not convertible there is always a form of conversion and collateral. “Confidence” alone is a very dangerous and temporary collateral against fiat money especially in a age when communication travels fast.

                The only real collateral of fiat money is the underlying country’s capacity to produce and grow.The US in the 1800 was a new and the fastest growing country in the world and it needed to borrow and had the capacity to do so against future growth expectation.

                You can not compare the 1800 with what as been going on since the greenback became a fiat currency in 1971. If we can’t compare private debt with public debt the same should apply to those gold standard day and today.

            • Canada ran a surplus for 10 year starting in the mid-90′s. The world did not end up here.

      • “It’s not pointless at all. Explain how the high debt is hurting us all?”

        Cullen, with great respect, you can’t be serious?

        A debt is a claim on future wealth. If you can’t print your own money you must acquire more money (income) then you need to live in order to pay back the debt.

        If you are the government and you CAN print your own money, then technically there is no limit to how much debt you can take on. In the extreme, you may be able to create enough money to pay your debt if you don’t have enough income, but in order to do so you must steal the wealth of the people and your creditors via monetary inflation/devaluation.

        You know this better than I. Am I missing something here?

        • You’re missing a lot. You’re missing the fact that government debt = non-govt accumulated net financial assets. That the debt is incured as part of government injection of net-financial assets into the economy, which in turn accommodates non-govt sector’s desire to save in your currency. That inflation occurs when injection of NFAs outstrips the productive capacity of your economy – as in the case the ability of the firms to increase their production in response to increased demand hits the wall and they raise the prices – in which case you shouldn’t be injecting NFAs to begin with.
          In short, neither govt debt nor its size per se are a problem. It can definitely be, depending on the circumstances. But who decided that today’s debt is too big? All the terrible things that were supposed to happen to us because of the size of our debt never came to pass. And debt hysteria started long, long time ago. See this, for example

          • Yes, that all sounds good in theory. And you’re right, the debt alarms have been ringing for decades. And for good reason. Take a look at debt levels at all levels and sectors of our society? Just because you can’t predict what the ultimate breaking point is, does not mean rising debt doesn’t matter.

            From a personal perspective I’d say you hit the wall when you can no longer service your debts.

            From a governmental fiat currency perspective, I’d day you hit the wall once the gov starts devaluing my currency to, not just foster economic growth, but simply to service the debt.

            Are we there yet?

          • One more thing, Peter: ” All the terrible things that were supposed to happen to us because of the size of our debt never came to pass.”

            Are you kidding? The most important sector in the economy, housing has been in depression for about four years or so. And things are not getting better. 44 some odd million Americans on food stamps. Declining wages. Graduates with no jobs and huge debts. People out of work for years. Labour participation at historic lows (and not because families are richer). Crumbling infrastructure. Increased poverty. Nice trailer homes everywhere. I can go on. What would it take to prove to you that terrible things are happening? An asteroid collision?

            • Housing is not in depression because of govt spending. Housing is in depression because we have no lending standards in this country. There used to be a time in America when you had to post collateral to obtain a loan. Those days are long gone now that every public company with a banking arm needs to maximize profits. So, we tear down the standards and look what you get – a broken lending market.

              You want to avoid another housing crisis in this country? Implement a 20% down law. There. Done. You’re welcome. But it will never happen because it would hurt bank profits.

              • I totally agree, but the result was too much debt, which could not longer be serviced, let alone grow.

                The reasons for government limits to debt may not be the same as the reasons for private citizens. But there are limits. Let’s just hope it doe not take a currency collapse to prove it.

                • Of course there are limits. I’ve never said otherwise. But the govt can’t go insolvent like a hh. They could cause hyperinflation, but that’s a totally different animal. Pvt sector debts are too large. No doubt. That is the cornerstone of 85% of my work here….

                  • And you do excellent work, and I personally thank you for it.

                    My point, as a private citizen, is that private sector debts and wealth are all that really matter. Governments who destroy their currency can always just issue a new currency, like Germany did, and (almost) pretend nothing ever happened. But it’s the people who have to pay the piper. When we lose, we lose for good. That’s ultimately why gov debts matter. Because WE have to pay them somehow, either via a devalued currency or higher taxes, or both.

                    • So, John , you agree that the problem is private debt, right? Next you need to realize that private debt is high because people leverage, and one reason people leverage is because they don’t have enough money to sustain normal standards of living, paying for education etc. So this is not about govt debt at all, except we are currently grossly overtaxed.
                      And inflation concerns were answered many times, so, please, don’t repeat those.

                    • WE have to pay them somehow, either via a devalued currency or higher taxes, or both.

                      Growing economy pays for itself. You now have about 20% un- and under-employed, lots of spare capacity – so, lots of room for growth. Don’t worry about getting fat when you’re starving.

        • Right. But let’s keep things in perspective. Our problem is not high inflation. The defense would like to enter into evidence exhibit A.

          • Cullen,

            First of all, you can believe the official CPI numbers, or you can use your own judgement and look around. Let’s not pretend the gov does not fudge the numbers (not by lying necessarily) just by carefully manipulating the inputs. The way they measure employment has changed. The way they measure CPI has changed. Why? No doubt to hide the truth. Sam Clemens said there are lies, damn lies and statistics.

            Second, I said in some previous comment once, that nominal prices alone do not tell the story. What really matters is affordability. During a deflation prices can go go down but products can still become less affordable if money is getting scarcer at a faster rate. See the ’30s for reference.

            • I look around. I see interest rates near their all-time lows. I see housing prices cratering. Mortgages are 45% of the personal paycheck. Are you just excluding that lump sum in favor of gasoline and food (25% of hh costs?). Housing affordability is through the roof! And the CPI doesn’t even properly account for the decline in housing prices. It INFLATES them by using equivalent rents.

              I don’t know why people simply ignore their largest cost when considering inflation. I know you see the gas sign every day, but come on.

              • Yeah, good points, but once again. I am not arguing inflation per se. I am arguing affordability. Housing prices are so low because the average guy can’t afford one, in real terms. The reality set in once the debt machine broke.

                And I would argue that energy and food are the primary costs for any family and economy. Without cheap energy there is no economy as we have today. And without food there are no people to populate the economy. A bit extreme, I know but you get the point.

                We are just (still) lucky enough that most people may yet be able to absorb the higher costs in food and fuel, but believe it or not, many of us are reaching even that limit.

        • Dah!?

          Obviously, assets are better than debt/liabilities!

          What would u rather own? A fully paid house (asset) or a $1m loan (liability)?

          • Paul (and everyone else who misses this),

            While you were paying off your house (saving technically), someone else MUST have been borrowing…

            SPENDING = INCOME.

            Savings is a leakage to the economy. For every dollar saved another dollar must be injected by borrowing. That could be someone else in the private sector; it could be the foreign sector (exports); or it could be the government!

            • Another good point, Adam, but I thought that every dollar in circulate is spent nine times?

          • Mr Skinner, the house unless I had a government loan which would allow for a default with consequences…

    • Our politicians yell about the deficit, but they won’t fund the IRS enough to collect 200 billions of uncollected taxes even though every dollar spent on collcting yields at least 10 dollars collected. And they won’t cut huge payments to oil and ag business, not to mention loopholes, so who are they kidding? Gullible voters I suppose.

      • Gerald, so they collect the 200 billion, it will only be spent and nothing will change…

  8. I am not an economist, but it seems to me that gauging financial wealth by comparing net worth to debt is somewhat specious. We all know that net worth can collapse very quickly because the assets that comprise that net worth depend on the market. Houses anyone?

    But debt it debt. The nominal value of an existing debt does not change due to supply/demand forces of the market. And one way or another it has to be paid–either by the borrower, or the lender, or a combination of the two.

    I think the better way to measure financial wealth is by income vs. debt, because you need income to pay the debt. You don’t pay a debt with your net worth. Yes, you can monetize your assets to pay down your debt, but that reduces your net worth. There is not escape in the aggregate.

    With incomes stagnant or decreasing, are we all going to monetize our assets to pay the debt? If we all did, to whom would we sell them? So then what happens to net worth then?

    • John, your income like most is stagnant, but the top 2% are making out like bandits. You must have seen the millions of dollars salaries at failing banks and wall street.

  9. You may be right, geraldP, but that’s another issue and not the point I was trying to make.

  10. lol. lets say we believe our governments phoney accounting, and not even count all the hidden debt. and lets ignore the growth trend in debt over the last 10 tears. the national debt alone is $14 trillion and growing by over a trillion a year. a 100% of gdp.

    btw, when they say “america is broke” they are referring to our government. not households.

    and how about considering some of the future liabilities in the equation.

  11. Mr. Roche,

    With respect, and if you will forgive the didactic tone, I urge you to reconsider your perspective by reading with care Reinhart and Rogoff’s “This Time is Different”.

    US gov’t spending has grown 6%/yr. for 20-30 years to the “private GDP” (total GDP less total gov’t spending, including personal transfers) growth of 5-5.5% over the period, whereas private GDP growth since ’00 has been less than 3% to gov’t spending of 6%. (The gov’t is doubling in size every 11-12 years to the private economy doubling every 17-18 years.)

    Worse, the 10-year average trend rate of real private per capita US GDP has begun to contract as of ’10 vs. 2.75% real per capita gov’t spending growth. At the differential nominal and real per capita growth rates, the US will reach the critical faster-than-exponential Jubilee threshold by no later than the late ’10s to early ’20s, at which point gov’t spending will have to double every 4-5 years vs. 11-12 years today just to prevent outright contraction of nominal GDP by 30% or more.

    Moreover, the US fiscal deficit at an astounding annualized 17-18% of private GDP and 80% of federal receipts is among the more obvious terminal trajectories from history for gov’ts heading toward fiscal default. Incremental gov’t borrowing and spending since the onset of the Greatest Depression (and end of real per capita GDP growth) will reach 45%+ of private GDP this fiscal year and is on track to reach 100% of today’s private GDP by ’15-’16. It took Japan 6-7 years to run cumulative deficits of 50% of private GDP and 12 years to reach 100%; we are at a pace to do it in half the time.

    Finally, one of the unambiguous indicators of eventual or imminent fiscal insolvency is when net interest on the public debt to gov’t receipts reaches the 20-25% threshold, after which the interest burden can no longer be sustained with the trend rate of spending and level of public debt outstanding. The US gov’t’s net interest to receipts is today at 12-13% and growing at 10-12% since the onset of the Greatest Depression, which is a doubling time of just 6-7 years, all else equal.

    Thus, we have no more than 5-6 years before gov’t spending, receipts, and net interest/receipts severely constrain gov’t functioning, including restrain the overstretched US imperial military, and the private US economy; and this will occur with the peak rate of change of growth effects of peak Baby Boomers drawing down on elder transfer programs, as well as global peak oil production and peak oil exports effectively preventing growth of real per capita GDP worldwide.

    Therefore, it is conceivable that global energy constraints and disruptions to the production and supply chains of the imperial trade regime will exacerbate fiscal and private economic conditions worldwide even sooner than ’15-’16, coinciding, if not causing, another deep global economic contraction, financial market crash, and causing severe fiscal austerity or default sooner.

    P.S. The nearly $10 trillion in US gov’t debt held by the public at the term structure is close to $12 trillion in FV terms (126% of today’s private GDP) with compounding interest at the average term. The $14 trillion in total public debt outstanding in total FV terms is $23 trillion at the longer average term (240% of today’s private GDP). These figures are the effective public debt levels and associated net interest costs we face in the next 7-30 years, not counting any incremental debt and net interest cost added in the years ahead. The private economy simply cannot grow anywhere near the rate required to service the public and private debt in the years ahead. And gov’t spending cannot continue to grow at twice or more the rate of private GDP and deficits to private GDP of 18% to prevent overall GDP contraction. Something has to give . . .

    • That is a bunch of numbers but even orthodox economics says that as long as interest on debt is less than growth rate of the economy, then Intertemporal Government Budget Constraint holds (not to mention that solvency due to inability to pay off debt does not hold for fiat regimes). And MMT recognizes that interest rate is a policy variable set by the Fed. Scott Fullwiler wrote a great paper of Fiscal Sustainability from MMT perspective, I advice you to read it:

      • Aaah I see that since the FED controls the interest rate and keeps them low to stimulate growth the growth will outpace the interest on the debt and all will be fine. But if the whole world is in debt and under the false illusion that US treasuries are worthless who buys the US debt? Does it continue to be the FED? and if so how will that play out?

          • You know I remember Reaganomics and the liberal’s complaints about the deficits then and then everyone else saying that we would grow our way out and I guess we did and then the moral implication that we paid off our debt with dollars of less value and I really didn’t care so much because I saw the whole merry go round getting started by trade imbalances and thought that “revenge was sweet”, but nowadays the whole world seems to be in trouble and I have to worry about the trade sanctions that occured after the Great Depression and wonder if we might have to go to war before all this plays out. If MMT is correct then great pressure might be on Cullen to get the word out before the Middle East wars spread elsewhere.

          • El Viejo, there are several possibilities. First, MMTers say you don’t have to issue debt at all. Your dollars are always desirable as long as you’re able to enforce taxation, so, you can just spend without issuing debt. Now, this is impossible under current law, so, either the Fed buys Tsys, or, what is more likely, the private sector will still buy it – see this discussion about how even with current laws there is still going to be arbitrage for the private sector to buy the Tsys.
            Johm, Warren Mosler has a paper called “A General Analytical Framework for the Analysis of Currencies and Other Commodities” where he discusses money as a public monopoly.

      • Scott – this is great. Thank you. Now will Reinhart & Rogoff refund me $20 on their book I should now return?

  12. James, you make a good point. Gauging government solvency using private sector balance sheets is disingenuous, unless you assume the gov can just confiscate your private wealth any time they wish. Oh wait, I forgot. They are.

  13. Even a blind person can see that the US is broke.

    Its government’s debt is US$14.2 trillion or 96% of GDP. The government’s annual revenue is US$2.28 trillion, whereas its annual expenditure is an EXTRA US$1.4 trillion!!!

    The US fiscal gap is US$202 trillion and things are so bad that the Fed is now funding 70% of new loans to the US Treasury (by creating dollar bills out of thin air – not even, by simply creating dollars via credit entries on computer screens!)

    If the interest rates rise by 100bps, the government’s annual interest payment will increase by US$140 billion!!! If interest rates go back to 4 or 5%, annual interest payments will increase by US$560 – US$600 billion!!! Then, the US government will spend 25-30% of its annual revenue on interest payments on existing debt.

    Of course, the US will not default (the Fed can always create trillions of additional dollars), so technically it is not insolvent.

    However, the end game will be extreme inflation and a currency collapse.

    Keep your gold, silver and other hard assets. A great inflation is now underway.

    • So, Paul, you now agree that Fed is part of the govt, right? Good progress. Now you need to realize that the Fed controls the interest rates. I strongly suggest you read this paper by Scott Fullwiler, it is all laid out, with some algebra even:
      “Interest Rates and Fiscal Sustainability”

      • Peter D,

        The Fed is NOT a part of the government – it is a private bank. Go to the yellow/white pages, u’ll see it listed next to Federal Express. The Federal Reserve is as ‘federal’ as Federal Express!

        The Fed is in the business of lending money, so now that the private sector isn’t borrowing, it is very happy to lend to the US government (this is what the QE or money lending program is all about).

        The banks live off interest and the Federal Reserve does not care who borrows as long as someone borrows from it.

        Before you dismiss my facts, please go and read ‘Creature from Jekyll Island’ and ‘Secrets of the Federal Reserve’.

        Also, go and watch a documentary on the Federal Reserve by Eustance Mullins (you should be able to find it on youtube)

        The mind is like a parachute – they both work when they are open.

        • And I told you that this is a bunch of conspiracy theories. The Fed is a creature of the Congress. But you yourself said “Of course, the US will not default (the Fed can always create trillions of additional dollars), so technically it is not insolvent”, so, you seem to contradict yourself, because what you said holds only if the Fed always accommodates, in which case there is no sense in saying the Fed is not part of the govt.

          • Peter D,

            The Fed always comes to the ‘rescue’ and eases NOT to help Americans!

            The Fed always eases and prints for the following two reasons:

            a. Provide a cheap source of funding for the bankrupt US government
            b. To lend even more money so that it can collect even more interest

            By the way, the conspiracy theory is not that the Federal Reserve is private – this is a fact (go and check the location of its listing in your white/yellow pages). The conspiracy is what has been fed to Americans for decades – that the Fed is there to provide price stability and create maximum employment!

            If these are the Fed’s dual mandates, why has it failed so miserably???

            Do you really think that a 97% loss of purchasing power of the Federal Reserve Note since 1913 is a coincidence or is this what you call price stability?

            And, what about the 25 million Americans who are currently out of work (the U6 unemployment rate is almost 16%)? Is this what you call ‘full employment’???

            If you realise the true purpose of the Federal Reserve (indebt the society and maximise profits for its banking cartel), you will note that it has succeeded perfectly!!!

            Do you think Bernanke is stupid? Do you think Rockefeller, Rothschilds, Morgan, Warburg and Lazard families are stupid??? No, no, no….

            These are some of the richest families on the planet (although they never appear in Forbes), and they did not become rich by stupidity. These guys realised in the early 20th century that in order to stay powerful, they had to fool the public via deception. This is why they called their central bank the ‘Federal’ Reserve and this is why Bernanke’s policies ALWAYS favour the banks.

            Open your eyes and your mind; otherwise you will also be taken to the cleaners.

            Before you dismiss my facts as lunacy, go and read the following books -

            Creature from Jekyll Island

            Secrets of the Federal Reserve

            Good luck to you Mr. Peter D, I hope you accept the truth.

            • Paul

              All your scary numbers only prove one thing; That purchasing power of the dollar since 1913 and overall well being of the citizenry are not related.

              If you could somehow demonstrate that we are 97% worse off (which is virtually 100% worse off) then I would give your analysis some credibility. If we are 100% worse off from our 1913 brethren, why do we have cars with GPS and they didnt, why do we have HDTV and they didnt, why do we have treatments for brain cancer and they didnt, why do we have 40 hr work weeks and they didnt, why do we have the ability to have a weekend vacation 1000 miles away and they didnt?

              We are at least 100x better off than our 1913 brethren yet we have that lousy old devalued dollar. I guess it just goes to show you that the value of the dollar means little to overall welfare.

  14. One more point. The US gov’t debt held by the public has grown at 10%/yr. (doubling time of 7 years) since the secular bull market and GDP trend growth peak in ’00 to nominal GDP growth of 3.8% and private GDP of 2.8% (doubling time of 24-25 years), with the public debt held by the public now at 100% of private GDP.

    Were the trend rates to persist hereafter, public debt held by the public (not counting non-marketable intra-governmental debt or gross public debt) will reach 100% of nominal GDP and 180-85% of private GDP before the end of the decade.

    However, since the onset of Peak Oil and the Greatest Depression, the US gov’t public debt held by the public has grown at an average rate of 22-23% (doubling time of 3 years) to nominal GDP of 1.3% and private GDP of -0.9%.

    Were the post-Peak Oil and -Greatest Depression trend rates to persist hereafter, the public debt will reach 165-350% of GDP and 290-810% of private GDP by ’15-’20.

    Obviously, this is mathematically impossible, and the post-’10 trend rate of real per capita private GDP will not permit growth of US gov’t borrowing and spending much longer. Draconian cuts will occur, like it or not, whether by choice or by the gov’t failing to remain solvent to continue spending. It is only a matter of when, not if.

    Consequently, the US stock market is GROSSLY overvalued based on the post-’07 trend rate of likely nominal and real private per capita GDP and the associated secular revenue and earnings growth and P/E trend hereafter. The only question is when the stock market discounts negative real per capita private GDP growth and S&P 500 revenue growth of no more than nominal GDP at the Greatest Depression secular trend rate.

  15. forget about going broke, ask yourself this:

    does the usa have the stature that it had ten years ago?

    is the standard of living higher now than it was ten years ago?

    is the usa prepared to handle a major shock to the economy?

    what are the markets telling you? you know mr. gold and mr. dollar?

    • “does the usa have the stature that it had ten years ago?”
      Compared to what? I mean, we’re still only 5% of the world population and yet we produce 25% of all the worlds total annual output.

      “is the standard of living higher now than it was ten years ago?”
      It depends on who you are. Top 1% are allot richer then they were 10 years ago.

      “is the usa prepared to handle a major shock to the economy?”
      Is the world?

  16. I don’t understand this. How is hh net worth 57T when public debt is only 12T? That means hh must be holding 45T in corporate or foreign debt, yes?

    • You’re kidding, right? How about stock holdings, property, real estate, savings accounts, demand deposit, small business stakes, and so forth. There’s a lot of wealth in this country.

      • Right. This is the wealthiest nation on earth.

        Guys and gals, don’t be fooled by the talking heads in pinstripe suits. They want you to believe that it is the govt that is stealing your wealth by spending money. The reality is that this country is in this mess because those same guys in suits have helped to breakdown every legal barrier stopping the financial institutions from making money. This would have been a garden style variety recession had it not been for the banks. Instead, main st suffers and wall st gets the bailout. You deserved the bailout. Not them. And now they’re trying to convince us all that it’s not them that is the problem, but our govt. And now they’re proposing fewer regulations and more ways to make the banks rich. Open your eyes. You’re batting for the wrong team….

        • Absolutely, my brother and I had this same dicussion a year ago. Potential money pooling at the banks (in an attempt to increase debt) and the people refusing or not being able to borrow. They would have done better by increasing the whole FICA paycheck rebate. Psychologically, people are more inclined to spend to the level of their regular income. A big rebate just goes into the bank.

          Think of the “new” money creation by debt and the increase in the money supply. We really would have inflation.

        • Cullen,

          Wanted to get your take on something.

          I worked at a large investment bank during the crisis. We survived, in large part due to TARP & the Fed backstop. I am, thankfully, and of my own volition, no longer working there, but during the crisis I certainly was pro-”bailout”, if out of self-interest alone. I realize now that shuttering a lot of the worst banks and putting them into receivership would have been the best solution. But at the time, you couldn’t have convinced me that backstopping the banks wasn’t absolutely necessary to avoid a full-blown meltdown. This leads me to two thoughts/questions for you:

          1) Do you think putting a number of the large banks (Citi, BofA, Morgan, maybe Goldman) into receivership put us into a deeper hole than we got into?
          2) Is the financialization of the economy an inevitable result of the gross wealth disparity? A kind of corporatized equalization mechanism that chips away at that upper 2%’s hoard, basis points at a time? Or is that misguided and simplistic. I don’t think I believe it, but I wonder if financialization has been the result of more forces than government dereg.

          Thanks in advance.

          • *edit: Do you think putting the banks into receivership WOULD have put us into a deeper hole than we got into?

          • Thanks for the reply. You pretty much summed up what I was thinking as well.

          • Totally agree with you Cullen. Sweden is doing great. From 1994 until 2010, Sweden’s average annual GDP Growth was 2.68 percent reaching an historical high of 6.90 percent in September of 2010.

            Sweden predicts a budget surplus and plans to tax cuts are economy beats Europe according to a Bloomberg article from Johan Carlstrom.

            “The largest Nordic economy will expand 4.6 percent this year, compared with the 4.8 percent predicted last month, the government said in its spring fiscal policy bill released today in Stockholm. The government raised its forecast for growth in 2012 and 2013 and predicted a widening surplus over the next four years as unemployment falls.”

            “The Swedish economy grew 5.5 percent in 2010, the most since 1970, as exports recovered from the global financial crisis.”

            Sweden is doing the right thing:
            “Reinfeldt’s four-party government alliance had already revealed it will invest more money in the country’s railway infrastructure and that it wants to ease benefit rules for long- term sick leave. It’s also considering next year cutting income taxes for foreign nationals with “expert knowledge,” dividend taxes for some small businesses and allowing bigger write-offs for investments in research and development.”

            Applying recipes for expansion:
            “The government has cut income taxes by 70 billion kronor ($11.1 billion), or about 2.1 percent of the economy, since coming to power in 2006. It has also reduced corporate and payroll taxes and abolished a levy on wealth.”

            On top of that:
            Finance Minister Anders Borg wants Sweden to introduce more tougher rules on capital buffers for banks than other countries.

            The government is closely monitoring housing to avoid a bubble and already has introduced measures to contain rising household debt such as introducing a loan-to value cap of 85% for mortgage borrowing….

        • Actually, Cullen, I blame both the banks and the gov’t. For a hundred years or so, after the banks captured gov’t, they have colluded to steal the wealth of the people. Each has benefited from this alliance.

          I’m sorry, I don’t see gov’t, in this current phase, as being there to foster the growth of private sector wealth. Governments throughout history have always done everything they could to take private sector wealth to feed themselves. I’m not saying government is all bad. We need government. But we need government, by and for the people. To give them a pass and blame it all on the banks only identifies half of the culprits.

          • More banking regulation. That’s my point regarding govt. We sacrificed lending standards for corporate profits. The results – debates like this due to 30 million unemployed Americans….

        • I thought it was the government telling me that the banks were stealing our money?

          Those dirty bankers, with guns and tactical units buttressed by penal institutions…

          Yes, by God, they make the rules, steal our money, place the blame on us and send us to the gulags….

        • Cullen,

          For the first time, I agree with you 100%.

          The REAL bastards are the bankstas. They loaned huge amounts of cash, indebted the US society (Americans were also guilty of being greedy) and then, when the banks went bust, they forced the government to save them at the expense of the taxpayer.

          The quicker Americans realise that the US government is simply a puppet and the real controllers are the elite banking families (Morgan, Warburg, Rockefeller, Rothschild, Lazard etc.), the quicker they will force the perpetrators out of power. As long as Americans are fooled into pointing fingers at the smokescreen (Republicans and Democrats), nothing will change.

          Obama was all about ‘change’ but if you see his economic advisers, they are the same corrupt morons who bankrupted America – some change!

          The Federal Reserve MUST be exposed for what it is and then abolished.

          May the banksta families long burn in hell.

      • Yes, but it’s all be declining in real terms, except of course for houses which have declined in both nominal and real terms.

  17. well mayb i’m off by a factor of 10. but even $600,000 seems high.

    i must be hangin with wrong crowd.

  18. Cullen:

    Why do you suppose there is so little discussion of defense spending here, and in the MS media, when discussing deficits and national debt.

    Why is it only about entitlements, (Medicare, and Social Security)?

    We would be equally secure with half the defense spending we do now, though admittedly it would cause some pretty severe employment disruptions (shipbuilding, airplanes, soldiers).

    Here is a pretty good Time mag article,8599,1967353,00.html

    I’d love to see your analysis of this matter.

    • Good question. We’re all so scared of another 9/11 that we somehow justify policing the world. I’m not against defense spending, but I have to wonder why it’s our job to defend the world. For instance, why are we in Libya at all? I don’t get it. It’s not our job to police the entire world. If we really want to cut spending we need to stop pretending to be the world’s police officers. America was a better place when we remained more isolated in military terms…

      • We were warned…

        Dwight D. Eisenhower.
        Farewell Adress – 17th of January 1961

        “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.”

      • Our policing of the world is not an altruistic or pointless act.

        Under a gold standard, the holder of the world’s reserve currency must also have the most gold.

        Under a fiat paper standard, the holder of the world’s reserve currency needs to make sure the world economy has steady access to energy. It’s an implicit arrangement.

        Those that still think Iraq was not about oil, and point to China’s investments in Iraq are missing the point.

        What did China do with those petrodollars from Iraq? China bought US government and agency debt. Money is not just a means of exchange, store of value, or unit of account. People need to remember that money has geopolitical significance, especially for an Empire. And so, the Empire uses money just as it uses military strength. Money, for an Empire is a tool of statecraft.

        In the end, even fiat needs a connection to something tangible. And that connection must not be severed, or discussed openly. Instead, tell the little people about democratization, or WMDs…

  19. Great. Now all America has to do is hold a gigantic garage sale and sell off 20% or so of the private assets, note the word ‘private’, turn the proceeds over to the Government and we’re home free!

    Only a moron would seriously try to make this argument.

    • Or, just tax away all of our assets. Then the govt will be “rich”. But what will happen to the real economy? Think hard about that one…

  20. Peter (I could respond in the thread)

    “So, John , you agree that the problem is private debt, right?’

    I have been commenting in several threads, so I think some of my points are getting conflated.

    I think the problem is both private and public debt. Too much private debt leads to the mess we have now. Too much public debt can lead to severely devalued currency or even a currency collapse.

    In both cases, the people pay the bill. I may be responsible with my finances, but I can still suffer a major hit to my wealth if the gov’t is not responsible with theirs.

    • In both cases, the people pay the bill. I may be responsible with my finances, but I can still suffer a major hit to my wealth if the gov’t is not responsible with theirs.

      Absolutely. Nobody advocates irresponsible spending. But this is not the same as saying that we need to cut vital, important spending because some magic ratios of debt-to-GDP after which it all supposedly goes downhill. Like, you know, the small measly social safety net that we have, like updating our infrastructure, like education budgets (seriously, cutting education is the MOST MORONIC THING TO DO EVER. Education is about the only sure investment we can leave for the future generations.)

      Room for growth is not the same as growth.

      It is a potential, let’s realize it. John, have you read Warren Mosler’s “7
      Deadly Innocent Frauds”?
      It is well worth your time and will answer most of your concerns, I think.

      • Peter,

        I agree with you, to a point.

        There is no magic ratio, but that should not give us license to keep accumulating debt until the day of reckoning arrives. We want to avoid that day. Read Reinhart (sp?) and Rogoff “This time is different” or the new book Endgame by Mauldin. There is no known point at which the bond market will lose confidence in a currency. But there is no warning before it happens either.

        As I said before, perhaps a good place to stop is before inflation is used as a means of financing debt rather than growth.

        I agree with you on education and infrastructure. To let them decline is bad. They are the foundation of future growth. That said, if you risk destroying your currency, you have to cut back on spending somewhere. This is going to be a huge battle going forward if America does not develop some new, massive economic growth engine based on wealth, not debt.

        I believe it can happen. but it will have be big. Really big.

        • John,

          “There is no magic ratio, but that should not give us license to keep accumulating debt until the day of reckoning arrives.
          That said, if you risk destroying your currency, you have to cut back on spending somewhere.”

          This is all rhetoric. It is repeated as infinitum in the media. And it is all based on wrong understanding of the potential of our monetary regime. Destroying the currency? What does it mean? As Cullen and many others noted, all the attempts to proactively cut the debt in US history lead to recessions and depression and were self-defeating, since the deficits and debt went up right back again. Why? Because by removing money from the economy you let it shrink, your tax receipts go down (remember, the govt can control the tax rate but not the tax receipts) and the deficit magically reappears. When economy grows the opposite happens (which is not to say that any economic growth is good – there are still issues of sustainability and stability).
          You know what, why do I spent time when others said these things much better than I:

  21. Peter: “Growing economy pays for itself. You now have about 20% un- and under-employed, lots of spare capacity – so, lots of room for growth. Don’t worry about getting fat when you’re starving.”

    Room for growth is not the same as growth.

  22. Had accounts with several banks including the featured topic herein. Closed them all, and happy I did. Some of the “fine” investment advice my wife had from Credit Suisse as from Morgan Stanley (notice their hefty payment default in Japan?) before we married is now all set aright. No losses anymore, just safeguarding what we have in diversified places. We are avoiding ALL financial advice except our own common sense. All the rest of the sounding noise is politics.

  23. “This would have been a garden style variety recession had it not been for the banks. Instead, main st suffers and wall st gets the bailout. You deserved the bailout. Not them.”

    Cullen, most Americans will be persuaded by this, but the causes go far deeper and are much more historically far reaching.

    I would urge you to study Peak Oil, peak oil exports, and net energy (EROEI), as the overwhelming majority of Americans are not well informed or are misinformed about this critical topic that will directly affect the rest of their lives hereafter in unexpected ways. Few influentials are telling Americans the truth, for obvious reasons; instead, they will blame Al Qaeda, terrorists, haters of freedom, other politicians, banksters, the Fed, competing tribal desert sky gods, the Mayan Prophesy, aliens from the Rinds of Uranus, and who knows what else.

    The banking situation occurred because of the hyper-financialization coinciding with deindustrialization of the US economy that started coincident with the US reaching peak domestic crude oil production in 1970 and a secondary peak in 1985. Since then, US per capita oil production has fallen 3.1% per year or 53-62% compounded over 25-40 years.

    To make up for the loss of self-sustaining crude oil production that caused us to fail to maintain our productive mfg. base, we grew debt-money at compounding rate until we have today debt-money “assets” of 8-9 times the underlying productive capital stock necessary to sustain crude oil and goods production.

    Put another way, at the differential scale of debt-money “assets” to productive capital stock, and at the long-term trend rate of population and production, there will be no real per capita US GDP growth indefinitely hereafter until a sufficient amount of debt-money “assets” are consumed over time at the necessary per capita rate; and even then the level of material standard of consumption made possible by fossil fuels will be 2/3 to 3/4 lower sustainable at that point.

    At the long-term nominal GDP and M2 growth rate of 6% (made possible by US oil production of 4-5%/year from 1920 to 1970), the period of asset consumption, all else equal, will take 34-35 years.

    The other principal inference is that, just to sustain today’s per capita GDP indefinitely, per capita consumption of liquid fossil fuels at the US domestic crude oil depletion rate must be reduced by 45-50% TODAY and another 25-50% over the next 10-20 years, requiring the typical person to double, triple, and quadruple up for housing, auto transport, utilities, etc.

    Yes, we have debt-money assets in the tens of trillions of dollars; however, we will be forced to conserve and consume those assets for the next 10-20 years just to prevent inexorable per capita decline.

    That the ownership of these assets is so concentrated to the top 1-10% of US households by net wealth (the top 1-10% own 40-85% of all financial assets and receive 25-45% of US income), the bottom 80-90% of US households will be required disproportionately to reduce their per capita consumption to maintain a socially acceptable level of “household” consumption.

    No politician can tell us this and remain in office. No corporate leader can say this and keep his job. No mass-media influential can tell us without being labeled a nut, un-American, a “Liberal” media elitist, or worse. Thus, we are destined to be woefully uninformed and vulnerable to demagoguery, political propaganda (“economics”), and mass-media disinformation, making us unprepared to adapt and become more resilient.

  24. Hi Cullen, Others,

    Why do we call the (vertical) currency issued by the fed/government “debt”? Is it because the currency is created through the purchase of interest bearing Treasuries? Since the fed returns much of the interest to Treasury, isn’t our currency really more like “tokens” (or perhaps like Lincoln’s “greenbacks”) where currency is just abstractions/symbols of available goods/services?

    Also, when discussing monetary policy and government spending, should we be focusing on the rate at which our currency is created/destroyed relative to the rate (or potential rate — e.g. the output gap) at which goods/services are created or used? Thanks for any insights.

    • Just to clarify: … should we be focusing on the rate at which our currency is created/destroyed relative to the rate (or potential rate — e.g. the output gap) at which goods/services are created or used, rather than on the absolute amount of currency in the economy?

  25. Peter, “education” and “health care” spending has grown at a combined rate of 3-4 times the labor force for 20-30 years. The incremental growth of “education” spending is now being taken up by payouts for self-sustaining administration costs and pension payouts and benefits, and demographic effects will exacerbate this trend.

    The 10-year avg. rate of real per capita private GDP is now contracting for the first time in US history. Gov’t, “education” (public AND private), and “health care” spending is no longer sustainable, if we can avoid contraction of 30% in the years ahead.

    The human mind operates in a linear dimension, and growth of population, debt-money, and resource consumption is exponential. Nature, however, is log-linear or functions at a finite limit bound to population and resource consumption. We human apes have exceeded the carrying capacity of the finite planet, but our linear consciousness does not allow us to perceive in real time the cumulative debilitating effects of our unsustainable exponential growth within a finite space.

    Consequently, we do not realize that the limits to growth of population growth and consumption have been in effect in the US since the 1970s-80s, whereas growth is no longer possible as of the late 1990s and mid-2000s to date (since the bursting tech bubble, 9/11, and Peak Oil).

    For example, there has been no net new full-time private sector US employment since the mid- to late 1990s, and no growth since the early 1990s after “education” and “health care” employment.

    Similarly, US real industrial production per capita is back to the levels of the late mid- to 1980s.

    How many Americans know these facts categorically? In my personal experience, fewer than 1%. Does it matter? If one does not know, perhaps not. If one knows, it can explain a lot about where we are today and why. If one does not want to know, well, that speaks for itself and explains a lot about the American mass-social psychology of denial and mass delusion.

  26. “Housing affordability is through the roof!”

    You must not live in Los Angeles.

    • Yeah, I live in San Diego which is even worse. We’re in our own little bubbles here in SoCal. It’s not fair to extrapolate out to the rest of the country….

    • Yes, by historical affordability measures (something like median income over average mortgage payment) housing is affordable (even for LA that has a huge housing crash in the 90s.) The rates are very low, the prices depressed. But with balance sheet recessions people are reluctant about leveraging and credit availability is low too.