US Fiscal Position (2025)
Current Metrics
“Central Government Debt Today (% Revenue): 583% | Proj Debt in 2035 (% Revenue, CBO): 648% | Proj Nominal Growth Rate: 3.9% | Proj Effective Nominal Interest Rate: 3.5%” — a-00084
| Metric | 2025 Value | 2035 Projection |
|---|---|---|
| Debt / Revenue | 583% | 648% |
| Debt / GDP | ~100% | ~118% |
| Nominal Growth Rate | 3.9% | 3.9% (CBO) |
| Effective Interest Rate | 3.5% | ~3.5% (CBO) |
Risk Assessment
“At this time, I judge the long-term risks of US government debt to be very high because the current and projected levels of US government debt and debt service relative to revenues are the highest they’ve been since World War II.” — a-00117
The long-term risk is structural (post-WWII high), not cyclical. The US is in the same position as wartime financing — but without the wartime productivity surge.
The r vs g Margin of Safety
With r (3.5%) barely below g (3.9%), the margin of safety is ~40 basis points. a-00082
Stress scenarios:
- r rises 1% (to 4.5%) → r > g → automatic debt spiral
- g falls 1% (to 2.9%) → r > g → same result
- Primary deficit increases → accelerated path to 648%
Global Position: All Major Economies in Late Stage
“By my measures the US and most major countries (the other G7 countries and China) are overindebted, in the late stages of their Big Debt Cycles, and have to frequently rely on Monetary Policy 3 (i.e., big fiscal deficits that are funded by central banks buying the debt).” — a-00120
Key implication: No major economy has a clean balance sheet to serve as credible safe haven. This drives demand for gold and hard assets as the only non-sovereign stores of value.
Multi-Indicator Dashboard Approach
“I weigh a number of factors, many of which I have described. The table shows these indicators across major countries as of my writing this in March 2025.” — a-00116
Assess simultaneously:
- Central government: debt/revenue, debt service/revenue, primary deficit trajectory
- Central bank: profitability, net worth, unbacked money supply, reserve coverage
Both balance sheets matter — a CB with deeply negative net worth cannot credibly control inflation.
Federal Reserve Position
Post-2022 tightening, the Fed:
- Holds long-duration bonds bought at low rates
- Funds them with short-term reserves at higher rates
- Result: negative carry + mark-to-market losses → negative net worth a-00096
“After the central bank has bought a lot of debt and interest rates have risen so debt prices have fallen, central banks have losses that are so big that they lead the central banks to have negative net worths. That is another red flag.” — a-00096
This is currently happening. It is a yellow flag (concerning but not yet crisis-level) unless it forces the Fed to print money to cover operating losses.
The death spiral condition: CB forced to print money to cover negative cash flow → more inflation → rates rise more → more losses → more printing. a-00095
Counter-Cyclical Fiscal Adjustment: The Timeless Principle
“When there are large government debts that are growing quickly so that large cuts to budget deficits are needed, the most important things to do are to 1) cut the deficit by enough to rectify the problem, 2) cut the deficit when economic conditions are good so the cuts are counter-cyclical, and 3) have monetary policy be stimulative enough to keep the economy strong in the face of such cuts.” — a-00269
Counter-cyclical adjustment requires three conditions: (1) cuts large enough to materially reduce debt trajectory, (2) implemented during expansion (not recession), (3) paired with monetary easing to offset contractionary impact. The US post-2025 window: cut deficits while growth is positive, not wait for the crisis when options are limited. Doing austerity in a recession violates rule 2 and accelerates the downturn — the 1937 error and 2010-11 European austerity error both followed this pattern. — a-00269