Credit rating agency Fitch downgraded the United States from an AAA to AA+ rating.
The U.S. is no longer officially a risk-free borrower.
Truth be told, our country earned that credit rating a while ago.
There was a time in our nation’s history when large budget deficits would have been considered extreme and irresponsible.
I’m not saying that congress of the past had more capacity to feel shame than our current shitshow.
They’ve generally always been a rotten group of folks.
There just wasn’t ever a precedent in place that made it acceptable to borrow $32 trillion that they had absolutely no intention of ever paying back.
Inflation also plays a role.
The concept of trillion-dollar deficits would have been impossible to comprehend decades ago, when a dollar was worth considerably more than it is today.
But let’s take a look at the budget deficit as a percentage of GDP.
This removes the skewing effects of inflation … and unfortunately, gives us a better view of just how badly run the business of our country is being run.
In the 50s and ‘60s, budget deficits weren’t uncommon. PERIOD
We ran deficits most years, but we also ran surpluses and broke even a fairly decent amount of the time.
It was also rare for deficits to exceed 2.5% of GDP.
Deficits rose as a percentage of GDP in the 1970s, due in part to the cost of the Vietnam War.
And then they continued to get bigger and bigger throughout the ‘80s.
Somehow, we managed to balance the budget in the late 1990s … and even run a few large surpluses along the way!
And then the tech bust sapped tax revenues, Bush decided that “deficits don’t matter” and all responsibility went out the window.
By the end of the Bush era and the beginning of the Obama years, deficits had expanded to nearly 10% of GDP.
And then there was COVID-19, surging to nearly 15%.
Today, we’re running deficits of over 5% of GDP, which is more than double what would have been considered extreme in the ‘50s, ‘60s or even the ‘70s.
Any attempt today to bring us closer to a balanced budget will either involve raising taxes, to the point of causing a deep recession, or cutting spending — also to the point of causing a deep recession.
But what can we actually do about this problem?
Hedge fund maven Bill Ackman is shorting 30-year Treasurys. He’s betting that all of this fiscal insanity will force bond prices lower.
I’m not quite that bold, as I know full and well that the Federal Reserve has a bigger wallet than I do. Push comes to shove, I can’t fight the Fed and win.
My solution is simply to get my own house in order. My debt is non-existent. I diversify in real estate and other tangible assets.
I also employ short-term trading strategies that allow me to get in and out of trades quickly, while still making sizable profits which alone provide for my lifestyle and then some..
Strategies that are so easy to follow, you can join alongside me and profit from too!