The Zero To Negative Multiplier Of Debt On Growth, by Lance Roberts

When a country becomes too heavily indebted, any additional debt, by adding to the debt service burden, retards rather than promotes growth. From Lance Roberts at realinvestmentadvice.com:

There is a zero to a negative multiplier of debt on economic growth. The recent spending spree of the Government to facilitate a transition to a socialistic economy is problematic.

“The scale and scope of government spending expansion in the last year are unprecedented. Because Uncle Sam doesn’t have the money, lots of it went on the government’s credit card. The deficit and debt skyrocketed. But this is only the beginning. The Biden administration recently proposed a $6 trillion budget for fiscal 2022, two-thirds of which would be borrowed.” – Reason

The CBO (Congressional Budget Office) recently produced its long-term debt projection through 2050, ensuring poor economic returns. I reconstructed a chart from Deutsche Bank showing the US Federal Debt and Federal Reserve balance sheet. The chart uses the CBO projections through 2050.

Multiplier Debt Growth, The Zero To Negative Multiplier Of Debt On Growth

At the current growth rate, the Federal debt load will climb from $28 trillion to roughly $140 trillion by 2050. Concurrently, assuming the Fed continues monetizing 30% of debt issuance, its balance sheet will swell to more than $40 trillion.

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