Debt Problem

Discussion – Government Debt Problem Globally

As we focus on the Storehouse Vision and establishing Cities of Refuge (part of which is in preparation for future coming economic and political storms) we know the scripture says: “everything that can be shaken, will be shaken” (Hebrews 12:27). We also know what happens in the end-times leading up to Jesus’ return is recorded in the book of Revelation. It includes massive economic disruption, scarcity, famine, even the fall of global trade (Rev 6 + 18) and then the rise of a global system of control, and without pledging allegiance to this “beast” people won’t be able to “buy or sell” (Rev 13:17). Where we are on the end-times timeline is often debated, but what we do know is that these things are close, given the reestablishment of Israel in 1948. We also know these economic prophecies haven’t yet been fulfilled on the world stage, but they are coming as sure as the scriptures say. And are likely coming soon

Background

• March 2021 Discussion: National Debt ($28Tn)
• May 2023 Discussion: Debt Ceiling ($31Tn)
• Today March 2025 ($36Tn)

How Countries Go Broke

Ray Dalio is about to release a book (September 2025) that caught my attention. It explains – based on his analysis – that the US and the world is at risk for a catastrophic “de-leveraging” event within 3 years time if governments don’t radically change their taxing and spending (especially the US). Such an “80 year” event is at least on the levels of 1930s global depression and destruction of various forms of money (the German Papiermark’s failure during the Weimar republic was one). These events historically have included the central bank printing too much money and losing the position of the world’s reserve currency, which would make it doubly bad for the USA.

US Debt Problem

Importantly, Dalio points out in the book that the level of global debt in absolute terms and in relative terms (% of GDP) are at unprecedented levels, so that makes it even more unpredictable of how big the “big one” will ultimately be.

In essence, Ray is saying unless we get our current projected deficit down from 7.5% of GDP to something like 3% GDP, we will enter the danger zone of where the government is issuing new debt just to service the interest on the old debt. He describes this as a no-turning back moment, because the debt and the money printing that goes along with it just spirals out of control from there. And as such, the risk for an economic “heart attack” goes way up. Again, we are 3 years away from that unless we radically change.

Department of Governmental Efficiency  

What about DOGE? Can DOGE and Elon Musk save the day?

Maybe. But not necessarily. DOGE is hoping for an at best amount of annual cuts of cost to be $1Tn per year. That would get us to maybe a deficit of $1Tn, which is 3-4% of GDP. However, it is likely, many of these savings will be one time, therefore going forward annually it will likely be less. BUT – and this is a big BUT, President Trump has outlined he wants to repurpose the savings for other spending priorities. AND then the plan is ALSO to extend the tax-cuts (costs maybe $0.4Tn annually net of GDP pickup). So, net-net will DOGE reduce the deficit much? Maybe not much. We will see.

Ray Dalio

Ray Dalio, found of Bridgewater

Who is Ray Dalio? He is the founder of the biggest hedge fund ever to exist, known as Bridgewater Capital, right here in Westport, CT. Ray cut his teeth in fixed income (bonds) and global-macro (currencies) investing . So, he knows a thing or two about governments and debt, the history of modern finance. failure of currencies, etc.

Trump Dump?

We had the Trump Bump when President Trump was elected. Now those gains have been given back in a “Trump Dump” or correction (down 10%) given uncertainty of the tariffs’ impact on the economy and inflation.

We discuss the debt problem in the context of the recent market route, described here as “Wall Street Fears Trump Will Wreck the Soft Landing“. Still others are writing about how President Trump’s America First policy risks undoing the world order post-WWII and therefore post 1944 Bretton-Woods dollar dominance: Has American Exceptionalism Come to An End?

Referenced in Discussion

Bill Gross, Pimco declares Treasuries headed for default:

World’s largest bond investor Pimco dumps US Treasuries

Warren Buffett:

Warren Buffett: Tariffs are ‘an act of war’

Berkshire Hathaway long cash, bearish on housing:

Warren Buffett’s Berkshire Hathaway sounds the alarm on housing market

David Stockman, Budget Director under Reagan

Resigned the administration in 1985 protesting the lack of will to cut spending and the deficit…