The story of the US credit binge (it’s shorter than you think)

Came across this very good analysis by Jeffrey Grundlach, Chief Investment Officer from TCW, on Barry Ritholz’s blog The Big Picture .

The analysis is written for people reasonably unfamiliar with finance. There’s just a lot of common sense lines in the story. If we ran our own finances like the US govt, we’d be in debt for our lifetime and a generation more perhaps, and still borrowing. The govt debt is at 350% GDP right now and growing. I don’t even want to know how many multiples it might be of US revenue (such as taxes). From reading the possibilities of US monetization of debt and the resultant inflation, one understands why the emerging countries are beginning to clamour for a new global currency standard.

What some of us may not realize is that the debt burden of the country, and the individual, really began from the 80s with Reagan’s administration. So the story is a lot shorter than you think. Jeffrey’s theory is that the US credit story is a tragedy in 3 acts. And we’re just beginning Act 3.

No, it’s not over yet.

Letter from Jeffrey Grundlach

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