Morning Commentary: The U.S. National Debt – An Historic Perspective

Foreign Exchange - Morning Commentary

The U.S. National Debt – An Historic Perspective

Share this story:
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
The U.S. National Debt hit $22 trillion dollars on Monday. The number is an alarmingly large figure but it barely caused a ripple in the markets or on CNBC or in the WSJ. The national debt has been growing quite rapidly since the end of the Great Recession but has not interrupted the current economic expansion or the ability of the U.S. government to borrow money and function properly.
This economic problem began to really surface during the 1980’s but knows no political boundaries as the debt has grown under both Democratic and Republican administrations. Most recently, the debt has grown by $2 trillion since President Trump took office and by $10.6 trillion during the Obama administration as the government took extraordinary measures to support the economy. Wars, recessions, tax cuts, natural disasters, etc. all add to debt and to the deficits. What makes this particularly concerning at this time is that we are experiencing a multi-year economic expansion and we are not at war – deficits and debt usually decline during peacetime and periods of economic growth.
Here is a brief history of our national debt:
Year                Debt (billions)              Debt/GDP Ratio
1934                $27                              40%                             Depression                 
1945                $260                            114%                           World War II
1957                $271                            57%                             Peacetime
1977                $699                            33%
1986                $2,125                         46%                             Reagan Tax Cuts
2002                $6,228                         57%                             War on Terror, Tax Cuts
2010                $13,562                       90%                             Great Recession        
2019                $22,703 (est.)              108%                           Trump Tax Cuts
Are there reasons to be concerned? Yes there are.  Here are four reasons for concern down the road. (1) The national debt is taking a larger and larger share of GDP meaning that an increasingly large portion of the government budget is used to service interest. (2) The national debt normally recedes during peacetime and economic recoveries as the government pays down its debt and reloads tools to use during the next downturn. (3) We are increasingly becoming dependent on foreign countries (China, Japan, EZ) to buy our debt and finance our deficits, increasing their influence. (4) Interest rates are historically low and as they rise it will take more of the budget to fund the deficits.
For now, the U.S. has been able to manage through these debts and deficits quite easily as the economy continues to grow and there remains an appetite to buy our debt. But in the medium to longer term, we need do a better job of balancing our books without putting a greater burden on future generations.
  • The big news from overnight that overshadowed almost all other data was the U.S. posting a very disappointing U.S. retail sales number for December and jobless claims coming in much higher than expected. U.S. retail sales for December (prior to the government shutdown) came in at -1.2% against expectations of a gain of 0.1%. This is the biggest drop in more than nine years. Overlaid on top of the retail sales data was jobless claims coming in much higher than expected at 239,000. U.S. interest rates have fallen sharply and U.S. equities have flipped from positive to negative prior to the opening. The DXY is mixed to slightly weaker.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Fidelity: Bollinger band stock signal

Viewpoints: What to do after a data breach