“Blessed are the young, for they shall inherit the national debt.” – Herbert Hoover (31st U.S. President)

Herbert Hoover served as the 31st President of the United States from 1929 to 1933.  And for those who are half decent at reciting US history, you’d note that he served at the onset of the Great Depression.  Starting in 1929 and lasting until 1941, it was the longest and deepest downturn in the history of the United States.  Many causes are sited as to why the Great Depression started, government policies, bank failures, the collapse of the money supply, stock market crash, collapse of world trade due to onset of tariffs…take your pick.  No one thing is blamed, rather it was the perfect storm of all these things that was the catalyst to the decade plus long economic depression.

So, how did it end?  Sadly, it was America’s involvement in World War II.  The war resulted in young men being drafted into military service (earning a paycheck), and the creation of millions of jobs in defense and war industries.  All told, the national debt was a mere $17 billion in 1929.  But by the time the war started and the depression ended in 1941, it stood at $49 billion, a 188% increase in national debt.

A common measurement of the US debt burden is to compare it to Gross Domestic Product, or GDP, commonly called the Debt to GDP ratio (creative right?).  GDP measures the output of the overall economy.  The US Debt to GDP ratio in 1929 was 17%.  But by the time the Great Depression was done wreaking havoc, the ratio had ballooned to 44%.

Fast forward to 2024, and you’ve covered a lot of history.  Wars, terrorist attacks, Great Financial Crisis of ’08-’09, oil embargos, Lehman Brothers collapse, TARP money, bailouts, COVID, stimulus money, and a million news items in between, and we find ourselves with a national debt of over $34 trillion and a Debt to GDP ratio of 121% according to Statista.

You see, a government can run deficits like this because a) they can raise taxes and earn more revenue, b) issue bonds to cover the debt payments, c) print more money, and/or d) a myriad of other things too complex for my short essay.

“So, what does all this mean?” you astutely ask.  Shall we build a bunker, buy dry canned food, and head for the hills?  Or perhaps sell our stocks and hold precious cash…or better yet, gold…or better yet, Bitcoin?  To which I say…not so fast.  Far be it from me to write an entire expose on this topic for fear of a) losing all my readership to a nap and/or b) starting a tweet storm of how you dislike this political party or that.  So, I’ll end this essay by shining a light on another economy that’s in far worse shape than ours.  An economy whose Debt to GDP ratio is higher than humanly imaginable.  But yet, an economy that sits squarely as the third largest economy in the world.  That economy, gentle reader, is Japan.

Japan’s Debt to GDP ratio currently stands at 255%, again citing Statista.  The ratio averaged 146% from 1980 to 2022 and reached an all-time high of 264% in 2022.  It started at 51% in 1980.  So, for over 40 years, Japan has run an astounding national debt.  And their ratio is unheard of.  How, in the name of all that is good and moral, are they still in business?  How are they the globe’s third largest economy?  Answer?  Quoting myself from above: “…a government can run deficits like this because a) they can raise taxes and earn more revenue, b) issue bonds to cover the debt payments, c) print more money, and/or d) a myriad of other things too complex for my short essay.”

And Japan has proven it can be done.  Is there still an implosion on the horizon for them?  Will the economic grim reaper be knocking on their door soon?  Time will tell.  But as of last year, the world’s foremost investor, Warren Buffet, was scooping up stocks in Japan.  He couldn’t buy them fast enough.  And their stock market, while languishing for many years, has come back in a strong way.

All told, for now, government debts and deficits have a way of making headlines…while also not mattering.  Lest you think I’m saying the US debt is fine and we should do nothing…read on.  Lest you think I’m saying to invest all your money in Japan…I’m not.

Debt does matter.  It’s outspending your income, living above your means.  It can’t be sustained in the long-long term.  Granted, Japan has been ‘fine’ for 40 years, but history is not yet complete.  Time has a way of forcing us to pay the piper.  How will it all end…I don’t know.  And, on a daily basis, I don’t worry about it.  What I do worry about is stewarding my personal household income well today.  Finding ways to live below my means, and saving for future needs like college and retirement.  I can’t live on deficits like my government can.  I can’t print money.  But I can invest in stocks of well-run companies who deliver the goods and services I need to meet my family’s needs and also some wants.

And, I can vote.  We live in a democracy where there’s a cadence of elections that I can decide and determine how my vote will count.  This year is an election year, and far be it from me to tell how to vote.  But I would encourage you to let your voice be heard in the way you’d like to see how government steward our tax dollars.  It’s a tall order.  A great responsibility.

We’re blessed to live in this great nation…no matter how high our debt levels are.  We have freedoms afforded to us by the men and women who’ve fought to protect it.  And, we’re free to vote for those politicians whom we deem to be prudent stewards of the times we’re in.  Let us embrace that responsibility, let us live below our means, and let us be grateful for our daily blessings.

The Best Is Ahead!