America’s Famous 106% Debt-to-GDP Number Is Wrong

From a historical perspective, America's current debt problem is much worse than it appears. Current debt/GDP figures are often put in the context of the claimed historical peak: "U.S. federal debt/GDP reached 106%" after World War II. However, wartime GDP was valued at government-controlled prices, which makes the denominator smaller and the World War II peak look larger. Using arguably the best academic estimate of the prices that would have prevailed without price controls produces a World War II peak closer to 86%. After price controls were lifted, annual inflation ran at 12% for several years. That is a main reason that the conventional series drops so rapidly in 1947 and 1948. 

Sources: FRED; Evans (1982)

July 2026, Chicken Little Portfolio Performance

Stocks last to get the message?

Stock markets around the world are at, or close to, all-time highs. As stocks rise, government debt continues to rise, and real interest rate are at multi-decade highs. Can stocks withstand government malfeasance and higher interest rates? 

Debt up, interest rates up, stocks still standing 

June 2026, Chicken Little Portfolio Performance

Financial Fragility  

Stock markets around the world are at, or close to, all-time highs. I continue to believe the financial system is fragile, that interest rates will continue to rise, and that stocks will fall along with severe financial distress.

The next depression could be worse

May 2026, Chicken Little Portfolio Performance

Wolf!

Interest rates around the world have broken out to new cycle highs (See my post "Global Stock Markets are Next to Fall" from mid-May). To mix metaphors, I have been crying wolf that the sky is falling for years; now, all the negative pieces seem to be coming together. I remain 100% negative on risky assets including stocks. 

Global Stock Markets are Next to Fall

Stocks: The Last to Fall

The Chicken Little "sky is falling" thesis has three parts. Government fiscal and monetary policy are disastrous. Consequently, real interest rates will rise leading to a decline of asset prices including stocks. All that remains to occur is the decline in stock markets.

April 2026, Chicken Little Portfolio Performance

 Crushed by Debt

Global stock markets continue to go up almost every day. In the face of this relentless bull market, Chicken Little still believes the financial sky will fall. Real interest rates will continue to rise and (eventually) cause the decline of stocks and other risky assets.

March 2026, Chicken Little Portfolio Performance

War without preparation

President Trump is proposing a 50% increase in military spending for the coming year. If this budget were passed, it would only partially restore a severe decline in military spending. A 200% increase to $3 trillion would get the US back to where we were in 1962. The current focus is on the middle east, but China is our most potent adversary. 

February 2026, Chicken Little Portfolio Performance

Winter is coming

In 2019, I observed that, like the grasshopper, the US was running a huge government deficit during the salad days of low interest rates, low military spending, and no recession. We spent when we should have saved. Today, interest rates have risen, military costs are increasing, and we have negative savings for the next recession. 

January 2026, Chicken Little Portfolio Performance

 Bull Market in jeopardy?

Global stock markets remain the last asset class standing. US Treasury bonds have lost half their value. Bitcoin has suffered a 40% decline, the US housing market is weak, and silver lost 40% in 2 trading days. Can stock markets around the world continue to rally? 

December 2025, Chicken Little Portfolio Performance

 Bull Market remains strong

In 2025, the bull market in global equities remained powerful, while Chicken Little occasionally left his hiding spot to try to short stocks. Every short effort ending in losses, and 2025 continued the losing approach of Chicken Little. Global interest rates, however, continued to rise, giving me some reason to fear that the sky might still fall.  

2025: Bull Market beats up Chicken Little

November 2025, Chicken Little Portfolio Performance

Equities: the last market standing.

Global stock markets are among the last major asset classes to prosper. Bond markets globally have been destroyed, Oil is under $60/barrel even with a weak dollar, Bitcoin has lost 30% of its value, and US residential real estate has declined in price over the last year. 

Stocks strong amid other market declines

October 2025, Chicken Little Portfolio Performance

AI to pay off the debt?

Can AI, and technology more broadly, make us so rich that we can pay off our massive debts without collapse? US debts and deficits are at record levels. However, if productivity accelerates, we can grow out way out of the problem. There are many anecdotal signs of efficiency gains from AI, but no sign of a productivity boom yet in statistics.

r

Robots to the Fiscal Rescue?