Media reports on the US' $34 trillion debt pile:
JP Morgan say it could well be a "boiling frog" phenomenon for the economy, as higher deficits and ballooning debt servicing costs could easily become unsustainable
What's this about a boiling frog? It's a metaphor (its also utterly wrong, a myth, but more on that below):
- a boiling frog situation is one in which people fail to act on a potential problem that grows over time, causing it to become more severe until it eventually bubbles over. A frog thrown in boiling water might jump out, but if the water comes to a boil slowly, it's too late by the time it notices it's being cooked.
Anyway, JPM argue that:
- national debt hit a fresh $34 trillion this month
- debt picture will only worsen in the coming years
JPM:
- "The problem for the US is the starting point; every round of fiscal stimulus brings the US one step closer to debt unsustainability,"
- "However, we're accustomed to deteriorating US government finances with limited consequences for investors, and one day that may change (the boiling frog analogy)"
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Unlike US Congresspeople, frogs are not stupid. If you tried to boil a frog, it'd notice as the temperature increased and hop out once it got too hot for comfort.
