Here’s the shocking answer in several pictures.
Total Credit Market Debt Owed vs GDP
TCMDO vs GDP 2026 Q1
- TCMDO: 115.556 Trillion
- Nominal GDP: 31.866 Trillion
- Real GDP: 24.180 Trillion
On August 15, 1971 president Nixon temporarily suspended redeemability of gold for dollars.
It turned out to be permanent. Since then, there has been no constraints on the expansion of money, national debt, or trade deficits.
TCMDO vs GDP 1971 Q2
- TCMDO: 1.727 Trillion
- Nominal GDP: 1.156 Trillion
- Real GDP: 5.473 Trillion
Total Credit Market Debt owed vs GDP Detail
TCMDO vs GDP Between 2020 Q1 and 2026 Q1
- TCMDO rose from 81.519 trillion to 115.556 trillion, up 34.037 trillion
- Nominal GDP rose from 21.751 trillion to 31.866 trillion, up 10.115 trillion
- Real GDP rose from 20.709 trillion to 24.180 trillion, up 3.471 trillion
In the last six years, debt has risen 10 times faster than real GDP and the curve is accelerating dramatically.
Change in Total Credit Market Debt vs Change in GDP
Change in TCMDO vs Change in Real GDP
- 2024 Q3: TCMDO 1.790 trillion v Real GDP 192 billion
- 2024 Q4: TCMDO 536 billion v Real GDP 108 billion
- 2025 Q1: TCMDO 1.720 trillion v Real GDP -38 billion
- 2025 Q2: TCMDO 1.132 trillion v Real GDP 223 billion
- 2025 Q3: TCMDO 2.023 trillion v Real GDP 256 billion
- 2025 Q4: TCMDO 1.596 trillion v Real GDP 29 billion
- 2026 Q1: TCMDO 1.897 trillion v Real GDP 125 billion
- Seven-Quarter Average: TCMDO 1.628 trillion v Real GDP 128 billion
Don’t Worry Because
- Trump promised to reduce inflation
- Trump promised to cut your energy bills in half
- Trump praises Walmart for lowering prices
- Trump and Elizabeth Warren are investigating oil price gouging
- Trump and Elizabeth Warren are investigating meat price gouging
- Trump has ended 8 wars, one of them 35 times
- There is no affordability issue. It’s a hoax. We are eating lobster.
- Egg prices are down 400 percent says Trump. That’s what everyone should be talking about.
Reflections on Lobster
There is no affordability issue. Lobsters are proof.
Thanks to Trump, you no longer have to go to Japan or Canada to get a Maine lobster.
There is no affordability issue. We are eating lobster and rib eyes.
So please don’t worry about inflation, prices, credit expansion, debt deficits or anything else.
It’s all a hoax.
Nixon Shock
I have been writing about the fundamental problem for nearly two decades. Here’s a synopsis from September 2019.
Please consider Nixon Shock, the Reserve Currency Curse, and a Pending Currency Crisis
In 1971 President Nixon appointed the then Democrat John Connally as Treasury Secretary. That’s when things started rolling.
Our Currency But Your Problem
Shortly after taking the Treasury post, Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar “is our currency, but your problem.”
By 1971, US money supply had increased by 10%. In May 1971, West Germany left the Bretton Woods system, unwilling to revalue the Deutsche Mark. Switzerland also started redeeming dollars for gold.
On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar to protect the dollar against “foreign price-gougers“.
On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.
On August 15, 1971 Nixon directed Connally to suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold. He also issued Executive Order 11615, imposing a 90-day freeze on wages and prices in order to counter inflation. This was the first time the U.S. government had enacted wage and price controls since World War II.
The American public believed the government was rescuing them from price gougers and from a foreign-caused exchange crisis. Politically, Nixon’s actions were a great success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, “We unhesitatingly applaud the boldness with which the President has moved.”
So Much for Temporary
The move was not temporary. There have not been any restraints on deficit spending since.
Wars became easy to finance. Deficits? No problem.
In 2011, Paul Volcker, who replaced William Miller as Fed Chair in 1979, expressed regret over the abandonment of Bretton Woods.
“Nobody’s in charge,” said Paul Volcker.
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TCMDO mixes up bank lending, which creates new money, and other, lending, which just rearranges who has the dough. The change in the first plus federal deficit is a great indicator of activity.
Nonsense
It measures credit. It does not mix up anything.
Besides, the numbers speak for themselves.
Adding to your chart the graft of the quantity of savings would be interesting…on a number of levels. The concept of credit expanding without savings expanding, to wit, borrowing money that no one ever saved, should inspire reflection.
Not saying this means nothing, but it includes a lot of things which are on opposite sides of the balance sheet. Government debt instruments are counted as assets by the people holding them, and the same relationship exists between banks and consumers. Dissolving all these debts would also cancel all assets and savings.
What would one expect in a society as a huge demographic bulge moves through the python (age)? One would expect the overrepresented cohort to frantically be saving and investing, competing for scarce asset yields, driving up the prices of assets and real estate and driving down yields.
All these savings and investments will eventually have to be liquidated (or passed on to benefactors) as the boomers die off. The real problem is not the total amount of assets and liabilities but their distribution and the nature of the investments.
David Sachs — “pass our AI bill, or the stock market get’s it”
I suspect what Mish describes is behind the inflation of stock prices as evinced by the secular increase in the Buffet indicator. And perhaps also home prices relative to the average wage.
Yes and Yes
It is only going to get worse. About 80% of billionaire political donations in the 2024 election went to Republican candidates. follow the money the repubs have millions more to spend on the election because they support the oliarchy
Whenever R’s or D’s sweep, they immediately sabotage themselves to ensure “gridlock”, so they can deny responsibility for the mess.
Organize with your neighbors to seize the House. Or do not bother.
Uniparty you mean. The 2 parties are just different marketing departments for the Epstein class who do the ruling of the US Empire.
The Republicans are on their way out, demographically.
The “tech bros” will start making deals with the newer political parties that are forming. They’ll have to.
Billionaires follow the consensus, they don’t lead
Just like the Fed follows interest rates, it doesn’t lead
If Billionaires think the wind is blowing “D” then they will shift accordingly — e.g., $400 million ZukBux to assist in stealing the 2020 election
+ plus what Frosty also noted
In 1971, a lot of things economically and in terms of “culture wars” seemed to be unraveling. It was thought we had lost our industrial mojo, foreign oil shocks were about to strike, and the USA would enter a paroxysm about its leadership reminiscent of Trump. It was easy to construct a narrative that the USA would follow Ancient Rome off a cliff. Pete Peterson, Nixon’s Secretary of Commerce ’72 to ’73, started in on the debt discussion here, in the 1970s.
Remarkably, skeptics including myself were shown too panicky, if sometimes right. (Ancient Rome, too, wasn’t unbuilt in a day.) Comebacks and evolution happened. Things unfolded badly for various groups here, but as of today, in the face of new realms of troubling weirdness, the USA is amazingly dynamic and robust. I still generate doom scenarios daily, but happily, I’m not as right as I like to think.
correct. anyone who thinks empires unravel quickly has no concept of history. the USSR was unravelling for decades internally but the plug was pulled quite quickly in 1991. nobody in the west saw that coming. the amerikan empire has had many spells of unravelling and stitching back together. having lived in charleston SC for a decade and gazing out my office window at fort sumter we all know the USA was re engineered in 1865 at the appomatax court house. having so many USA bases fired upon in the past 5 months under our glorious cult leader as commander in chief is alarming. might we keep expanding at the edges of the world wide empire and also splinter off some of our empire in mideast and perhaps a few usa states in the next few years. i suspect that will happen. all empires crumble. of course most are not measured in months or years but decades.
“There is a lot of ruin in a nation.”
(A poorly worded quote that nevertheless fits.)
1971 had nothing to do with the acceleration of inflation. The FED could have just raised the value of gold higher than 35 dollars an ounce.
What drove interest rates was the deregulation of Reg. Q ceilings. Martin had changed the trading desk’s operation system from using free reserves to interest rate manipulation. The commercial banking system’s desire to outbid the nonbanks, induced nonbank disintermediation, put the pressure on the FED FUNDs Bracket on the top of the bracket (open market operations of the buying type). Disintermediation has only applied to the nonbanks since 1933.
Idiotic. The Fed does not control the price of gold.
Irrelevant. That’s why I didn’t look it up.
During the decade ending in 1964 aggregate monetary purchasing power, AD, money times the velocity of circulation, increased at an annual compounded rate of about 6 percent. In the subsequent 9 years, the increase was more than 13 percent, and in 1972-73 nearly 30 percent.
All figures taken from the Federal Reserve Bulletin
The Great Inflation was due to the deregulation of Reg. Q ceilings. The Great Moderation was due to the stabilization of the DD to TD ratio. The GFC was due to an all-time low in the DD to TD ratio.
The biggest error in the history of the world is that banks lend deposits.
An increase in bank CDs adds nothing to GDP
People are so stupid that there is not even a cumulative listing of Reg. Q ceiling changes.
The FED more than validated OPECs price increases. Stagflation was the inevitable result.
The Nixon Shock: President Nixon directed Treasury Secretary John Connally to suspend the gold window. They did not change the official peg to a new higher number; they refused to redeem dollars for gold at all
It was entirely because of the Pentagon’s communist containment deficit (and probably partly due to the growth of the E-$ market)
TACO ETF on the way?
There’s a mathematical formula to determining when Trump will TACO – and here’s when a pivot is expected
https://www.morningstar.com/news/marketwatch/2026072283/theres-a-mathematical-formula-to-determining-when-trump-will-taco-and-heres-when-a-pivot-is-expected
So the plucky US financial industry keeps churning out new risk management toys/tools. I’m looking at various prediction markets as proxies and hedges for various Trump screwups.
All of this is the basis of how modern America operates, as taught in any elite business school, its effectively a legal ponzi scheme underpinned with hope, flag waving, and threat of violence
It will work until it doesnt and my guess is the music will stop when the empire loses control of the trading system. This is the greatest risk from Trumps inexperience/ignorance
Highly recommend reading Chris Whalens book “Inflated”, if any of this nominal numbers game is surprising to anyone
You cannot make a productive economy with the level of stealing and incompetence involved.
With the regime stealing or, when we are “lucky”, simply wasting it, the answer grows towards “infinity”.
Tax “cut” is a lie without a cut in spending. And so long as voters keep voting for the lie, the lies will continue.
If you lend me $2T, I will produce better results.
That’s what Wimpy said. Trump shares Wimpy’s taste for hamburgers today, but so do we all.
Busting a gut on all those “Don’t Worry Because” — truly professionally comedic & hilarious. 😂 Great article Mish.
I’ve worried every single day for over 6 decades, with a well-crafted “because.” I have been wrong every one of those days, so far. Past results are not guarantees of future results, but that track record is not nothing.
And yes, everything in the universe will perish, no exceptions. But being right on just when and how is the magic key to success.
Great post! It is the most important issue of our day in my opinion and needs congressional attention immediately. I have posted about this issue in remarks many times, most recently with this link explaining fundamentals as to why printing money (what has been since Nixon’s shock) can’t create economic growth:
Why Increases in Money Supply Can’t Create Economic Growth | Mises Institute
Any injection of new money can be robust, neutral, or harmful. It all depends upon the distributed lag effect of monetary flows, volume times transaction’s velocity. And the distributed lag effect(s) of money flows have been mathematical constants for > 100 years.
The real problem is with leakages from the main income stream and mal-investment.
It is axiomatic. Lending/investing by the DFIs (deposit taking, money creating institutions), expands both the volume and the velocity of new money. I.e., lending/investing by the DFIs is inflationary.
Lending/investing by the NBFIs (nonbanks) increases the turnover of existing deposits (a transfer of ownership), within the commercial banking system. I.e., lending/investing by the NBFIs is non-inflationary (other things equal).
The correct solution to stagflation is the 1966 Interest Rate Adjustment Act, i.e., drive the banks gradually out of the savings business, lowering deposit rates, while draining bank reserves.
This action raises the real interest rate outside of the payment’s system, while making the banking system more profitable.
The U.S. Golden Age in Capitalism was driven by velocity, not money, putting savings back to work.
Congress will never change this system unless it collapses or there is campaign and lobbying reform. There are way too many powerful interests that maintain the status quo
This is only changeable when the system is in crisis. The only president since nixon that had the opportunity was obama after the GFC, and even as a liberal reformer (ha ha) he sold out to big money
Unfortunately, I am very sure you are correct. Winston Churchill once said to the effect that the United States will do the right thing only after trying everything else. I hope we survive all the wrong things that occur first.
A rise in prices, if not too rapid and extreme, has a stimulating effect on business profit expectations. Acting under the impulse that wider profit margins are in the offing, businesses will go into debt, hire workers, buy additional inventory, expand their rate of operations, [and if their optimistic anticipations cover a long enough period], decide to expand their plant capacity, and develop new outlets for their products.
Maybe, but probably not if the measuring tool is contracting; the dollar losing value. In my opinion we have had way too much investment in non-wealth building ventures because the deflating dollar has not been a good tool to measure the relative value between different goods and services.
I like Mises. But I don’t think the following is right
“Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real variables, like employment, real GDP, and real consumption…It implies that the central bank does not affect the real economy (e.g., the number of jobs, the size of real GDP, the amount of real investment) by creating money”
“In economics, a multiplier broadly refers to an economic factor that, when increased or changed, causes increases or changes in many other related economic variables. In terms of gross domestic product, the multiplier effect causes gains in total output to be greater than the change in spending that caused it.”
https://fred.stlouisfed.org/series/M1SL
May 2020 will forever make that chart broken af
sometimes in world history, a plague, like covid, can have profound affects on humans, including migrations and currency and wars and famines…..
Inflation is the greatest theft in human history. In that respect, Trump really has made America great again.
It doesn’t matter if the debt is asset backed or not because all of it can’t be sold at market value without a liquidity problem igniting a solvency crisis.
The Feds balance sheet has grown by $215 billion since Dec 3rd, 2025.
QE is alive and well.
Do not look behind the curtain!
Hi, thanks. 1 where did you get your stats from ?
2 what does and does not include “credit market debt” ? Sorry if that question sounds stupid. 2 1 Is a bank loan credit market debt ?
2 2 do you included shadow banking debt ?
2 3 do you include innovative schemes in the IA industry with circular promises to buy/sell stuff in the future which could/should be recorded as debt.
2 4 do you include “social debt”, by that i mean, promises to pay fixed levels of retirement or to pay for health care costs in the future ?
Those are usually not discounted as debt.
If not discounted how big is credit market debt vs other types of debt ?
5 Would you be so kind as to calculate for us the ratio credit market debt / GDP, it s not easy do it visually.
Our team of three dozen actuaries is working hard on the answers and should be back to you before March 12, 2027
ha ha ha. the amerikan oligarchs are gonna atttempt to steal everything not nailed down in the name of saving us all from those scary mooooooslims. i eyewitnessed personally in Russia in the 1990s their oligarchs. some of them were actually decent folks. just scared of their shadows as the USSR of their youth was no longer in tact. these men were in their 30s and 40s. it was fascinating. i sat in a few meetings with them in their opulent headquarters at timber and oil…….companies. they were wiring out the money like it was on fire.
TCMDO
https://fred.stlouisfed.org/series/TCMDO
Still have a question after looking at that link.
Does it include credit card debt, even that which gets paid off monthly? If so that would explain a vast amount of the increase over the decades since 71. Virtually no one had cards then and almost everyone does now even if they pay it off monthly like I do (and I now buy 95% of my monthly purchases on credit card to get cash back and other rewards when say 10 or 20 years ago it was the other way around, 95% cash and 5% card).
Yep, times were harder then for young adults. You even needed cash for health care.
The 5-day check clearing float was often a lifesaver!
From Grok
What it measures
It tracks the total outstanding liabilities in the form of debt securities and loans across all sectors of the U.S. economy (households, businesses, government, financial institutions, etc.). In short, it is a broad measure of total credit market debt outstanding.
The series is updated with each quarterly Z.1 release (next expected around September 10, 2026). Data can be revised with each release. More construction details are available via the Federal Reserve’s series analyzer for FL894104005.
That would seem to include credit card debt even if paid off monthly.
From that I would conclude the number is skewed a bit then due to so many using credit cards the way I do and that credit is not really required for GDP (I could have paid cash or debit).
Banks handing out mortgage money like candy
Talked to a few spec residential developers this weekend…the banks can’t shovel it out the door fast enough
Poor credit…no problem
Uh Oh!
Sounds like housing, 2003 through 2008…
How did that end?
Another interesting factoid, almost all the builders (single person GC’s that also do spec) that built during the 2000-2023 upswing are gone or going — just not enough margin (used to be a solid 10%+, which was fine for a 12 month build, now heading towards 5%) …sure they made a boatload $$$ churning out these McMansions, but many of them hoped to keep on doing it for something to keep themselves busy and put away even more $$$ for grandkids, etc
Mostly Italian with some Anglo’s sprinkled in
The replacements: 80% Indians, and 20% women
Just an observation
by 2011 and 2012, cap rates in phoenix were wonderful. the prices to purchase were so low i had to get back into the landlording business. hopefully we get a repeat. let the younger generations be able to afford some cheap r/e.
Same in Denver, bottomed 2011 or so….and then, to the moon, Alice
aye aye. cap rates reached into the high teens and mid twenties. i used to mock my arrogant no nothing pals that bought at the top, if they thought they were like donald trump. this was in mania of 2004 to 2006. they got clobbered. sold them all about 2 years ago. seems like they are down about 5 to 10% in the hoods i know of old crafstman bungalows……..i’m an old new yorker. we gave donald the finger in a traffic jam one summer in 1980s on the BQE when he had his head out the limo and waving at everyone like he was the president. ha ha ha. life imitating art. those hicks in iowa and south brooklyn……. thought the apprentice was a real life documentary……….
An early member of the resistance
I’VE been against the amerikan empire my entire life. pro actively trying to convince my fellow citizens that being a peaceful republic is preferable to world wide war mongering imperial power. i of course have consistently lost that fight. like a 90 pound weakling against the hells angels and the mexican cartel and the sicilian mafia……….and the pax dumbphuckistan MICC brainwashing…………
What’s really bizarre to me is that the weirdo, JD Vance, is the person in high politics who sounds closest to your geopolitical expression. The “hells angels” clobbering that type since WW2 use Neville Chamberlain and appeasement as the stick to whack him and his ilk with.