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Budget gaps

The global debt problem seems likely to continue and grow, at least in developed economies. As you can see in the chart below, big nations governments are not able to balance their budget, and with the exceptions of Canada and Germany, all of them are running budget deficits. In one end of the spectrum, France collects very high taxes relative to its gdp (55%), and yet their spending is even higher (60ish%). The U.S., on the other end, collects much less in taxes (less than 30%, but has the biggest gap relative to revenue. All these gaps need to be financed with debt, and their cumulative effects are affecting these economies ability to grow. The US is betting heavily on AI to create a new paradigm that allows more revenue to close the gap, similar to the late 90’s period that allow Clinton to show a budget surplus thanks to the internet. But since there is no fiscal discipline, government spending will grow as well, erasing the benefits. The only realistic solution might be inflation.


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