I keep reading about our Debt blasting past 40T, so I asked AI "has the USA ever not been in debt?? Here is the answer: "Yes—once. The US started life in debt (over $75 million from Revolutionary War financing by 1791) and has been in debt continuously ever since 1837, but there was a brief window under President Andrew Jackson when it hit zero. Jackson made eliminating the debt a personal crusade, calling it a "national curse." Through aggressive tariffs, vetoing spending bills, and selling off federal land, he drove the debt down from about $58 million in 1829 to nothing by January 1835. On January 8, 1835, Congress formally announced the national debt was paid in full — the only time in US history that's happened (TreasuryDirect, NPR).
That debt-free condition lasted only about a year or two. The Panic of 1837 hit soon after — tied partly to the same policies (bank liquidation, the Specie Circular) that had enabled the debt payoff — and the government had to start borrowing again almost immediately. The US has run a national debt continuously ever since, now around $38 trillion.
So the honest answer is: briefly, yes, but it's been a 190-year debt streak since then with no sign of repeating it."
Now I'm not 100% trusting of AI and I only asked Perplexity, but it certainly seems like debt is the American Way so the consequences of inflation, rates and productivity etc are all complicatedly connected. Complicated to me, but not to Peter.
“Old Hickory said we can catch ‘em by surprise if we didn’t fire a shot until we looked ‘em in the eyes” - you have to be a geezer to know that song (“The Ballad of New Orleans”), but those lyrics summed up the mindset of Andrew Jackson.
From the Financial Times article ZeroHedge tweeted out:
"After a blistering rally this year led by Samsung Electronics and SK Hynix, which account for nearly half the Kospi, the index shed just over 17 per cent in three days to its lowest level since early April following a savage sell-off for both companies. Nevertheless, Samsung and SK are still up about 60 per cent and 95 per cent respectively this year.
Retail investors became the Korean market’s biggest buyers this year after missing out on a 75 per cent rally in 2025. Many used margin loans and leveraged exchange traded funds to increase exposure to technology shares. "
This is a classic case of reckless finance being gobsmacked by basic economics. The euphoria and hysteria over AI have made AI stocks as well as related hardware and tech stocks beyond frothy in every stock market (not just Korea and not just on Wall Street).
When markets reverse suddenly, retail investors cannot respond fast enough to cash out quickly enough to protect their leverage. Then the losses leave them underwater the leverage wipes out the rest of their asset base.
Leverage is debt. Investing on margin means the investor is buying using other people's money. It works as long as the investments pay off and the debts are paid off. When those don't happen, financial wreckage ensues.
Investors have to learn this lesson repeatedly about once every generation or so. Apparently the world is about due for fresh education in the consequences of reckless finance.
Right now the pivot point still looks to be the Strait of Hormuz. If that gets reopened and Persian Gulf oil flows are restored, economic crisis is avoided.
If the Strait remains closed, and/or if Persian Gulf oil flows are not restored, economic crisis is assured.
20% of global oil supply comes from the Persian Gulf. If that is taken offline for any appreciable length of time (longer than we have experienced to date) we will be facing a massive oil supply shock on a global basis. That is a recipe for economic chaos and confusion.
Every time you post an analysis like this, Peter, I am consciously grateful for your balanced and highly intelligent work. I’ve said it many times: you are a treasure!
There are scenarios leading up to the midterm elections where economic indicators may balance out, at least in the eyes of the voters. IF the war ends, IF the AI bubble doesn’t collapse in some catastrophic way, IF no new disaster happens.
Last week, I saw some article about China’s stock market losing more than a trillion dollars of value within a very short time, but I’ve heard nothing more about it. The Korean stock market apparently has also dropped considerably, as of today. But sometimes these articles amount to just clickbait. If you see any substantial indicators of Asian stock turmoil, I hope you will bring your level-headed genius to sorting out what’s happening. We all know - thanks, in part, to you - how precarious the financial world is. Thanks, Peter!
According to Plutarch, Philip II of Macedon once threatened to attack Sparta, saying "If I invade Laconia [Sparta], I shall turn you out" ("ἂν ἐμβάλω εἰς τὴν Λακωνικήν, ἀναστάτους ὑμᾶς ποιήσω").
The ephors who ruled Sparta day to day sent back a one-word reply: "If".
Apparently that was enough to persuade Philip to look elsewhere for places to attack.
In any sentence that begins with the word "if", it generally is the most important word.
I keep reading about our Debt blasting past 40T, so I asked AI "has the USA ever not been in debt?? Here is the answer: "Yes—once. The US started life in debt (over $75 million from Revolutionary War financing by 1791) and has been in debt continuously ever since 1837, but there was a brief window under President Andrew Jackson when it hit zero. Jackson made eliminating the debt a personal crusade, calling it a "national curse." Through aggressive tariffs, vetoing spending bills, and selling off federal land, he drove the debt down from about $58 million in 1829 to nothing by January 1835. On January 8, 1835, Congress formally announced the national debt was paid in full — the only time in US history that's happened (TreasuryDirect, NPR).
That debt-free condition lasted only about a year or two. The Panic of 1837 hit soon after — tied partly to the same policies (bank liquidation, the Specie Circular) that had enabled the debt payoff — and the government had to start borrowing again almost immediately. The US has run a national debt continuously ever since, now around $38 trillion.
So the honest answer is: briefly, yes, but it's been a 190-year debt streak since then with no sign of repeating it."
Now I'm not 100% trusting of AI and I only asked Perplexity, but it certainly seems like debt is the American Way so the consequences of inflation, rates and productivity etc are all complicatedly connected. Complicated to me, but not to Peter.
Andrew Jackson is the only US President to have paid off the national debt.
Governments as a rule tend to embrace the dictum of Alexander Hamilton: “A national debt is a national blessing.”
And so here we are….$40 Trillion in the hole and counting.
“Old Hickory said we can catch ‘em by surprise if we didn’t fire a shot until we looked ‘em in the eyes” - you have to be a geezer to know that song (“The Ballad of New Orleans”), but those lyrics summed up the mindset of Andrew Jackson.
https://x.com/zerohedge/status/2082717879615603145?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E2082717879615603145%7Ctwgr%5E94a9be16de858e181c4eba28ba6828dc207984a5%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fwww.zerohedge.com%2Fmarkets%2Fsouth-korea-has-several-market-rescue-options-crash-crushes-700000-retailer-traders
From the Financial Times article ZeroHedge tweeted out:
"After a blistering rally this year led by Samsung Electronics and SK Hynix, which account for nearly half the Kospi, the index shed just over 17 per cent in three days to its lowest level since early April following a savage sell-off for both companies. Nevertheless, Samsung and SK are still up about 60 per cent and 95 per cent respectively this year.
Retail investors became the Korean market’s biggest buyers this year after missing out on a 75 per cent rally in 2025. Many used margin loans and leveraged exchange traded funds to increase exposure to technology shares. "
https://archive.ph/97laE#selection-1837.0-1845.221
This is a classic case of reckless finance being gobsmacked by basic economics. The euphoria and hysteria over AI have made AI stocks as well as related hardware and tech stocks beyond frothy in every stock market (not just Korea and not just on Wall Street).
When markets reverse suddenly, retail investors cannot respond fast enough to cash out quickly enough to protect their leverage. Then the losses leave them underwater the leverage wipes out the rest of their asset base.
Leverage is debt. Investing on margin means the investor is buying using other people's money. It works as long as the investments pay off and the debts are paid off. When those don't happen, financial wreckage ensues.
Investors have to learn this lesson repeatedly about once every generation or so. Apparently the world is about due for fresh education in the consequences of reckless finance.
Peter, are your spidy-senses tingling, alerting you to contagion and chaos?
Right now the pivot point still looks to be the Strait of Hormuz. If that gets reopened and Persian Gulf oil flows are restored, economic crisis is avoided.
If the Strait remains closed, and/or if Persian Gulf oil flows are not restored, economic crisis is assured.
20% of global oil supply comes from the Persian Gulf. If that is taken offline for any appreciable length of time (longer than we have experienced to date) we will be facing a massive oil supply shock on a global basis. That is a recipe for economic chaos and confusion.
Every time you post an analysis like this, Peter, I am consciously grateful for your balanced and highly intelligent work. I’ve said it many times: you are a treasure!
There are scenarios leading up to the midterm elections where economic indicators may balance out, at least in the eyes of the voters. IF the war ends, IF the AI bubble doesn’t collapse in some catastrophic way, IF no new disaster happens.
Last week, I saw some article about China’s stock market losing more than a trillion dollars of value within a very short time, but I’ve heard nothing more about it. The Korean stock market apparently has also dropped considerably, as of today. But sometimes these articles amount to just clickbait. If you see any substantial indicators of Asian stock turmoil, I hope you will bring your level-headed genius to sorting out what’s happening. We all know - thanks, in part, to you - how precarious the financial world is. Thanks, Peter!
According to Plutarch, Philip II of Macedon once threatened to attack Sparta, saying "If I invade Laconia [Sparta], I shall turn you out" ("ἂν ἐμβάλω εἰς τὴν Λακωνικήν, ἀναστάτους ὑμᾶς ποιήσω").
The ephors who ruled Sparta day to day sent back a one-word reply: "If".
Apparently that was enough to persuade Philip to look elsewhere for places to attack.
In any sentence that begins with the word "if", it generally is the most important word.
Yes! (And next up was: Alexander the Great!)