Sustainability Status
RUNAWAY
Explosive (r > g feedback)
15-Year Debt / GDP
164.2%
+46.2% change
Terminal Marginal Yield
5.53%
+133 bp supply premium
Interest Bill (% GDP)
8.2%
Simulation Trajectory Ledger (15-Year Horizon)
Select or scrub years to analyze debt dynamics breakdown
| Year | Debt / GDP | Marginal Yield (10Y) | Effective Rate (r) | Nominal Growth (g) | r - g Gap | Primary Deficit | Interest Exp. (% GDP) | Net Borrowing / yr | Trajectory |
|---|
Economic Framework: The Goldman Gutman Warning Explained
The Sovereign Debt Accumulation Equation
Debt-to-GDP evolution follows the Domar-Blanchard dynamic identity:
Δd_t = [(r_t - g_t) / (1 + g_t)] · d_{t-1} + pd_t
Where r is the effective interest rate on public debt, g is nominal GDP growth, and pd is the primary deficit. When r > g, the sovereign debt ratio grows automatically unless offset by a large primary surplus.
The Supply Overhang & Runaway Spiral Loop
As Goldman's Gutman highlighted, persistent high primary deficits flood the bond market with Treasury issuance. When institutional balance sheets reach saturation:
- Bond term premia and credit spreads widen ($\Delta y = \alpha \cdot \Delta d$).
- Maturing low-coupon bonds roll over into high marginal yields.
- Interest service balloons, forcing higher net borrowing, sparking a self-reinforcing debt spiral unless structural spending cuts occur.