KFSC MACRO INTELLIGENCE

Will They Have to Print? Part 1

How World War II pushed America's debt to 106% of the economy, how the country shrank it, and, with debt back near those levels, whether the same playbook will be used again.

By Ernesto and Emmelis Keaney  |  October 27, 2026
Readings about today are the latest available on October 27, 2026, and each carries its own date. The history does not change.

▪ WATCH THE VIDEO, THEN READ ON

This is Part 1 of our two-part commentary. Watch the Part 1 video first, then read on for the full data behind every chart.

▶ VIDEO, PART 1

How World War II pushed America's debt to 106% of the economy, close to where it is today

WATCHING ON YOUR PHONE? Tap the video, then tap the full-screen button (the square corners at the bottom right of the player). Turn your phone sideways for the biggest picture.

How to read this. Each section opens on a moment you can picture, gives one number that matters, and then explains what it meant. The detailed figures sit in the graphics, which are the slides from the videos. Opinions are marked "In our view." Nothing here is a forecast. Numbers in brackets point to the numbered sources at the end.

Why we are telling this story now

America's debt is back near a level it has reached only once before. Picture everything the whole country produces in a year as $100. In fiscal 2025, the federal government owed about $98 of it to the investors who hold its debt (98.1% of gross domestic product).^[1] The only time it owed more was during and right after World War II, when it peaked at about $106 for every $100 (106.3%) in 1946.^[1] By the Congressional Budget Office's first estimate, interest on that debt cost more in fiscal 2026 than Medicare after premiums, or the military.^[2] Officials say we can grow our way out. The last time the country carried a debt this size, it did shrink it, and how it did so decided what savers kept. So that is where we start: in 1944.

Sources for this graphic: debt held by the public as a percent of GDP^[1]; the Congressional Budget Office's Monthly Budget Review^[2]; the 10-year Treasury yield^[3]. Pictures are illustrations.

1944: the war pushed the debt toward the size of the whole economy

In 1944, America was paying for a world war. In fiscal 1944, out of every $100 the country produced, the federal government spent about $41 (40.7%), most of it on the war, against about $10 in fiscal 1939.^[4]

Taxes brought in less than $20 of that $41. The government borrowed the other $21, a deficit of 21.2% of the economy.^[4] Families across the country lent much of that money by buying war bonds.

The borrowing piled up fast. Gross federal debt rose from $79.2 billion in fiscal 1942 to $204.1 billion in fiscal 1944, more than two and a half times in two years.^[5] For every $100 the country produced, the debt held by the public doubled over those two years, from about $41 to $82. By 1946 it reached about $106.^[1]

Why could the country borrow on that scale? The war had to be paid for, and borrowing was cheap. Since 1942, the Federal Reserve had been holding interest rates down at the Treasury's request.^[6] So even as the debt soared, the interest bill stayed near $1 for every $100 the country produced.^[4]

Prices were held down too. Under wartime price controls, consumer prices rose about 15% from December 1941 to December 1944.^[7] One estimate says the controls held prices more than 30% below where they would otherwise have been.^[8]

And in July 1944, at Bretton Woods, New Hampshire, delegates from 44 nations created a new money system with the dollar at its center, fixed to gold at $35 an ounce.^[9]

What this teaches. The debt was not built in calm times. It was the cost of a war, paid partly in taxes and partly in borrowing at rates the Fed held down, while price controls kept a lid on what things cost. The question that followed was how to carry it. Before we follow one family through the answer, here is what officials have said about money since then, and what they say now.

Three promises from Washington, and what followed

On the evening of August 15, 1971, President Nixon went on television and told the country he was cutting the dollar's link to gold. He called it a step to "suspend temporarily" the dollar's convertibility. He also said that for "the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today." For a foreign car or a trip abroad, he said, the dollar might buy "slightly less."^[10]

The temporary step became permanent. The dollar was devalued against gold in December 1971 and again in February 1973, and by March 1973 the major currencies were floating, their values set by markets. The gold link never came back.^[11,12]

Eight years later, a different kind of announcement. In October 1979, Fed Chairman Paul Volcker set out to break inflation and warned that "some difficult adjustments may lie ahead."^[13] Inflation fell from 14.8% over the 12 months to March 1980 to 3.8% over 1983.^[7] The cost: the Fed's rate averaged almost 19% in December 1980^[14], and unemployment hit 10.8% in late 1982.^[15]

And in March 2007, Fed Chairman Ben Bernanke told Congress that the effect of subprime mortgage problems on "the broader economy and financial markets ... seems likely to be contained."^[16] Within two years, the S&P 500 had lost 57% from its October 2007 peak^[17], and national home prices were down about 21% from their 2006 peak, on the way to a 27% fall by 2012.^[18] Unemployment reached 10% in October 2009.^[15]

What this teaches. Officials can be right. What they expect does not always happen, as in 2007. And a "temporary" step can become permanent. We do not treat officials' words as data. We treat them as a statement of intent: they tell us what the people running the country's money plan to do. We may agree with them or not. But we pay attention, and then we check what actually happens.

Sources for this graphic: the Nixon address^[10]; Federal Reserve History and the State Department's Office of the Historian on the devaluations and floating^[11,12]; the Volcker announcement^[13] and the Bernanke testimony^[16]; consumer prices, the federal funds rate, unemployment and home prices from FRED^[7,14,15,18]; the S&P 500 from LSEG^[17]. KFSC calculation. Pictures and papers are illustrations.

Washington plans to grow out of the debt. Whether that works depends on how.

Officials have told us how they plan to handle it. In August, Treasury Secretary Scott Bessent said, as reported by Fortune: "There's nothing magic about the $40 trillion number. And we can grow our way out of that."^[19] The same week, Vice President JD Vance said there is a plan "to get the economy growing faster than the debt."^[20] In October 2025, President Trump put it this way, as reported by Fortune: "You grow yourself out of that debt."^[21] And on August 28, at the Jackson Hole economic symposium, Fed Chairman Kevin Warsh said: "It is the Fed's job to deliver stable prices."^[22]

Sources for this graphic: debt held by the public as a percent of GDP^[1]; dollars owed are gross federal debt^[5].

Grow our way out sounds simple. But grow how?

"Grow our way out" sounds simple. Here is what it means at a kitchen table.

A family owes $100,000 and earns $100,000 a year. Its debt equals one year's income. Ten years later it still owes the same $100,000, but now earns $150,000. The debt is two-thirds of a year's income. The family has outgrown its debt, without paying back a dollar.

But there is a question hiding inside that sentence: grow how?

• If the family got real raises, it can buy more than before. It is better off.
• If prices simply rose by half, the paycheck looks bigger but buys no more. And the $20,000 it kept in savings now buys only what about $13,300 used to.

Same debt ratio. Very different family. Real growth makes a family richer; rising prices only make the paycheck look bigger. Keep that question in mind, because the last time America's debt was this large, the country did outgrow it, through both kinds of growth at once. The rest of this story is about how, and who paid.

The other side. In our view, growth may not be enough on its own. The Congressional Budget Office projects that, under current law, debt held by the public rises from 101% of GDP in 2026 to 120% in 2036. That is CBO's projection, not ours.^[23]

This graphic is a hypothetical illustration, not a real household and not a forecast. KFSC arithmetic: $100,000 divided by $150,000 is 67%; $20,000 divided by 1.5 is $13,333.

In 1945 the debt was huge, but America held a strong hand

Meet the Smiths. They are not a real family. They are illustrative, but everything that happens around them is built from real numbers.

It is the end of 1945. The war is over. The Smiths lent the government $10,000 by buying war bonds that pay 2.5% a year. And in a jar on the kitchen shelf, they keep $1,000 in cash for a rainy day. We will follow that jar and that bond for the next six years.

Their country has just paid for a world war. In fiscal 1945, the government spent about $41 of every $100 the country produced.^[4] By 1946, it owed about $106 for every $100 the country produced in a year (106.3%): more than everything the country made in a year.^[1]

But the United States was in an unusual position, and it matters for everything that follows.

• The world needed what America made. Europe was rebuilding, and it was short of the dollars it needed to buy food and energy.^[24] The Marshall Plan, approved by Congress in 1948, sent more than $12 billion of aid to Europe, which also created markets for American goods.^[25]
• America held the gold. In the early postwar years, the United States held about three-quarters of the world's official gold, meaning gold owned by governments and central banks.^[26]
• The dollar was at the center. Under the Bretton Woods system, other currencies were pegged to the dollar, and the dollar was pegged to gold at $35 an ounce. The system became fully operational only in 1958.^[9]

What this teaches. In our view, a debt that large becomes a crisis when lenders lose faith or the bill grows too heavy to carry. In 1945, the world needed American goods and American dollars. That gave the government room. The question was how to carry the debt without breaking the country's budget, or the Smiths'. Later, we ask whether today's America has that same room.

Sources for this graphic: Federal Reserve History on the creation and launch of the Bretton Woods system, the end of convertibility and the Gold Reserve Act^[9,24,26,27]. The gold-bar picture is an illustration.

In one month of 1946, food prices jumped almost 14%

During the war, the government controlled prices. One estimate says the controls held prices more than 30% below where they would otherwise have been. Most of them came off in 1946.^[8]

The Smiths felt what happened next at the checkout. In July 1946 alone, consumer prices rose 5.9%, and food prices rose 13.8%. In one month.^[7,28] From June to December that year, food rose nearly 28%.^[28] Over the twelve months to March 1947, prices overall rose 19.7%.^[7]

Picture the grocery receipt. Food that cost $20 at the end of 1945 cost about $33 for the same basket by the end of 1951. Same family. Same groceries. Fewer things in the cart for each dollar. Food prices rose 63.6% over those six years.^[28]

Now look at the jar. The Smiths never touched it. Six years later it still held $1,000. But prices had risen 45.6%, so the jar bought only what about $690 had bought at the end of 1945.^[7] Nobody stole a dollar. Nothing went missing. And yet the Smiths were poorer.

Did people notice? Shoppers did, immediately. A jump of that size shows up on every receipt. Savers noticed much less, and the war bond story below shows why: their statements kept showing the same number of dollars. The loss was in what those dollars could buy, and that is easy to miss.

What this teaches. Inflation is a loss you do not see on a statement. The dollars stay; their buying power leaves. That is why we measure savings in what they can buy, not in how many dollars they show.

Sources for this graphic: consumer prices for food and for all items, U.S. Bureau of Labor Statistics via FRED^[7,28]. The $20 to $33 grocery figure uses food prices; the $690 uses all items. KFSC calculation. Pictures are illustrations.

The Fed kept the war debt cheap by holding rates down

Why would a government let prices run like that? To understand it, go back to 1942, in the middle of the war.

The Treasury needed to borrow enormous sums, and it wanted to borrow cheaply. So it asked the Federal Reserve to hold interest rates down. The Fed's own chairman, Marriner Eccles, would have preferred to pay for more of the war with taxes. But in wartime, the Fed agreed. It pegged the rate on short-term Treasury bills at three-eighths of one percent, and it held long-term rates at or below 2.5%, an informal ceiling rather than a written one.^[6] The 3-month bill rate in our FRED data sits at 0.38% every month from January 1946 to June 1947.^[29]

How do you hold a rate down? Think of a store that promises to buy certain bonds, any time, at a set price. The Fed was that store.

Here is why the price matters. A $1,000 bond that pays $25 a year yields 2.5%. If worried investors sell and its price falls to $900, the same $25 is now a 2.8% yield. Bond prices and yields move like a seesaw: when one goes down, the other goes up. So if the Fed stands ready to buy whenever the price dips, the price cannot fall far, and the yield cannot rise past the cap.

And what does "printing" really mean? This is where most of the confusion lives, so it is worth one careful paragraph.

When the government spends more than it collects, it does not print the difference. It borrows, by selling Treasury securities, which are IOUs, at public auctions.^[30] Each year, much of the old debt comes due and is paid off with new borrowing. In the August 2026 refunding, for example, the Treasury sold $125 billion: $96.3 billion paid off maturing debt held by the public, and the other $28.7 billion raised additional cash.^[31] Paying off an old loan with a new one is called refinancing. You still owe, and if the new rate is higher, that part of the debt now costs more.

The Federal Reserve is separate. It does not buy new debt from the Treasury. It can buy Treasuries that already exist, from banks and investors.^[30] It pays by crediting the accounts banks keep at the Fed, called reserves; when the seller is not a bank, a new bank deposit is created as well.^[32] That new money is what people really mean by "printing."

After the war, to keep its promise, the Fed had to keep buying whenever investors sold. Those purchases added to bank reserves and, through them, to the money supply, and the Fed gave up control over the size of its own holdings.^[6] In our view, 1942 to 1951 is the clearest example in American history of the kind of printing people worry about.

What this teaches. Borrowing, holding rates down, creating money, and inflation are four different things. They can happen together, as they did after the war, or apart. A smaller debt burden can be the result. It is never the same as paying the debt off.

Sources for this graphic: Federal Reserve History, The Treasury-Fed Accord^[6]; the Federal Reserve Board's explanation of its securities purchases^[30].

The dollar was tied to gold, and prices still rose 46%

Here is the obvious question. If the dollar was tied to gold, how could prices rise 45.6% in six years?

The short answer: the gold tie fixed the dollar's price in gold, not its price in groceries. And it did not reach the Smiths' kitchen at all. Five things explain it.

• Americans could not trade dollars for gold. Under the Gold Reserve Act of 1934, dollars could no longer be redeemed for gold at home, and Americans could not freely own gold again until 1974. Rising prices at home could not set off a run on the Treasury's gold.^[27]
• Only foreign governments could. They could exchange dollars for gold at $35 an ounce. Even that system worked only in part until 1958, because most other currencies could not yet be freely exchanged.^[9]
• The gold pile was huge. With about three-quarters of the world's official gold, early withdrawals were easy to absorb.^[26]
• The world wanted dollars, not gold. Europe was short of dollars to buy food and energy, so few were eager to trade them in.^[24]
• Inflation had been bottled up. Wartime price controls held prices down, by more than 30% on one estimate. When most controls came off in 1946, the cork came out.^[8]

There is one more piece. Even at home, the gold tie was never "an ounce behind every dollar." The Federal Reserve was required to hold gold against only a fraction of its notes and deposits. So the supply of money could grow without new gold, as long as foreign governments did not ask for more gold than the country held.^[33]

What this teaches. The gold standard most people picture, a dollar you can take to the bank and swap for gold, did not exist for the Smiths. Nothing stood between rising prices and their jar. The gold limit only began to bite later, as dollars piled up abroad. That part of the story comes later.

Sources for this graphic: Federal Reserve History on the Gold Reserve Act, Bretton Woods and the end of convertibility^[9,26,27]; U.S. Bureau of Labor Statistics, Monthly Labor Review (2014), for the price-control estimate^[8].

A war bond paid back in full still lost a fifth of its buying power

Back to the Smiths' war bond: $10,000, at 2.5% a year.

The government kept every promise. Over six years it paid $1,500 in interest and returned the full $10,000. That is $11,500 in all, and not one payment missed.

But prices rose 45.6% over those same six years. Measured in what it could buy at the end of 1945, that $11,500 was worth only about $7,900. The Smiths were paid in full and still lost about a fifth of their buying power.^[7]

And they probably did not see it on paper. Their bond's stated value never changed, and because the Fed stood behind the prices of government bonds that traded in the market, those held steady too.^[6] Short-term savers fared no better. A 3-month Treasury bill paid 0.38% a year, every month from January 1946 through June 1947, while prices rose 17.6% from June 1946 to June 1947.^[7,29]

So who won? The biggest borrower of all: the government. Every year that prices outran interest rates, its debt got lighter in real terms. In our view, the same arithmetic helped anyone with a fixed-rate debt, and it hurt anyone holding cash, bonds or a fixed income. Workers whose pay rose with prices kept up; those whose pay lagged fell behind.

Economists call this financial repression: holding interest rates below inflation so that a government's debt shrinks in real terms. In plain words, the lenders quietly paid part of the bill. There was no default and no missed payment. Just dollars that bought less.

What this teaches. A bond can be paid back in full and still lose buying power. Both risks matter, and only one of them shows up on a statement.

Sources for this graphic: consumer prices from FRED^[7]; Federal Reserve History on the rate cap^[6]. KFSC calculation. The bond is hypothetical: 2.5% a year, held six years, before taxes, interest not reinvested. The $7,900 values every payment at end-1951 prices, a simplification; valuing each $250 interest payment at its own year-end prices gives about $8,000.

In 1951, the Fed stopped holding rates down for the Treasury

By 1950, America was at war again, this time in Korea. Prices took off. In January 1951 alone, consumer prices rose 1.6%, a pace that would come to 21% if it lasted a full year.^[7]

The Fed wanted to raise interest rates to cool it. The Treasury and President Truman wanted the cap kept. Remember the seesaw from earlier: when rates rise, the price of existing bonds falls, and they wanted the war bonds that families like the Smiths held to keep their value.^[6]

The dispute came to a head. On February 19, 1951, the Fed told the Treasury it would no longer hold rates where they were. On March 4, 1951, the two announced an agreement, the Treasury-Fed Accord. The Fed was free again to manage money and credit for the whole economy, not for the government's borrowing costs.^[6]

What this teaches. For nine years, from 1942 to 1951, the central bank's first job had been keeping the government's borrowing cheap. It took a public fight to change that. In our view, that is why we pay close attention whenever officials talk about the Fed and the government's borrowing costs in the same breath.

Sources for this graphic: consumer prices, December 1950 to January 1951, from FRED^[7]; Federal Reserve History, The Treasury-Fed Accord^[6]. KFSC calculation.

The war debt was never paid off. The economy outgrew it.

So how did a debt larger than a year's economic output shrink to less than a quarter of one, from 106.3% in 1946 to 22.2% in 1974?^[1]

Not by paying it off. From 1948 to 1974, the dollars owed actually rose 59%. What changed was the size of everything around the debt.^[1,34]

Think of a fraction. The debt is the top number; the economy's yearly income is the bottom. The top kept growing a little. The bottom grew much faster. Measured in dollars, the economy became 5.63 times larger between 1948 and 1974.^[34]

Now the question from the start: grow how? Both kinds of growth were at work. Real output, the actual goods and services produced, rose 2.67 times. Prices rose 2.11 times. Multiply the two and you get the 5.63.^[34] As an arithmetic test, take one force away at a time: with no rise in prices, the 1974 ratio would have been about 46.9%; with no real growth, about 59.4%. With both, it was 22.2%. Real growth did more of the work. It took both.^[34]

Two more forces helped.

• Budget surpluses before interest. In 22 of the 28 years from 1947 to 1974, the government collected more than it spent before paying interest. Wartime spending fell fast, from 40.7% of the economy in fiscal 1945 to 10.8% in 1948.^[4]
• Cheap borrowing. From 1949 to 1959, the government's estimated average borrowing cost ran about even with inflation, within about a tenth of a point on average. Lenders earned about what inflation took away, and little more.^[35]

The fastest drop came first. From 1946 to 1951, the years of the price jump and the rate cap, the ratio fell from 106.3% to 61.8%. That is more than half of the whole decline in five years.^[1]

How much was growth alone? Economists Julien Acalin and Laurence Ball asked what would have happened without the surpluses, the rate cap and the surprise inflation. In their model, the debt would have ended near 74% of the economy in 1974, not the roughly 22% it actually reached. That is a model, not history, but it shows how much those three forces mattered.^[36]

What this teaches. The postwar debt was outgrown, not repaid, and growth alone did not do it. In our view, the Smiths' lost buying power was part of how the country paid.

Sources for this graphic: FRED debt, GDP, real GDP, price index, budget and interest series^[1,4,34,35]; Federal Reserve History on the rate cap^[6]. KFSC calculation.

Sources for this graphic: FRED debt, GDP, real GDP and price index, calendar years^[1,34]. KFSC calculation, keeping the actual dollars of debt. The what-if figures are arithmetic illustrations, not alternative histories.

America's gold was cut in half, and the gold promise ended

There was one more cost, and it came due abroad.

In September 1949, the gold held by the U.S. government was worth $24.6 billion at the official $35 an ounce. By December 1970, it was down to $11.1 billion, less than half.^[37] Over almost the same years, the debt held by the public fell from 78.6% of the economy to 26.4%.^[1] The debt looked better and better at home, while a separate weakness grew abroad.

Think of a coat-check ticket. People trust the ticket because they believe the coat is behind the counter. Every dollar held by a foreign government was a ticket that could be handed in for gold. Through the 1950s and 1960s, the world held more and more dollar tickets: from U.S. payments deficits, military spending, foreign aid and investment abroad, and, from 1964, easier U.S. monetary policy. The pile of gold behind them kept shrinking.^[24,26] Economists call this the Triffin dilemma: the world needs plenty of dollars, but the more dollars there are, the less believable the gold promise becomes.^[26]

The cracks showed one by one.

• 1961. Eight central banks, including the United States and France, pooled gold to hold the price steady in London.^[26]
• February 4, 1965. France's President de Gaulle publicly called for settling international debts in gold.^[38]
• June 1967. France quietly withdrew from the London gold pool.^[39]
• March 1968. The pool collapsed.^[26]
• August 15, 1971. President Nixon closed the gold window, "temporarily."^[10,26]
• March 1973. The major currencies were floating. The promise was never restored.^[12]

What this teaches. A debt ratio is a domestic scorecard. The gold problem was international. One improved while the other got worse, and the second one is what ended the system. In our view, it is a reminder to look at more than one measure.

Sources for this graphic: U.S. monetary gold stock, NBER Macrohistory via FRED, monthly averages at the official price^[37]; debt ratio from FRED^[1]; Federal Reserve History, Foreign Relations of the United States and the State Department's Office of the Historian for the timeline^{[12,26,38,39]}.

The Smiths did everything right, and still lost a fifth

So this is how America shrank its war debt. The economy really grew. Prices rose. In most years, the budget ran a surplus before interest. And the Fed held borrowing costs down until 1951. The Smiths, with their jar and their war bond, paid part of the bill, quietly, in buying power.

Five lessons carry into today:

• "Outgrowing" a debt is not paying it back. The dollars owed went up. The economy grew faster.
• Always ask: grow how? Real growth makes a family richer. Growth that is mostly higher prices shrinks the debt by shrinking what savings can buy.
• Being paid in full is not the same as keeping your buying power. The war bond was paid in full and still lost about a fifth.
• Growth alone did only part of the work. Surpluses, cheap borrowing and surprise inflation did the rest.
• Officials' words are a starting point. We may agree or not. We pay attention, and then we check.

Today, officials again say we can grow our way out. We do not know which path comes next. Our job is to see what is actually happening, compare it with what was done before, and act on what we find. What follows asks whether the same playbook will be used again: how we got here, what is different this time, and how our strategies are positioned.

Sources

Numbered by first appearance. FRED series were read from our exports and the master data file; each figure in the text carries its own date. "KFSC calculation" means figures we computed from these sources.

1. FRED. Federal debt held by the public as percent of GDP (FYPUGDA188S), fiscal years; dollars owed computed from the ratio and calendar-year GDP (GDPA).
2. Congressional Budget Office. (2026, October 8). Monthly Budget Review: September 2026.
3. FRED. 10-year Treasury constant maturity yield (DGS10).
4. FRED / Office of Management and Budget. Federal net outlays (FYONGDA188S), surplus or deficit (FYFSGDA188S) and interest outlays (FYOIGDA188S), percent of GDP, fiscal years; balance before interest is a KFSC calculation.
5. FRED. Gross federal debt (FYGFD), fiscal years; dollars owed shown on the debt chart.
6. Romero, J. Federal Reserve History. The Treasury-Fed Accord.
7. FRED. Consumer Price Index, all items, not seasonally adjusted (CPIAUCNS); KFSC calculations.
8. Bureau of Labor Statistics. (2014). One hundred years of price change. Monthly Labor Review.
9. Federal Reserve History. Creation of the Bretton Woods System.
10. Nixon, R. (1971, August 15). Address to the Nation Outlining a New Economic Policy: "The Challenge of Peace." American Presidency Project.
11. Federal Reserve History. Smithsonian Agreement.
12. U.S. Department of State, Office of the Historian. Nixon and the End of the Bretton Woods System, 1971-1973.
13. Federal Reserve History. Volcker's Announcement of Anti-Inflation Measures.
14. FRED. Effective federal funds rate, monthly (FEDFUNDS): December 1980; June and October of each midterm year since 1958; KFSC calculation (a change of less than 0.05 point counted as unchanged).
15. FRED / BLS. Unemployment rate, monthly, seasonally adjusted (UNRATE): November and December 1982, October 2009.
16. Bernanke, B. (2007, March 28). Testimony before the Joint Economic Committee.
17. LSEG Workspace. S&P 500 index, daily close, price only (.SPX) and total return (through October 22, 2026); KFSC calculation.
18. FRED / S&P Dow Jones Indices. S&P CoreLogic Case-Shiller U.S. National Home Price Index, not seasonally adjusted (CSUSHPINSA): peak July 2006, March 2009, low February 2012; KFSC calculation.
19. Lichtenberg, N. (2026, August 20). Scott Bessent on the national debt. Fortune. Quotes as reported; CNBC original not yet checked.
20. Mittelstadt, N. (2026, August 21). Vance says Bessent has "very discreet plan". KATV. As reported; Newsmax original not yet checked.
21. Roytburg, E. (2025, October 4). Trump says the U.S. can grow its way out of $37 trillion in debt. Fortune. As reported; One America News original not yet checked.
22. Warsh, K. (2026, August 28). In Our Time. Federal Reserve.
23. Congressional Budget Office. (2026, March 11). Testimony on the Budget and Economic Outlook: 2026 to 2036.
24. Federal Reserve History. Launch of the Bretton Woods System.
25. U.S. Department of State, Office of the Historian. The Marshall Plan.
26. Federal Reserve History. Nixon Ends Convertibility of U.S. Dollars to Gold.
27. Federal Reserve History. Gold Reserve Act of 1934.
28. FRED. Consumer Price Index, food, not seasonally adjusted (CPIUFDNS).
29. FRED. 3-month Treasury bill, secondary market rate, monthly (TB3MS) and daily (DTB3).
30. Board of Governors of the Federal Reserve System. FAQ: Fed securities purchases and federal borrowing; TreasuryDirect, How Auctions Work.
31. U.S. Department of the Treasury. (2026, August 5). Quarterly Refunding Statement.
32. Castro, A., Cavallo, M., & Zarutskie, R. (2022, June 3). Understanding Bank Deposit Growth during the COVID-19 Pandemic. FEDS Notes.
33. Woodward, G. T. (2011, June 23). Brief History of the Gold Standard (CRS R41887).
34. FRED. GDP, real GDP and GDP price index (GDP, GDPC1, GDPDEF); KFSC calculation, calendar-year GDP.
35. FRED. Federal interest outlays (FYOINT), debt held by the public and GDP; estimated average borrowing cost is a KFSC calculation.
36. Acalin, J., & Ball, L. M. (2023). Did the U.S. really grow out of its World War II debt? (NBER Working Paper 31577).
37. FRED / NBER Macrohistory. U.S. monetary gold stock (M1476BUSM027NNBR to 1946; M1476CUSM144NNBR from 1947), monthly averages at the official price.
38. Foreign Relations of the United States, 1964-1968, Vol. VIII, Document 36.
39. Foreign Relations of the United States, 1964-1968, Vol. VIII, Document 155.

Important disclosures

Keaney Financial Services Corp does not produce forecasts. Third-party statistics are shown as published on their retrieval dates and are subject to later revision by the organizations that produce them.

1. Compliance Disclosures and Risk Warnings

This commentary and its two videos are published by Keaney Financial Services Corp for educational and informational purposes only. They tell the story of how World War II pushed federal debt held by the public to 106.3% of gross domestic product in 1946, and how that ratio fell to 22.2% by 1974, through real growth, rising prices, budget surpluses before interest and a cap on interest rates, using an illustrative family, the Smiths, to show who bore the cost; explain the 1942 to 1951 interest-rate peg, the Treasury-Fed Accord of 1951, and what is often called financial repression; describe the Bretton Woods gold-exchange system, the London Gold Pool, France’s 1965 call for a return to gold and its 1967 withdrawal from the pool, and the end of dollar convertibility to gold in 1971; explain the difference between Treasury borrowing, bank deposit creation and Federal Reserve purchases of securities, using the Treasury’s August 2026 refunding as an example; review how the debt climbed again after 2008 and 2020, today’s interest rates, inflation, oil and diesel prices, borrowing tied to artificial intelligence, the federal deficit and interest bill, holdings of Treasury debt, Federal Reserve purchases, credit spreads, stock valuations, the price of gold measured against consumer goods and home prices, and Congressional Budget Office figures and projections; compare officials’ stated plan to grow out of the debt with the four forces that reduced the postwar debt ratio; and describe how the KFSC Risk Managed Strategies are currently positioned: in cash, short-term Treasuries and a physical gold trust, with no direct equity exposure at this time. It is not investment advice, a recommendation to buy or sell any security, an offer or solicitation, or a guarantee of any outcome. Past performance is not indicative of future results and does not guarantee future returns. All investments involve risk, including the possible loss of principal. Markets can be volatile, and values can fluctuate due to economic, geopolitical, regulatory, and other factors. Readers should consult their own financial, legal, and tax advisors before making investment decisions. Keaney Financial Services Corp and its representatives do not guarantee the accuracy or completeness of any third-party data referenced herein. Strategy Holdings Disclosure: as of October 23, 2026, the KFSC Risk Managed Strategies hold cash, short-term Treasuries and a physical gold trust and have no direct equity exposure; references to stocks or equities describe an asset class the strategies may hold again at any time at the advisors’ discretion, not a current holding, and having no direct equity exposure does not remove all sensitivity to stock-market conditions. References to cash, short-term Treasuries, a physical gold trust, equities or any other holding apply solely to the KFSC Risk Managed Strategies and not to any other investments held within Keaney Financial Services Corp. or outside these discretionary managed accounts. This commentary is intended solely for clients and prospective clients of Keaney Financial Services Corp who are invested in, or are considering, the KFSC Risk Managed Strategies, and nothing in it is investment advice.

2. Framework and Risk Management Disclosure

The KFSC Institutional Intelligence System, including its KFSC Macro Regime Model and four diagnostic frameworks (the Monetary Integrity Framework, the Liquidity Transmission Framework, the Strategic Scarcity Framework, and the Market Structure Framework), provides analytical tools used to support advisor decision-making. These tools are not automated systems, do not predict future market outcomes, and do not dictate trades or portfolio actions. All portfolio decisions are made at the sole discretion of the advisor based on their interpretation of available data, client objectives, and prevailing market conditions. Investing involves risk, including political and geopolitical instability, changes in economic and monetary systems, currency fluctuations, market liquidity conditions, and rapid price volatility. These factors may result in significant fluctuations in portfolio value and may not be suitable for all investors. All investing involves risk, including the possible loss of principal. Asset allocation, diversification, and risk management strategies are designed to manage risk but do not guarantee profits or protect against losses.

3. Forward-Looking Statements Disclosure

This commentary contains statements about current positioning and current conditions that refer to the future. They include: that, when older Treasury debt is refinanced at a higher rate, that portion becomes more expensive to service, with the effect on the government’s overall borrowing cost depending on how much debt matures and the rates on replacement borrowing; that, in the one-year illustrative scenario in which the government’s average borrowing cost reaches 5% and the economy grows 4% in dollars with the deficit before interest unchanged, debt would rise by about 3.6% of the economy in that year; that, in our view, a war that keeps fuel expensive makes it harder for the Federal Reserve to cut rates again; that, in our view, a plan that leans on growth alone leans on only one of the four forces that reduced the postwar debt; that, if growth falls short, the gap is closed some other way, through spending, taxes, more borrowing or higher prices; that, in our view, current Federal Reserve purchases of Treasury bills, larger Treasury buybacks and officials’ statements point to a possible tilt toward letting inflation carry part of the debt, which is not certain and may not happen; that, in our view, stocks and gold both look fragile and either could move 20% up or down, which is a statement about risk, not a prediction of any move; that, in our view, rising rates tend to bring pullbacks, which bring volatility and can bring opportunity; that stocks could keep rising, in which case the strategies would not share directly in those gains; that equity exposure may be added back at any time, and that cash and Treasury yields, holdings, allocations and positioning may change at any time as data and advisor judgment change; that, if rates were held below inflation again, cash and short-term Treasury positions could lose buying power; and that the Congressional Budget Office’s projections of the debt and the interest bill, which are the Congressional Budget Office’s and not Keaney Financial Services Corp’s, depend on its assumptions and can change. These statements describe current views and general relationships. They are not predictions, and actual results may differ materially. They reflect information available on October 27, 2026, may change without notice, and Keaney Financial Services Corp has no obligation to update them. Nothing in this commentary predicts any future price, interest rate, inflation rate, debt level, deficit, government or central bank action, or market outcome. Keaney Financial Services Corp does not produce forecasts.

4. Allocation and Positioning Disclosure

This commentary is not intended as investment advice for the general public. It is specifically prepared for clients invested in the KFSC Risk Managed Strategies and may not apply to other investments managed by advisors at Keaney Financial Services Corp. outside of these strategies. The KFSC Risk Managed Strategies are discretionary, dynamic, and adaptive. Portfolio positioning, allocations, and exposures may change at any time without notice due to evolving market conditions and the advisor’s judgment. These strategies are implemented across six distinct mandates on a spectrum from Asset Preservation through Aggressive Growth (Asset Preservation, Conservative, Conservative Growth, Moderate, Moderate Growth, and Aggressive Growth), each with its own risk profile, volatility expectations, and portfolio construction approach. Suitability of any particular strategy for an individual client is assessed prior to investment. While the macroeconomic themes described in this commentary are derived from the KFSC Institutional Intelligence System and inform the firm’s broader outlook, the specific asset class allocations, position sizes, and underlying holdings may differ materially across strategies, consistent with each strategy’s risk mandate.

5. Methodology and Data Disclosure

The figures in this commentary come from the sources listed in the Sources, each with its own as-of date: FRED (Federal Reserve Bank of St. Louis), LSEG Workspace, GuruFocus, the Congressional Budget Office, the Bureau of Labor Statistics, the Bureau of Economic Analysis, Federal Reserve History, the Board of Governors of the Federal Reserve System, TreasuryDirect, the U.S. Department of the Treasury, the Office of Management and Budget, the U.S. Department of State’s Office of the Historian and its Foreign Relations of the United States series, the National Bureau of Economic Research, the American Presidency Project and Encyclopaedia Britannica; news reports from the Associated Press, Reuters, Fortune and KATV are cited as reported. The data date is October 27, 2026. Market figures are the close on October 22, 2026, for gold (LSEG XAU=) and the S&P 500 (LSEG .SPX), and FRED’s October 26, 2026 readings for the high-yield and investment-grade credit spreads; the 10-year Treasury yield, the 10-year inflation-protected Treasury yield and the 10-year breakeven inflation rate are FRED’s October 26, 2026 readings; the 3-month Treasury bill is FRED’s daily reading of October 26, 2026 (DTB3), and its 1946 and 1947 rates are FRED’s monthly series (TB3MS); the 30-year mortgage rate is FRED’s weekly reading of October 22, 2026; the CAPE ratio is the October 2026 reading in an export of October 23, 2026; the Federal Reserve’s holdings of Treasury bills, notes and bonds are Wednesday levels from December 3, 2025 to October 21, 2026; West Texas Intermediate crude oil is October 20, 2026 against October 20, 2025, and diesel the week of October 26, 2026 against the week of October 27, 2025. Economic figures are the latest released by October 27, 2026: consumer prices and food prices for September 2026; manufacturing and total nonfarm employment for September 2026; gross domestic product, real gross domestic product and the GDP price index for the second quarter of 2026; federal interest payments and receipts for the second quarter of 2026; the national home price index for August 2026, released October 27, 2026; foreign holdings of federal debt for the first quarter of 2026, measured against debt held by the public for the same quarter; Treasury’s major foreign holders table for August 2026, released October 16, 2026; debt held by the public as a percent of gross domestic product, federal outlays, interest outlays and the budget balance for fiscal years through 2025; investment in intellectual property products for 2025; the federal funds target range of 3.75% to 4.00% set on September 16, 2026; the money supply (M2) for August 2026; total public debt outstanding for the second quarter of 2026; fiscal 2026 receipts, outlays, deficit, net interest and spending by category from the Congressional Budget Office’s Monthly Budget Review of October 8, 2026, which are first estimates; and projections from Congressional Budget Office testimony of March 11, 2026. Series carry different release lags and are not presented as though they describe the same day. The Congressional Budget Office’s net interest on the public debt ($1,028 billion for fiscal 2025) and FRED’s federal interest outlays ($970 billion for fiscal 2025) measure different scopes of interest; the commentary labels each and does not mix them. The government’s estimated average borrowing cost is federal interest outlays in a fiscal year divided by debt held by the public at the end of the prior fiscal year, with that debt in dollars derived from the published debt-to-GDP ratio and calendar-year gross domestic product; the balance before interest is the federal surplus or deficit plus federal interest outlays, each as a percent of gross domestic product; the U.S. monetary gold stock is National Bureau of Economic Research data retrieved from FRED, monthly averages of daily figures ending in December 1970, valued at the official gold price, not a market price; the price of gold measured against consumer goods uses monthly averages of the LSEG daily gold price against the consumer price index and its food index from January 1970 to September 2026, and against the national home price index from January 1987 to July 2026; volatility is the annualized standard deviation of daily price changes in gold and the S&P 500 over the periods named; the history of coins and of the Roman aureus is from Encyclopaedia Britannica; the 1942 to 1951 interest-rate peg, the Treasury-Fed Accord, private gold ownership under the Gold Reserve Act of 1934, the end of dollar convertibility to gold on August 15, 1971, and the Bretton Woods system are as described by Federal Reserve History, the U.S. Department of State’s Office of the Historian and the Foreign Relations of the United States series; President Nixon’s words are from his address of August 15, 1971, as published by the American Presidency Project; the simulated 1974 debt ratio of 74% is from Acalin and Ball, NBER Working Paper 31577, and was not computed by Keaney Financial Services Corp. Keaney Financial Services Corp computed the following itself, by arithmetic on the cited data: the share of fiscal 1944 federal spending covered by receipts and the growth of gross federal debt from fiscal 1942 to 1944; the government’s estimated average borrowing cost; the division of the 1948 to 1974 growth in gross domestic product into real growth and higher prices, and the 1974 debt ratios with only one of the two; the balance before interest for fiscal years 1946 to 2025; the change in the U.S. monetary gold stock; changes in consumer, food, home, oil, diesel, gold and stock prices over the periods named, including the declines and rises of 20% or more; the hypothetical bond and savings examples and the one-year illustrative scenario; interest as a share of federal receipts; the foreign share of debt held by the public; the manufacturing share of jobs and the intellectual-property share of gross domestic product; the Federal Reserve’s change in holdings; the ounces of gold needed to buy the same goods; volatility; and the rankings described as highest or lowest since a date. Percentages are computed on unrounded figures and then rounded, so a figure recomputed from rounded numbers may differ slightly. Where a figure is not held, it is named as missing rather than estimated. Keaney Financial Services Corp has not audited the figures published by the named sources and makes no representation as to their accuracy or completeness; data may be revised, restated, delayed, or estimated. No figure is the return of any account. Keaney Financial Services Corp does not originate underlying market or government data and contextualizes third-party data within the KFSC Macro Regime Model. Prepared October 27, 2026, with data as of October 27, 2026.

6. Research, Data, and Technology Disclosure

Research, analysis, and data referenced in this material are developed through the KFSC Institutional Intelligence System, which integrates multiple data sources, analytical inputs, and research processes. These sources may include contributions from non-affiliated third-party providers, such as market data vendors (e.g., LSEG), statistical agencies, central banks, and news organizations. Such sources are believed to be reliable but are not independently verified by Keaney Financial Services Corp. and may be revised. As part of the research and analytical process, advanced computational tools and artificial intelligence systems may be used to assist in organizing, synthesizing, and interpreting data. These tools support analysis within the KFSC Institutional Intelligence System, but they do not independently generate investment recommendations, make investment decisions, or replace the advisor’s judgment. All outputs are subject to human review, interpretation, and oversight. No amount of research, data analysis, or technological support can eliminate the inherent risks of investing or guarantee any specific outcome.

7. Specific Securities Disclosure

This commentary does not recommend any individual security, exchange-traded product, fund, or financial instrument. CoreWeave and Nvidia are named only as part of news reports about borrowing tied to artificial intelligence, as reported by Reuters; naming them is not a recommendation to buy, sell, or hold their securities, and the KFSC Risk Managed Strategies do not hold them directly. References to gold are to the metal and its market price, and references to a physical gold trust are to a type of holding used in the KFSC Risk Managed Strategies, not to any specific issuer or product. References to Treasuries and Treasury bills are to U.S. Treasury securities as a category by maturity, not to any specific issue or fund; references to cash are to cash and cash equivalents as a category, and references to stocks or equities are to the asset class, not to any specific company or fund. The S&P 500 is an unmanaged index and cannot be invested in directly. Any exposure held in client portfolios is selected based on advisor due diligence and the risk mandate of the specific KFSC Risk Managed Strategy in which the client is invested. No portion of this commentary should be interpreted as a recommendation to buy, sell, or hold any specific security or asset.

8. Historical Event Selection and Dataset Disclosure

The historical periods in this commentary are: federal debt held by the public as a percent of gross domestic product for fiscal years 1939 to 2025, including its rise to 106.3% in 1946 and its decline to 22.2% in 1974; federal outlays, the deficit, interest outlays and gross federal debt for fiscal 1939 to 1946; the money supply (M2) from January 1959 to August 2026, including January 1990 and the 12 months to February 2021; consumer prices from December 1941 to December 1944; the Bretton Woods conference of July 1944; the 1948 to 1974 breakdown of economic growth; the 1942 to 1951 interest-rate peg and the Treasury-Fed Accord of 1951; consumer and food prices from December 1945 to December 1951, in July 1946, from June to December 1946, in the twelve months to March 1947 and June 1947, and in January 1951; the 3-month Treasury bill rate in 1946 and 1947; private gold ownership from 1934 to 1974; the U.S. monetary gold stock from January 1940 to December 1970; the Bretton Woods system from 1944 to March 1973, including the London Gold Pool from November 1961 to March 1968, France’s call for a return to gold in February 1965 and its withdrawal from the pool in June 1967, and the end of dollar convertibility to gold on August 15, 1971; President Nixon’s address of August 15, 1971; Chairman Volcker’s announcement of October 1979, consumer prices in the twelve months to March 1980 and over 1983, the federal funds rate in December 1980 and unemployment in November and December 1982; Chairman Bernanke’s testimony of March 28, 2007, the S&P 500 from October 2007 to March 2009, home prices from July 2006 to February 2012 and unemployment in October 2009; the federal funds rate from June to October in the 17 midterm-election years since 1958; the balance before interest for fiscal 1947 to 1974 and fiscal 2008 to 2025; the federal interest bill for fiscal 2025 and 2026; the 10-year Treasury yield since 1962; the CAPE ratio since 1871, including mid-1997 and the S&P 500 from July 1997 to October 2002; declines of 20% or more in the S&P 500 in 2020 and 2022; the price of gold since 1968, including January 1970 to September 2026, 1980 to 2001, and January to July 2026; daily volatility of gold and the S&P 500 since 1971, over the ten years and the year to October 22, 2026; the national home price index from January 1987 to July 2026; the foreign share of federal debt in mid-2008 and early 2026; manufacturing employment in January 1945 and September 2026; the Federal Reserve’s holdings from December 3, 2025 to October 21, 2026; earliest coins, about 650 to 490 BC, and the Roman aureus to AD 312; and fiscal years 2025 and 2026. They were chosen to tell the story of the one prior period when federal debt of this size compared to the economy was brought down, and to describe current conditions; they are descriptive periods within the records identified, not events selected for backtesting or trend extrapolation, and one historical episode is a very small sample. Different start and end dates would give different results. Past patterns are not a reliable predictor of future patterns. All figures are as of the dates stated and are subject to revision as new information becomes available.

9. Statistical Interpretation and Non-Predictive Use Disclosure

All figures presented, including federal debt and debt held by the public as a percent of gross domestic product, gross domestic product, real gross domestic product and the GDP price index, the consumer price index and its food index and the rate of price increases derived from them, the national home price index, the 3-month Treasury bill rate, the 10-year Treasury, 10-year inflation-protected Treasury and 10-year breakeven inflation rates, the 30-year mortgage rate, the federal funds target range and effective rate, the unemployment rate, crude oil and diesel prices, credit spreads, the government’s estimated average borrowing cost, federal interest outlays and net interest, federal deficits, receipts, outlays and spending by category, the balance before interest, the Federal Reserve’s holdings of Treasury bills, notes and bonds, holdings of federal debt by foreign investors in dollars and as a share, manufacturing employment, investment in intellectual property, the CAPE ratio, the S&P 500, the price of gold and the ounces of gold needed to buy the same goods, volatility, the U.S. monetary gold stock, the Treasury’s refunding amounts, the simulated debt ratio from Acalin and Ball, and Congressional Budget Office estimates and projections, are drawn from the data identified in the Sources or computed from it as described in the Methodology and Data Disclosure, and are provided for descriptive and contextual purposes only. A single month’s reading is one observation, not a trend. These measures do not represent expected outcomes, imply the probability of recurrence, or constitute forecasts or projections. Keaney Financial Services Corp does not claim that any condition described will continue, reverse, strengthen, or weaken. All forward-looking interpretations remain subject to uncertainty and advisor discretion.

10. Asset Class Risk Disclosure

Treasuries: backed by the U.S. government for principal and interest at maturity, but their market value falls when rates rise and they can lose value if sold before maturity; maturing Treasuries may be reinvested at lower yields; inflation can exceed the yield; default risk is low but not zero. Stocks: can fall sharply and stay below prior levels for years; high valuations do not indicate timing. Gold and other commodities: can be highly volatile, pay no interest or dividends, and are affected by real interest rates, the dollar, central bank activity, supply, regulation and taxes; past declines in buying power have lasted decades, as from 1980 to 2001; a physical gold trust also carries its own expenses, and its value may not track the price of gold exactly. Cash and money market funds: lose buying power when inflation exceeds the interest earned; money market funds are not insured by the FDIC, are not guaranteed, and can lose value. Defensive positioning and holding reserves can lag a rising market; with no direct equity exposure, the strategies may not participate directly in gains if stocks rise. No asset is risk-free.

11. Hypothetical Illustration Disclosure

The Smiths are an illustrative family, not a real one; their savings jar of $1,000 and their $10,000 war bond, assumed to pay 2.5% a year from the end of 1945 to the end of 1951, are hypothetical examples built from actual consumer prices that assume the bond was held throughout and ignore taxes, which would have made the result worse. The everyday comparisons used in the narration and the written commentary (a family whose debt equals a year’s pay, a store standing ready to buy bonds, a coat-check ticket for gold held in storage, a homebuyer quoted a higher rate than her parents, a company that borrows before its orders arrive, a family business, and a family whose bills run ahead of its paycheck) are simplified illustrations of a single point each, not complete descriptions of government finance, and not investments; the 1974 debt ratios with only real growth or only higher prices are hypothetical calculations from actual data; the scenario in which the government’s average borrowing cost reaches 5% and the economy grows 4% in dollars is one-year illustrative arithmetic that starts from fiscal 2025 figures, assumes no change in policy or behavior and is not a forecast; and the 74% debt ratio for 1974 is a simulation by economists Julien Acalin and Laurence Ball under their own assumptions (NBER Working Paper 31577, 2023), not actual history, and was not computed by Keaney Financial Services Corp. These examples were constructed with the benefit of hindsight; they do not reflect actual trading, fees, taxes, costs or the effect of real market conditions on decisions, and no account achieved these results. None of these is a KFSC allocation or a recommendation. Hypothetical results have inherent limitations, and actual results would differ.

12. Advisor Discretion Statement

All investment decisions are advisor-led and implemented through the applicable KFSC Risk Managed Strategy risk option. Clients select a risk option before investing, and position sizing is determined at the strategy/model level. Our advisors do not make individualized position changes for each client within the same strategy model. Advisors may review whether a client’s selected risk option remains appropriate based on risk tolerance, objectives, time horizon, liquidity needs, and changes in financial circumstances. Models diagnose. Advisors decide. Portfolios implement.

13. Business Entity Disclosure

Keaney Financial Services Corp. provides insurance and financial services. Ameritas Investment Company, LLC (AIC), Member FINRA / SIPC, provides securities and investments. Ameritas Advisory Services, LLC (AAS) provides investment advisory services. AIC and AAS are not affiliated with Keaney Financial Services Corp. Ernesto Keaney and Emmelis Keaney are Investment Adviser Representatives of Ameritas Advisory Services, LLC. Accounts are managed on the Ameritas Wealth Platform.

Produced by Keaney Financial Services Corp · October 27, 2026 · Data as of October 27, 2026