Use access key #2 to skip to page content.

TMFHousel (90.28)

Misleading Statistic of the Day

Recs

26

February 26, 2010 – Comments (5)

The honor goes to Jack Cafferty of CNN. In an article titled "Single Most Serious Problem Facing US Today," Jack tells us:

"By 2019, it's estimated the national debt will rise to about $23 trillion dollars - that's more than one-third of the gross domestic product of the entire world"

National debt will haunt us viciously. Let's get that out of the way. But this statistic is horribly misleading.  

Nevermind that he's comparing 2019's debt projection's with 2010's global GDP, which makes no sense. 

The U.S's current national debt is 20% of global GDP ($12 trillion over $60 trillion). The IMF estimates real global GDP growth will average 3.3% over the next decade. Add in 2% inflation, and that's 5.3% nominal growth. So take $60 trillion, compound it at 5.3% for a decade, and you get $101 trillion, which is probably where global GDP will be in 10 years. 

Now take the debt estimate, $23 trillion, and divide it by the nominal gdp estimate, $101 trillion, and you get 22%. Up from 20% today. 

So rather than scaring the bejeezus out of everyone on CNN, an appropriate way for Cafferty to phrase the statistic would be, "In 10 years, US debt as a percentage of global GDP will probably be about where it is today." 

That, though, doesn't make as many headlines. 

5 Comments – Post Your Own

#1) On February 26, 2010 at 10:19 PM, checklist34 (99.70) wrote:

rec

Report this comment
#2) On February 26, 2010 at 10:40 PM, BravoBevo (99.97) wrote:

Let's continue comparing apples with hurricanes. So if the world's GDP is roughly $70 billion right now in 2010, it's probably pretty safe to say that before the year 2100 the U.S. national debt (then) will exceed 100% of the world's (2010) GDP (now).  D'Oh!

Report this comment
#3) On February 27, 2010 at 12:38 AM, checklist34 (99.70) wrote:

haha, Bevo

our debt already exceeds world GDP, in 1935

Report this comment
#4) On February 27, 2010 at 3:39 PM, whereaminow (20.23) wrote:

TMFHousel,

Sorry but I never seem to run out of things to say on this topic.  Are you aware of any non-linear models for projecting National Debt?  I've always seen linear models, which are inherently ridiculous. If every debt projection is based on linear models, then every debt projection is completely worthless.

David in Qatar

Report this comment
#5) On February 27, 2010 at 7:48 PM, TMFHousel (90.28) wrote:

David,

I have no idea where Cafferty got the debt projection from. All the forecasts I've seen stop around 2015.  

Report this comment

Featured Broker Partners


Advertisement