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Bilifuduo (98.08)

U.S. Debt To GDP Ratio Passes 100%

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December 21, 2011 – Comments (9)

*Cue playing of the world's smallest violin*

 

http://www.zerohedge.com/news/its-official-us-debtgdp-passes-100

 

According to ZeroHedge blogger Tyler Durden, we have finally broken through that three digit barrier. Using "on the books" data from the U.S. Bureau of Economic Analysis, the last annualized U.S. GDP was pinned at $15,180,900,000.00. Then, utilizing Treasury Direct, formed by the U.S. Department of the Treasury Bureau of the Public Debt to allow the purchase and redemption of securities from the U.S. Department of Treasury in electroni form, Mr. Durden calculated the total U.S. Debt to be  $15,182,756,264,288.80. 

 

This puts the U.S. Debt to GDP Ratio, as of December 20, at 100.012%

 

Alas, this is a regrettable milestone, but this by no means changes anything significantly; Personally, I don't believe that our national debt should be the foremost of our economic concerns (I've been reading too much Paul Krugman). What do you guys think?

9 Comments – Post Your Own

#1) On December 21, 2011 at 9:44 PM, Frankydontfailme (27.37) wrote:

The debt (and the underlying currency) should be our primary concern. Everything else can be faded with competent monetary policy and some leadership (heh).

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#2) On December 21, 2011 at 11:40 PM, awallejr (79.94) wrote:

Except that debt and deficit are two different things.  

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#3) On December 22, 2011 at 12:30 PM, ikkyu2 (99.46) wrote:

If the country still knew how to turn capital into GDP growth and prosperity, debt would be a good thing and I'd want more of it.

Currently, debt is bankrupting middle class families, fostering unemployment, and turning billionaires into multi-billionaires while GDP stagnates, so I'd be just as happy to see debt go down.

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#4) On December 22, 2011 at 3:11 PM, jwebbzor (< 20) wrote:

I think the debt is very important and should be front and center in our policy.

Read the book: This Time is Different - Reinhart & Rogoff
Their emperical data shows that as public debt exceeds 90% of GDP, nations historically have trouble growing their economies... There is sort of a stagnation that occurs as the debt weighs down the economy, not just in a fiscal sense, but also in a psychological sense.

Actual front and center should be our large fiscal deficits. Sure, reducing the deficit will lower aggregate demand and probably send us into another recession, but if we allow the current trajectory of the deficits to continue, I think the bond market will lose faith and interest rates will rise.

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#5) On December 22, 2011 at 3:30 PM, Melaschasm (85.85) wrote:

If this was a short term problem, I would not be worried.

Unfortunately the debt has been growing for many decades, and is going to grow even faster for many more decades.

At a time when we should have been running big surpluses to prepare for the baby boomer retirements, we instead borrowed ourselves into a very bad situation.  The US is running out of time to make the big fiscal reforms that are needed to avoid bankruptcy.  

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#6) On December 22, 2011 at 4:05 PM, QuarkHadron (84.39) wrote:

I think the debt is definitely a huge problem. More specifically, the interest on the debt is unsustainable.

I trust that everyone on these boards understands 'the power of compound interest.' Usually, it is used in the sense that it is a good thing that builds wealth. But the inverse applies equally. 

 The interest on the debt is paid from tax revenue. Each year, less revenue is left, after paying the interest on the debt, for the cost of running the government. So each year the debt (principal) grows, resulting in even more interest paid from revenue and even less from revenue left to cover the cost of running government - so the debt grows even more. That the cost of running the government continues to also increase only compounds the problem.

'Reducing' the deficit won't work. The deficit must be eliminated. Yet all we here from our useless, duopolistic parties is how great they are doing by arguing about 'reducing' the deficit.Government spending is simply out of control.

OPEC has been pushing for oil to replace the dollar as the reserve currency. BRIC has been working toward (and have actually deposited currency in) an independent reserve currency.

The price of an economic recovery will be rising interest rates. Rising interest rates will mean a higher cost of paying the interest on the debt. Resuling in even less revenue  left to cover the cost of running government - so the debt grows yet even more.

As our debt increases and the value of our currency decreases, the call to drop the dollar as the reserve currency will grow until it actually happens.

 Then, folks, none of our investments will be worth enough to keep us fed, let alone housed.

So, yes, the debt is our foremost economic problem - because the dollar is the international reserve currency. But it doesn't have to be - and if we continue devaluing our currency the rest of the world is going to get tired of the status quo. No amount of rationalizing from economists turned author is going to change that.

We need to swallow a bitter pill and suffer the consequences now (less social spending and higher taxes), while the dose is smaller and can be spread over time. Either that,  or we're going to have one huge choking dose shoved down our throats.

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#7) On December 22, 2011 at 4:56 PM, jwebbzor (< 20) wrote:

QuarkHadron, I completely agree. The issue of compounding interest on our national debt will be exacerbated once interest rates rise. The more I read and study it, the more I realize it could all happen in a flash.

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#8) On December 22, 2011 at 6:57 PM, Varchild2008 (84.39) wrote:

"Personally, I don't believe that our national debt should be the foremost of our economic concerns (I've been reading too much Paul Krugman). What do you guys think?"

What happens when Interest on the Debt per month reaches or exceeds Annual GDP?

Will you then at THAT point in time realize how important it is to deal with the debt right now instead of pretending it isn't a problem?

As long as people continue to believe DEBT isn't a problem, the threat of our Taxes going SKY HIGH by a Left-Leaning Controlled Washington D.C.  + an ever growing dependance on Welfare by the Populace....

The reality is CIVIL UNREST is in the cards at some point when all of the consequences of HIGH DEBT hit the fan.

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#9) On December 26, 2011 at 4:54 PM, QuarkHadron (84.39) wrote:

Regarding my comment on the international reserve currency, in the news today:

http://www.nytimes.com/2011/12/27/world/asia/chinese-and-japanese-leaders-discuss-regional-security.html

"China and Japan have agreed to start direct trading of their currencies..."

"China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars.

Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency."

 

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