U.S.'s $13 Trillion Debt Poised to Overtake GDP
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U.S.'s $13 Trillion Debt Poised to Overtake GDP
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Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#2It is worth to point out that one is a stock (debt) and one is a flow (GDP), and the right way of comparing them would be by taking the net present value of the flow, or comparing the cost of servicing the debt per year to GDP (so debt servicing cost climb to x percent of gdp).
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#3It is worth to point out that one is a stock (debt) and one is a flow (GDP), and the right way of comparing them would be by taking the net present value of the flow, or comparing the cost of servicing the debt per year to GDP (so debt servicing cost climb to x percent of gdp).
>or comparing the cost of servicing the debt per year to GDP (so debt servicing cost climb to x percent of gdp).
Yeah, or yearly debt servicing cost vs yearly tax revenue, or delta debt servicing cost vs delta tax revenue.
The GDP component only hints at the underlying issues - what it costs us to service the debt, and what it would cost us to stop adding to it, and what it would cost us to pay it down the hard way.
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#4It's interesting that many people seem to have accepted that endlessly taking on more debt is a good idea. Debt has to paid off and you can't just take it on endlessly. I wonder what the future looks like if the United States continues to take on more and more debt. Right now we can't really pay it off ever so we're stuck servicing it forever. Seems like we're giving our children a much worse world than the one we were born in. When I was born the debt was pretty manageable and over the course of my lifetime it exploded to something that's basically never going to be paid off.
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#5It is worth to point out that one is a stock (debt) and one is a flow (GDP), and the right way of comparing them would be by taking the net present value of the flow, or comparing the cost of servicing the debt per year to GDP (so debt servicing cost climb to x percent of gdp).
According to this NYT article (http://www.nytimes.com/2009/11/23/business/23rates.html), debt service was $202B in 2009. It is projected to go to $700B in 2019.
To put that in perspective, $500B more than covers what we spend on education, energy, homeland security and the wars in Iraq and Afghanistan.
Of course, this assumes that our interest rates stay the same. I don't see how this is possible as our debt/GDP rises. I fear we are seriously choking ourselves.
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#6It's interesting that many people seem to have accepted that endlessly taking on more debt is a good idea. Debt has to paid off and you can't just take it on endlessly. I wonder what the future looks like if the United States continues to take on more and more debt. Right now we can't really pay it off ever so we're stuck servicing it forever. Seems like we're giving our children a much worse world than the one we we…
Our future will pretty closely mirror what's going on in Europe right now. Greece's debt is some 115% of it's GDP and Italy has around 110%. What happens to Europe, and particularly the PIIGS nations in the next few months will be very important to pretty much the rest of the developed world.
And besides that, we can look to history to show us that most major empires (e.g. Roman, Ottoman, British) that ended up collapsing did so partly because of rampant over-spending and a very broken debt-to-gdp ratio.
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#7It's interesting that many people seem to have accepted that endlessly taking on more debt is a good idea. Debt has to paid off and you can't just take it on endlessly. I wonder what the future looks like if the United States continues to take on more and more debt. Right now we can't really pay it off ever so we're stuck servicing it forever. Seems like we're giving our children a much worse world than the one we we…
Our future will pretty closely mirror what's going on in Europe right now. Greece's debt is some 115% of it's GDP and Italy has around 110%. What happens to Europe, and particularly the PIIGS nations in the next few months will be very important to pretty much the rest of the developed world. And besides that, we can look to history to show us that most major empires (e.g. Roman, Ottoman, British) that ended up colla…
On the plus side at least we won't have an empire anymore. That's about the only good thing I see coming from all this.
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#8It's interesting that many people seem to have accepted that endlessly taking on more debt is a good idea. Debt has to paid off and you can't just take it on endlessly. I wonder what the future looks like if the United States continues to take on more and more debt. Right now we can't really pay it off ever so we're stuck servicing it forever. Seems like we're giving our children a much worse world than the one we we…
How will the average Joe be affected by all this?
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#9It is worth to point out that one is a stock (debt) and one is a flow (GDP), and the right way of comparing them would be by taking the net present value of the flow, or comparing the cost of servicing the debt per year to GDP (so debt servicing cost climb to x percent of gdp).
According to this NYT article ( http://www.nytimes.com/2009/11/23/business/23rates.html ), debt service was $202B in 2009. It is projected to go to $700B in 2019. To put that in perspective, $500B more than covers what we spend on education, energy, homeland security and the wars in Iraq and Afghanistan. Of course, this assumes that our interest rates stay the same. I don't see how this is possible as our debt/GDP ri…
I don't think we are choking ourselves. Loaning money to the US government means the government can use all its resources to pay you back. We have not tapped any of those resources yet; taxes in the US are pretty low compared to the rest of the developed world.
Also keep in mind that the government can loan money at a higher interest rate than it can borrow it at. (I am not sure how much income this generates, though.)
Re: U.S.'s $13 Trillion Debt Poised to Overtake GDP
#10It's interesting that many people seem to have accepted that endlessly taking on more debt is a good idea. Debt has to paid off and you can't just take it on endlessly. I wonder what the future looks like if the United States continues to take on more and more debt. Right now we can't really pay it off ever so we're stuck servicing it forever. Seems like we're giving our children a much worse world than the one we we…
How will the average Joe be affected by all this?
In all seriousness, when the average Joe has to take wheelbarrows of cash into a store to buy groceries.
(Granted, its unlikely our inflation will rival that of Zimbabwe)