gotcha...i can't find any stats on that. i was trying to find total u.s. wealth stats for q1 2009 or q4 2008 but i can't find a rock solid number. the main reason i point out the credit market debt as a percentage of gdp is because it is not slowing down at all. tell me if i am wrong but when i see this stat i think about it in terms of buying a house when people are told not to take out a mortage for more than 3 times their annual income. we are beyond that 3 times and we are quickly pushing towards 4 times. also, i am not saying a collapse is imminent but i don't see how this level of debt issuance is sustainable.
another thing you have to think about with wealth is what it is actually worth if it has to be monetized aka sold on the open market relatively quickly. we are leveraging our "wealth" and treating it as if it is the same thing as currency when it is not...especially when it is bought with debt and future earnings.
You are partial right in your statement. Its true the debt is over decades not due next year to say the least. However at 63, trillions the debt is 14% of your projected GDP total of 450 trillions over the next 25 years. Now the real mathematical errors is that government revenue to service that debt is only about 35% of GDP. So over 25 years the government has revenue of only 158 Trillion to service a debt of 63 Trillions which is 40%. Now this only if GDP grows and negative GDP growth means debt to revenue ratio continues to increase. That is the huge problem because when you commit such a large percentage of your future earning to debt obligations then there only two ways out this: 1) Consfication through taxation 2) Depreciation through inflation I think option #2 is where we are headed right now.
On the flipside, though, I also simplified my numbers quite a bit. I assumed 0% inflation. If you assume 2% inflation + 2% growth, the GDP over 25 years is $541T. If you assume 3% inflation and 3% growth, you're at $713T. (I don't know, however, how much of the obligations are inflation protected.) And we're assuming that the debt only goes out 25 years. I would guess the SS obligations go out well beyond that as it's normally quoted out 30-50 years. If you assume 35 years, then at 2%/2%, your GDP base is $957T and if you use 3%/3%, you're at $1450T. That's not to say my assumptions are accurate - but it shows you how wide a discrepency you have in the numbers when you work with that wide a range. And that doesn't account for any changes to SS that might slow it's growth (raising the retirement age, changing the inflation indexing, etc).
Correct in pure mathematical terms the best case scenario is increasing inflation over time to have GDP and govt revenue exceed debt obligation plus interest considering US Treasury debt. Many nations have been able to get out debt through inflation but the consequences of that can be devastating to an economy and the living standard. Inflation is the absolute and final form of hidden taxation.
I don't know. 63 trillion is still a large number no matter how you cut it, and I trust former Comptroller David Walker on his calls to reduce spending commitments. Most of the danger lies in our healthcare system and its guarantees that are seemingly set in stone by the elderly lobby. In that context (and not because of big lib spender Bama), my generation and its children have a big hole to cover while battling China and other states for economic superiority.
