Total US Debt Soars To 101.5% Of GDP

[Trajan]

danger will robinson. 70% in 2009.....we will hit the debt ceiling ( inc. all of the BS bills that were passed then and since last august) in Sept.



There is nothing quite like a $70 billion debt auction settlement at the last day of a month to bring total US debt to a record $15.692 trillion, which happens to be just $600 billion shy of the $16.394 trillion debt ceiling. (and no, contrary to simple economic textbook lesson, this does not mean that the private sector just got another $70 billion in debt capacity courtesy of taxpayers, as explained here). And now that we know what Q1 GDP was at the end of Q1, or namely $15.462 trillion, it is simply math to divine that today alone total US/debt to GDP rose by 50 bps to a mindboggling 101.5%.

Total US Debt Soars To 101.5% Of GDP | ZeroHedge

 

[itfitzme]

danger will robinson. 70% in 2009.....we will hit the debt ceiling ( inc. all of the BS bills that were passed then and since last august) in Sept.



There is nothing quite like a $70 billion debt auction settlement at the last day of a month to bring total US debt to a record $15.692 trillion, which happens to be just $600 billion shy of the $16.394 trillion debt ceiling. (and no, contrary to simple economic textbook lesson, this does not mean that the private sector just got another $70 billion in debt capacity courtesy of taxpayers, as explained here). And now that we know what Q1 GDP was at the end of Q1, or namely $15.462 trillion, it is simply math to divine that today alone total US/debt to GDP rose by 50 bps to a mindboggling 101.5%.

Total US Debt Soars To 101.5% Of GDP | ZeroHedge

Well, I suppose it would be less if the GDP was higher. There is a thought.

It is an interesting thing. Yep, it's a really big number. So what does it mean except it is really big?

So what is the difference between the Debt Held By The Public and Intergovernmental Holdings?

The Debt Held By The Public is $10,916,070,898,102.68.

Intergovernmental Holdings is $4,776,297,169,202.55.

What does it mean that the Debt Held by the Public is really only $11T, not $15.6T?

And what is the real effect of the debt?

Here is an interesting article. The real effects of debt

Unfortunately, it doesn't say why growth limits at some level. There is no clear causality. Any clue? What, if any, is the causal relationship between GDP growth and government debt?

The MMT guys point out that government debt is matched, penny to penny, with private savings. In fact, if the government runs a surplus then it takes away from private savings. And this only makes sense. A government surplus is money being taken out of the economy. Government bonds are savings.

So, yeah, it's a really big number, so what? What does it mean, except it is a really big number on a bookkeeping account? It is, at some account at the Federal Reserve, a bunch of interest bearing savings accounts that add up to a really big number.

I had some of that debt, in the form of bonds, that I cased in just the other day. At the Fed, for debt held by, say, the Chinese government, when they "cash" them in, the Fed marks down their "savings" account and marks up their "checking" account.

Okay, so? Now what? Except for the account where the numbers are recorded, what happens?

Here are a few more really big numbers. 7.7 million businesses. 160+ million workers. 320+ million in population. All really big numbers.

But really, they are not "mind boggling", unless you have a mind that is easily boggled. is your mind easily boggled by numbers?

 

[uscitizen]

It does not matter as long as the market does good?

 

[itfitzme]

It does not matter as long as the market does good?

Clever question.

Here are the things that vex me.

1) We cannot occupy a future dwelling. We cannot borrow from future consumption. Everything that is consumed in the future will be produced in the future.

See, when you look at the production and consumption, it doesn't matter. And it is the production and consumption that is the real thing.

2) It is clear that an increasing money supply, relative to population growth, standard of living, and CPI, allows output to increase. A decreasing supply causes output to decrease. And the really wicked part is that output is lower on the way down then on the way up, for the exact same level of money supply. There is something just funny about the money.

These two fundamental facts are indisputable.

The debt is simply an accounting of money, nothing else. It has no direct connection to the economy except in that we rely on it to account for the real production and consumption.

The problem is a purely monetary one. As long as the accounting practice allows the money supply to increase at a rate that equals the maximum rate of growth, then it's not an issue. It it increases to fast, then we get inflation. If it increases to slow, then we get deflation and falling production. (We can't get more growth then maximum, so the symmetry is lost.)

So what is the problem with the national debt that can interfere with the money supply being "stable" compared to the population, standard of living, and CPI growth rates? If it should, is it the debt or is it the accounting?

I say it's the accounting. There is something "broken" in our system of money. The accounting principles that apply to the household and businesses does not carry up to the entire economy. The very fact that the debt exists, and that it should then result in an issue, is testimonial to this. If the system was balanced, it wouldn't accumulate.

It's like driving a car that pulls to the right. You know it is off because you have to steer to to the left. The very fact that you have to steer to the left to go straight is testimony to the fact that the car pulls to the right.

Oh, and since the beginning of recorded history, well known in the Bible, debt accumulates. "Forgive our debtors....." I hear there is a seven year reference and that is where our seven year bankruptcy period comes from.

I am just supposing here, but isn't it interesting that, on the way up output is higher then on the way down, for the same amount of money. Think about it, isn't that just odd. It has hysteresis. Doesn't it just scream of some fundamental imbalance.

Do you suppose that on the way down, the debt is relieved, on the way up, the debt accumulates, and at zero growth, the debt just sits flat? I don't know, it's just a thought.

Do you suppose that, while we cannot consume future food, that the hysteresis can result in us being unable to account for future food so production falls. What is the macro economic affect to the money supply if the gov't cannot accumulate more debt or pays it off? Will this result in a relative decrease in the money supply such that production becomes less then it would otherwise be at the same level of money supply during growth?

 

[Widdekind]

1) We cannot occupy a future dwelling. We cannot borrow from future consumption. Everything that is consumed in the future will be produced in the future.

Debt pledges (some of) that future production "tomorrow", to the lender, in exchange for credits, "today", de facto "free money today" (without labor) for "Taxes tomorrow" (future indentured servitude)

an increasing money supply, relative to population growth, standard of living, and CPI, allows output to increase. A decreasing supply causes output to decrease.

Federal Reserve notes are "paper gold". Economies can only grow, when the supply of "gold" currency increases (to cover the inevitable negative cash-flows, of some economic entities).

What is the macro economic affect to the money supply if the gov't cannot accumulate more debt or pays it off? Will this result in a relative decrease in the money supply such that production becomes less

the expansion of the Money supply, through the creation of credit, simulates the "mining & minting of more gold coins". Increasing amounts of Fed "paper gold" cash, and bank credit, in circulation, grows the Money supply, thereby covering the losses of some (offsetting negative cash-flow with borrowed credit), who would otherwise "go broke" and "dry up" their parts of the stream of spending. Naively, if the Money supply was fixed, then every "economic cycle" would result in some "over-spending" their last coins, going bankrupt, and then "starving". Credit permits people to borrow their way through hard-times, hopefully to pay back the loans in good-times. i suspect that credit acts like a "social safety net", much more economically than Government programs -- which are, in fact, funded amidst deep deficit spending -- you might as well dispense with the Social programs & Taxes, and borrowing directly from banks yourself, to pay for your parents' retirement. Your kids would then pay for you -- i.e. the private sector already has the flexible capacity to more-than-mimic Big Government "care for our elderly".

Banks already are "social safety nets", and "ideal Demand-side stimuli" for economies, compared to which Government programs are crude & costly (as i understand things). Being blunt, though, i think the difference, is people prefer Government solutions, when they think Government Force can get other people's money to pay for them. People don't seem to realize, though, that everybody else has the exact same idea, so that we all wind up in a "Mexican standoff of Tax obligations".

 

[waltky]

Uncle Ferd says dey liable to foreclose onna White House to pay for earthquake an' tsunami damage...

Japan on Track to Overtake China as Top Foreign Owner of U.S. Debt
May 4, 2012 - After a 9.0 earthquake struck off the coast of Japan last March and sent a tsunami crashing into the Fukushima Daiichi nuclear power plant, causing a Japanese national emergency, some worried the Japanese would stop buying U.S. government debt—or even sell off some of what they already owned—thus precipitating a spike in the interest rates on that debt.

In fact, according to data published by the U.S. Treasury Department, Japan has done just opposite, buying more U.S. government debt--even as China has started to decrease its holdings of U.S. debt. Data from the most recent 8 months published by the Treasury indicate that between the last day of June 2011 and the last day of February 2012, entities in Japan increased their holdings of U.S. Treasury securities from $881.6 billion to $1.0959 trillion. At the same time, entities in the People’s Republic of China decreased their holdings of U.S. Treasury securities from $1.307 trillion to $1.1789 trillion.

In other words, in just eight months, the Japanese increased their net holdings of U.S. government debt by $214.3 billion while the Chinese decreased theirs by $128.1 billion. On average, from the end of June through February (the last month for which data has been reported), the Japanese have closed the gap between their holdings of U.S. debt and China's holdings of U.S. debt by about $53.13 billion per month. At the end of June 2011, the Chinese owned $425.4 billion more in U.S. government debt than the Japanese. By the end of this February, the Chinese owned only $83 billion more than the Japanese. If the June-through-February trend continued through March and April--for which data has not yet been reported--the Japanese may have already overtaken the Chinese in ownership of U.S. debt.

On March 15, 2011, four days after the earthquake and tsunami hit Japan, the Associated Press reported: “Some worry that Japan will sell some of its vast holdings of U.S. government debt to raise money. Doing so would push the prices of U.S. Treasury bonds down and yields up, raising U.S. interest rates.” A report in the New York Times that same day made a similar observation.

“Analysts also rushed to calculate the ‘repatriation risk’ as Japanese investors with money abroad rushed to bring it home--for reconstruction or to have readier access to their savings,” the Times reported. “With interest rates at home near zero, Japanese investors have looked elsewhere for higher yields. Japan is the second largest holder of United States Treasury bonds, after China, and any withdrawal on a large scale could put some upward pressure on interest rates in the United States.” As it turned out, the Japanese did not start drawing their money out of the United States. But the Chinese did.

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[edthecynic]

danger will robinson. 70% in 2009.....we will hit the debt ceiling ( inc. all of the BS bills that were passed then and since last august) in Sept.



There is nothing quite like a $70 billion debt auction settlement at the last day of a month to bring total US debt to a record $15.692 trillion, which happens to be just $600 billion shy of the $16.394 trillion debt ceiling. (and no, contrary to simple economic textbook lesson, this does not mean that the private sector just got another $70 billion in debt capacity courtesy of taxpayers, as explained here). And now that we know what Q1 GDP was at the end of Q1, or namely $15.462 trillion, it is simply math to divine that today alone total US/debt to GDP rose by 50 bps to a mindboggling 101.5%.

Total US Debt Soars To 101.5% Of GDP | ZeroHedge

'I don't worry about the deficit. It's big enough to take care of itself.'
Ronald Reagan

"Reagan proved deficits don't matter."
Dick Cheney

 

[waltky]

Japan has been even more nonchalant than the US in efforts to rein in spending...

Japan's fiscal death is a warning to the West
22 May 2012 - Fitch Ratings has downgraded Japan two notches to A+, citing a surge in public debt since the Lehman crisis and the lack of any plan to restore fiscal probity.

Key indicators are deteriorating on almost every front, raising concerns that the world's third largest economy is running aground after two "Lost Decades". Japan's debt has jumped by 61 percentage points of GDP since 2008, compared to eight points for the AAA bloc. Public debt is expected to reach 239pc of GDP this year, uncharted levels for a major economy in peace-time. `Net debt' – subtracting Japan's vast holdings of foreign bonds – is nearer 137pc but this is rising at an even steeper trajectory. "Japan's addiction to public sector spending is way beyond the boundaries or remedial `austerity'," said Dylan Grice from Societe Generale. "Political pressure on the Bank of Japan to crank the printing presses into top gear will become irresistible. We see no alternative."

Japan has been even more nonchalant than the US in efforts to rein in spending. The budget deficit will remain above 7pc of GDP late into the decade. Fitch said the pace of fiscal consolidation is "leisurely" and prone to "political risk". Plans to raise VAT from 5pc to 10pc face a battle in the Diet. Japan still enjoys "exceptional financing flexibility" but is vulnerable to shocks. Even a small rise in borrowing costs would play havoc. The IMF said Japan is the only advanced country to let its "cyclically adjusted deficit" rise further this year. Gross financing needs are 59pc of GDP in 2012, compared to 14.8pc in the UK and 8.9pc in Germany. The central bank has stepped up stimulus but is fighting to defend its independence, so traumatically lost in the 1930s. It is wary of uncorking inflation, fearing a catastrophic stampede out of government debt. Bettter the devil it knows of chronic deflation.

Mr Grice said it would take a fiscal squeeze of 13pc of GDP to stabilise debt, a tall order for a country with the world's oldest population. The workforce has been contracting since 1995. Nominal GDP has been falling at 0.5pc a year. Tokyo expects the population to fall from 128m in 2010 to 87m by 2060. Previous downgrades a decade ago were shrugged off by the markets. Yields on 10-year bonds kept falling as the economy slid deeper into deflation. They are now 0.85pc, the world's lowest. There was no flicker of change after Fitch's announcement. There is a graveyard full of `Japan bears' who warned of a debt debacle too early. It may prove different this time. Japan has exhausted its buffers. The savings rate has collapsed to 2pc of GDP from 16pc when the bubble burst in 1990. This has vastly reduced the pool of captive savings that can be tapped by the state.

Taxes cover half total spending. The rest is borrowed. Japanese banks and life insurers are still buying the bonds, but Jonathan Tepper from Variant Securities doubts that they can do so much beyond 2014. The Government Investment Pension Fund – the biggest holder of debt – became a net seller last year to cover redemption claims. The historic current account surplus of 3pc of GDP has evaporated. Last year's Fukushima disaster was the coup de grace. Japan will switch off its last nuclear reactor in May, leaving the country dependent on oil and gas imports to power its industry. David Rea from Capital Economics said Japan will run a trade deficit this year. It may also tip back into contraction soon after bumper growth in the first quarter driven by the one-off effects of eco-car subsidies and post-Fukushima reconstruction. Retail sales fell 1.2pc in March. Core machinery orders fell 2.8pc. Export orders have withered, reflecting the sharp slowdown in China.

Monetarists say that Japan's 20-year battle with stagnation is a warning to the West. The country failed to purge its banks swiftly and relied on Keynesian fiscal projects to prime pump the economy each time growth stalled. The result was a string of false dawns, with public debt ratcheting ever upwards. The Bank of Japan dabbled with quantitative easing, but too little and too late. The bonds were purchased from a moribund banking system, a recipe for failure since this has little effect on the M3 money supply. "Japan was never early enough or ambitious enough in its use of monetary stimulus," said Jamie Dannhauser from Lombard Street Research. It let asset prices slide, and let nominal GDP contract. The result has been rising debt on a shrinking economic base. "Once this starts it is very hard to stop. That is the danger for Ireland and Spain," he said. For Japan, the lost decades are tunning into a lost century.

Source

 

[ShackledNation]

First time since WWII that this has happened. Quite sad.

 

[Nova78]

OBAMA ------

 

[waltky]

Granny says we already got so much debt, our gran'chilluns is gonna be payin' it off...

CBO: Federal debt to double in 15 years
Tuesday, June 5, 2012 - Fiscal challenges worst since WWII

Federal debt will double by the middle of the next decade and reach more than twice the size of the entire U.S. economy by 2037 unless Congress changes course on taxes and spending, the Congressional Budget Office said in its latest analysis Tuesday. The CBO said it’s the country’s worst fiscal picture since a brief period during World War II, when spending ballooned to fund the military campaign but returned to normal soon after the war ended. “In the past few years, the federal government has been recording the largest budget deficits since 1945, both in dollar terms and as a share of the economy. Consequently, the amount of federal debt held by the public has surged,” the nonpartisan agency’s analysts said in a grim review of the government’s budget challenges.

The CBO said growing debt will be driven chiefly by an aging population that needs higher spending on health care, and by higher interest payments on the debt. Public debt will be equal to 70 percent of gross domestic product at the end of this fiscal year — up from 40 percent at the end of 2008 [-] and will be on its way to more than 200 percent of GDP by 2037. At that level, fiscal catastrophes are more likely, and the government’s ability to respond becomes far more constrained. Ironically, the CBO said the deep deficits and debt don’t have to happen. If Congress would step out of the way, major tax increases and deep spending cuts already built into the law would take effect and debt would begin to shrink almost immediately.

However, those tax increases and spending cuts have repeatedly proved to be unpalatable on both sides of the aisle. Instead, the GOP has fought to permanently extend lower tax rates, and Democrats have defended existing spending programs and proposed some new ones. That has left the country bumping along with deficits of $1 trillion or more each of the last three years. Yet with the economy still weak, lawmakers remain paralyzed as they try to figure out how to act over the long term without harming the economy now.

The report produced hand-wringing and finger-pointing on Capitol Hill. “The president’s policies are not working,” said House Budget Committee Chairman Paul Ryan, Wisconsin Republican. “The sobering reality of our economic challenges require leadership and action. The president and his party’s leaders have failed on both counts.” But House Minority Whip Steny H. Hoyer, Maryland Democrat, said the hurdle is the GOP’s demand that spending cuts fuel any debt solution. The “CBO’s report is a warning that we must get our fiscal house in order by achieving big and balanced deficit reduction that includes both spending and revenues,” he said. “Cutting domestic spending alone won’t work, and it will require both parties working together.”

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[waltky]

Granny not worried - she got her money in Halliburton an' Blackwater stock...

Debt fight poses new risk to U.S. credit rating
Thursday, June 14, 2012 - S&P warns of 2nd downgrade

Wall Street rating agencies are starting to sound warnings again about the possibility of further downgrades of the once-perfect U.S. credit rating as a critical year-end deadline for addressing the nation’s mounting debt nears. Standard & Poor’s Corp. this week said that the outlook for the U.S. rating is negative and suggested that it will downgrade the U.S. again if the political impasse over tax and entitlement reform extends into next year. The agency shook world markets last summer by downgrading the U.S. for the first time to AA+ from AAA.

S&P cites extreme politics as the biggest problem, and one that is getting worse as the presidential race and fight for control of Congress heats up. The agency doesn’t expect the political environment to improve after the elections - no matter who wins. At that point, Congress will have only two months to avert a massive fiscal train wreck from hitting the economy with huge tax increases and spending cuts at year’s end. “Political polarization has increased,” with serious consequences for the nation’s ability to manage its growing debts, said S&P analyst Nikola G. Swann. He noted that neither party has been able to muster broad bipartisan support for any major measure to address the deficit and prevent the debt from eventually getting out of control.

The agency noted that President Obama and both parties in Congress spurned the recommendations of a bipartisan presidential commission whose December 2010 plan could have brought the deficit and debt down to manageable levels. Further, another bipartisan panel appointed by the leaders of both parties last fall failed to draft an alternative plan and broke up amid partisan finger-pointing. Political impasse This year, with hyperpolitical posturing on all sides, Washington has abandoned all attempts at bipartisan agreement, despite the looming deadline.

The move toward extremes by both parties - with Democrats refusing to consider major reforms in fast-growing entitlement programs such as Social Security and Medicare, and Republicans refusing to consider raising taxes or even closing tax loopholes to reduce the deficit - has made finding a middle ground increasingly difficult, S&P said. As this impasse deepens, it raises questions about the government’s willingness to sustain its unprecedented $11 trillion mountain of public debt, S&P said, while Congress’ commitment to avoiding default is increasingly being tested by politicking over legislative measures needed to increase the official debt limit.

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