American debt hits 13T!

[pinzon]

Over 90% of GDP. The country is sinking faster than the Titanic.

[scarbowl]

Over 90% of GDP. The country is sinking faster than the Titanic.

 

A few other countries for comparison:
Italy - 103%
Japan - 170%
India - 78%
Canada - 62%

If the US is "sinking faster than the Titanic" then what are your words for Japan?

[pinzon]

Over 90% of GDP. The country is sinking faster than the Titanic.

 

A few other countries for comparison:
Italy - 103%
Japan - 170%
India - 78%
Canada - 62%

If the US is "sinking faster than the Titanic" then what are your words for Japan?

Japan = low interest, domestic debt. And it has been sinking for 20 years.

[TheWrathOfGrapes]

Over 90% of GDP. The country is sinking faster than the Titanic.

 

A few other countries for comparison:
Italy - 103%
Japan - 170%
India - 78%
Canada - 62%

If the US is "sinking faster than the Titanic" then what are your words for Japan?

I think it is more relevant and pertinent to look at the External Debt, instead of Public Debt. The figures below are from the CIA World Factbook, against GDP(ppp).

Ireland -- 1,293%
UK -- 423%
Portugal -- 217%
Spain -- 176%
Greece -- 162%
Italy -- 132%
Australia -- 112%
US -- 94%
Canada -- 65%
Japan -- 51%
India -- 6%
China -- 4%

The word for Japan is, "still okay", as most of the debt are public debt and funded internally. The external debt is only about half its GDP.

BTW, the Titanic actually sank rather slowly, with plenty of time to launch lifeboats to save the passengers...

[scarbowl]

Thanks for the added data.  It validates the silliness of the original poster.  Not that the debt isn't an issue but to suggest the USA is in terrible shape due to its debt ignores many countries who have higher debt but he/she didn't cite as "sinking" such as Australia. 

[pinzon]

Thanks for the added data.  It validates the silliness of the original poster.  Not that the debt isn't an issue but to suggest the USA is in terrible shape due to its debt ignores many countries who have higher debt but he/she didn't cite as "sinking" such as Australia.  

Do I have to spell everything out for you? Take at look at the debt's trajectory. At the rate it's going it will soon surpass those other countries. Furthermore, of those countries with debts greater than the USA's, only Oz and possibly Ireland have decent outlooks. Anyway, that's merely one of its problems. Sorry about your fading empire, friend.

[Vulcanl]

pinzon,

I am an American citizen and a realist.  The facts are clear: this level of debt accumulation is unsustainable and I have yet to see our political leaders propose anything remotely logical as to how we are going to get out of this.  It is one thing for countries like China (with massive reserves) to pump stimulus, and quite another for the USA (who needs to print money to do the same).  In the case of the latter something WILL give. 

Wrath,

Debt MATTERS.  Any statement to the contrary is just wishful thinking.

The below is a nice synopsis of the situation, however I don't agree with the proposed fixes.  I am of the opinion that we need to reboot.  This means doing a managed sovereign debt default,   and allowing the US Dollar to collapse.  It will be painful but I much prefer to take the hit all at once than mercilessly drag this problem out (much like Japan has done):

New York Times
May 29, 2010
The Trans-Atlantic Crisis
America's Uncertain Recovery

The stock market gyrated wildly last week, soaring when China denied reports it was about to forsake the euro, then retreating on bad news about Spain’s creditworthiness. Contagion from Europe is obviously still a threat to the United States. But Europe’s woes are only one of several risks still facing the American economy. And those risks are made all the worse by an increasingly incoherent response from Congress.

The biggest danger is high and intractable unemployment, currently 9.9 percent, or 15.3 million people, nearly half of whom have been jobless for more than six months. Even if last month’s strong job growth is sustained — a big if — it would take five years to get back to a more tolerable unemployment rate of 5 percent.

At the same time, state budgets are collapsing, with governments facing a collective budget hole of $112 billion in the fiscal year that starts for most of them on July 1. Closing the gaps will mean tax increases and spending cuts, which will provoke more layoffs, both among public employees and businesses that contract with state and local governments.

Adding to the economic pressure on families, more house price declines are likely, the result of millions of foreclosures and other distressed homes sales. Adding to the pressure on small businesses, credit will continue to be tight, as potentially hundreds of small banks fail, most of them weakened by souring loans on commercial real estate. The Federal Deposit Insurance Corporation recently reported that 775 banks were on its watch list, the most since mid-1993.

Any one of those issues would be worrying. Collectively, they constitute an emergency. Yet, the Senate left town on Friday for a week’s break without passing a bill to extend expiring unemployment benefits; senators said they would get to it later. The House voted for the bill, but stripped out provisions for a health-insurance subsidy for jobless workers and for more aid to states.

Congress’s reluctance to pass the package of measures, which costs about $70 billion, is grounded in familiar arguments that the nation must act now to cut the budget deficit. In fact, withholding support now — when the recovery is still fragile and needs are still great — runs the risk of condemning the economy to a long, hard slog of subpar growth, barely indistinguishable, in effect, from recession itself. That would be worse for the nation’s finances than upfront spending.

It is up to the Obama administration and Democratic Congressional leaders to make that case, ideally in tandem with a credible plan for reducing the deficit in the longer term. Health care reform was a down payment on controlling costs. Further serious discussion of the deficit has been put off until after the midterm election, when the president’s budget panel is due to report.

Even then, how many politicians will find the courage to deal frankly with the tax increases that deficit reduction will require? Economic recovery is not a given. Neither is effective political leadership. We will not have one without the other.

•
Europe's Endangered Banks
So far, Europe’s troubles have not hurt American banks, which own little debt from beleaguered Greece, Portugal or Spain. But the American and European financial sectors are entwined, and it is unclear whether American banks are prepared for what could happen.

Doubts remain about the solvency of the weaker European countries, despite the plan by the European Union and the International Monetary Fund to make up to $1 trillion available to indebted economies.

The plan has brought needed respite to financial markets. Crucially, the European Central Bank threw a lifeline to banks in the euro area, promising to buy tens of billions worth of weak-country debt from them, a small portion. The German Bundestag overcame public resistance and approved the rescue package.

But it has a fundamental shortcoming: it relies on deep budget cuts from countries that are in a recession or teetering on the edge. Several have weak governments that may not be able to carry through the prescribed fixes. Even if they do, the budget cuts are likely to make them even weaker.

Consider Ireland, which was quick to address the financial crisis. Last year, the Irish government slashed spending, cutting the pay of public-sector workers. It raised taxes. The Irish economy contracted 7 percent, and the budget deficit widened to 14 percent of its gross domestic product. This year, the deficit is expected to reach 12 percent of G.D.P.

Greece has now pledged to slash its budget deficit by more than 10 percentage points of G.D.P. by 2014. Spain says it will cut its deficit to 6 percent of G.D.P. next year from 11.2 percent in 2009. Italy announced cuts worth $30 billion. Portugal and even Germany have also announced budget cuts.

This is a recipe for economic stagnation. It also may not avert a debt rescheduling by some of the weaker European countries, which would force European banks to take a cut on their holdings. Sitting on slim cushions of capital reserves, European banks are in no shape for a sharp drop in the value of their assets.

It would be best to recognize that debt restructuring is inevitable. That would allow weaker countries to start growing again more quickly, but to withstand it European banks must be made to raise more capital. German banks’ capital amounts to less than 5 percent of their total assets, compared with 12.4 percent in the United States. And they are sitting on $650 billion in debt from the four most stricken countries.

American banks are more stable and better capitalized but must remain alert. American banks ended 2009 with $1.2 trillion worth of total European debt. That is about par with the amount of subprime residential mortgage debt outstanding in 2008. It would be foolhardy to assume this problem is far away.

[TheWrathOfGrapes]

Wrath,
Debt MATTERS.  Any statement to the contrary is just wishful thinking.

V - which word of the sentence below you do not understand?

I think it is more relevant and pertinent to look at the External Debt, instead of Public Debt.

We are talking about sinking country and precariousness of the financial situation of countries. As I explained in other threads, it is more appropriate to talk about external debt instead of public debt.  Japan has been able to coast along for 21 years precisely because its external debt is relatively low despite is huge public debt.  Likewise, Singapore's public debt is more than its GDP, but no one in his right mind will short Singapore or attack the Singapore Dollar. SG's external debt is tiny. Its large public debt is mainly issued for the purpose of developing the debt market.

Debt MATTERS.  Any statement to the contrary is just wishful thinking.

This is exactly the kind of wishful, no, wishy washy, thinking.  Debt per se, is meangingless.  In fact, a cash rich company is actually operating below the optimum.  There is always an optimum debt level to maximise the financial leverage and profits.

Take a personal example. If I take a debt of $1 million to buy a $4 million property, does it worry you?  I am not.  OTOH, you should be worried if you have to take out a $500,000 debt to finance a $550,000 property.

Which statement in my earlier post gives you the impression that debt does not matters?

[Vulcanl]

Wrath,

I understand your point.  Now understand mine: Debt begets more debt.  One starts off with your assumption (that certain levels are 'OK,' and indeed - healthy!), things go well for while and eventually something happens that creates a rationale for taking on more.  Thus the snowball effect begins, rationalized at every step of the way, and before you know it you are knee deep with no way out.

It's like when you start out in modern life and start to be bombarded with pitches for credit cards.  One (very effective) pitch is: get a a credit card so you can build up your credit score!  But wait a minute....why do I want a better credit score?!?!? - TO ENABLE THE TAKING ON OF MORE DEBT

There are examples of people and countries behaving responsibly, but the Western countries are exhibit A of how the temptation is just too great after a time.  History is littered with many such examples of empires collapsed due to this issue.

I am well aware of all the theories out there about how the public sector is 'different' and it SHOULD take on debt.  I don't buy any of it, not after what we have seen in our lifetimes.

Central banking is a failed experiment, in my opinion.  Let's get to a Gold (or other real store of value) standard. 

If you can't pay for it in cash, then don't buy it.  Period.

[TheWrathOfGrapes]

V:

I understand your point.

- I very much doubt it, otherwise you would not make those statements in your 2 posts above.

If you can't pay for it in cash, then don't buy it.  Period.

Hmmm, I must be mixing with the wrong crowd. I know of very few people who do that when paying for property purchases.  Even multi-millionaires use debt.

Period - that was very definitive. And definitely wrong. I think 99.9999% of the world disagree with you V - but then of course they are all wrong.

[Vulcanl]

Wrath,

You are now making the same mistake a lot of people on this board make.  Honestly I always thought you were more open-minded than that:

"...Period - that was very definitive..."

YES!!  It is.  Also happens to be 100% true.  If you avoid debt, always ensure that your income surpasses your outflows, and you invest wisely you will eventually be able to pay for everything in cash

"...And definitely wrong...""

How is it wrong?!?!?  Please explain what exactly is wrong with my statement?

"...I think 99.9999% of the world disagree with you V..."

And that is OK

"... - but then of course they are all wrong...

Now you are putting words in my mouth.

I am deeply disappointed with you, matey 

[TheWrathOfGrapes]

Hmmm, I must be mixing with the wrong crowd. I know of very few people who do that when paying for property purchases.  Even multi-millionaires use debt.

If you can't pay for it in cash, then don't buy it.  Period.

Mine, mine, you suffering from selective amnesia?

I asked you again, how many people buy property without debt? Maybe you did.  How many people buy cars, boats, planes, factories, etc without debt.

100% true?  No.  I am saying 99.9999% of the world's population use debt in one way or another at one time or another of their life.

BTW, you don't have to be disappointed. I don't need your approbation.

[pinzon]

Hmmm, I must be mixing with the wrong crowd. I know of very few people who do that when paying for property purchases.  Even multi-millionaires use debt.

If you can't pay for it in cash, then don't buy it.  Period.

Mine, mine, you suffering from selective amnesia?

I asked you again, how many people buy property without debt? Maybe you did.  How many people buy cars, boats, planes, factories, etc without debt.

100% true?  No.  I am saying 99.9999% of the world's population use debt in one way or another at one time or another of their life.

BTW, you don't have to be disappointed. I don't need your approbation.

Sure, it may be wise to borrow to finance infrastructure. The problem is that USA borrows to finance war, social spending, and consumerism. 13T is only the national debt. Add personal debt and USA is far more indebted than those other countries. 

Faster than the Titanic - the Titanic sank on it's first voyage. The US was supposed to be the one superpower after the Soviet Union collapsed. You had one good decade before the leaks sprung. Enjoy your sinking empire, friend.

[Vulcanl]

Wrath,

I seem to have hit some kind of nerve, and intentionally or not you are distorting my statement.

I do not deny that there is a continuing orgy of debt in the World.  Instead I am simply stating that had we never gone down this route the World would be a better place. 

There is much pain to come in the West, nothing in life is free.

I see a lot of Singaporeans overextending themselves with useless 'stuff.'  I hope these people wake up and realize that the path they are on leads to nothing but unhapiness (sounds to me like you are one of these people).

Chill out, dude....we're just having a conversation after all! 

[TheWrathOfGrapes]

Yes, V - we are having a conversation, which was why I was disappointed that you were disappointed - why the need for disappointment.

How to have a decent conversation when you distort what I said, then turn around and accuse me of the same:

I seem to have hit some kind of nerve, and intentionally or not you are distorting my statement.

Which is why I prefer to use quotes.

I said we should be talking, in this context, of external debt instead of public debt, and you immediately went off tangent and stuff this in my mouth:

Debt MATTERS.  Any statement to the contrary is just wishful thinking.

  Now, did I say in my original post that debt does not matter?  All I said is that in taking a country's financial pulse, it is more pertinent and accurate to look at the external DEBT instead of public DEBT.

And then you came up with the howler:

If you can't pay for it in cash, then don't buy it.  Period.

Note - this is a verbatim quote - so don't accuse me of distortion.

So, my question to you naturally was - do all people pay cash for property purchases?  You are still evading this.  Please answer this

Supplementary questions:
a) Do you, V, pay for everything you buy in cash?
b) Do you, V, own any credit cards?

Try to answer my questions before making any more unfounded statements or distorting what I said. Better still, quote my previous posts to support your case that I distort your statement.