Guest View
User: Pass: | become a member


Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Total US Debt Soars To 101.5% Of GDP

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

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%.

Below is a chart of two lines with different slopes. We leave it up to readers to figure out which line is GDP and which is total debt.

And as noted yesterday, now that the end of month auction has settled, one can easily see why the Treasury forecast of debt issuance through the end of September will only be correct if somehow the Treasury finds a way to print its own money without reliance on the Fed, or else every US taxpayer somehow hikes their tax payments by 15% voluntarily. Good luck on both counts.

Then again who cares about the short term. Here is what the total US debt/GDP will look like, frankly under either administration as both the presidential candidate and the incumbent have absolutely no idea how to fix an excess debt problem without issuing more debt (nor do they have any interest to).

And for those who still believe that insurmanoutable debt is suicide, we have good news, you are right, at least according to a new paper by Reinhart, Rogoff and Reinhart (via The American):

– We identify 26 episodes of public debt overhang–where debt to GDP ratios exceed 90% of GDP–since 1800. We find that in 23 of these 26 episodes, individual countries experienced lower growth than the average of other years. Across all 26 episodes, growth is lower by an average of 1.2%.

If this effect sounds modest, consider that the average duration of debt overhang episodes was 23 years. In 11 of the 26 high debt overhang episodes, real interest rates were the same or lower than in other periods.

– Obviously, it is possible that new developments in technology and globalization will provide such a remarkable reservoir of growth that today’s record debt burdens will eventually prove quite manageable. On the other hand, the fact many countries are facing “quadruple debt overhang problems”—public, private, external, and pension–suggests the problem could in fact be worse than in the past, a question we do not tackle here.

– Nor have we paid attention here to the likely possibility of significant “hidden debts”, especially public sector, which Reinhart and Rogoff (2009) find to be a significant factor in many debt crises, and as documented in detail in the Reinhart (2010) chartbook. Another line of reasoning for dismissing concerns about public debt and growth is the view the causality mostly runs from growth to debt.

Our analysis, based on these cases and the 23 others we identify, suggests that the long term risks of high debt are real.


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!





You must be logged in to make a comment.
You can sign up for a membership or get a free SWW trial or log in

Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Dashboard

 Sector Performances (Today)

 Thermal Imaging