- Sun Dec 30, 2018 11:44 am
#111830
Our National Debt is expected to rise to $21 trillion dollars in the next couple of years. I’m afraid that not too many really understand our National Debt. I have had friends say that we have managed with high debt in the past and nothing happened, so we can manage this. As in your own life, no debt is the perfect way to live but that would be unrealistic. I’ll try to explain a little bit about the National Debt, but I admit it is woefully incomplete.
a. The main measure used on national debt is debt to GDP. This is the measurement used but it is not a good one. The assets owned by the governments are figured into these figures.
b. The USA GDP in 2017 was $19.391 trillion dollars. Our National Debt is therefore at about 101% of GDP.
c. Who owns our debt? About 75% is owned by entities in this country. These entities are private citizens, the banks, the central bank (the FED,) and corporations. The balance is owned by foreign countries, foreign central banks and wealthy individuals seeking a safe place to stash their money. Downside? China owns about 6.1% of our National Debt. Who owns the debt is extremely important; Japan’s debt is about 150% of GDP but the debt is owned by Japanese entities almost in total.
d. The debt is financed by issuing bonds. These bond mature in 3 months, 6 months, 1 year, 4 years, 7 years and sometimes longer. The interest rates on these bonds reflect the going interest rates at the time and the confidence others have in the United States. When bonds become due we have been rolling over most of our debt (including the interest due.) Try to imagine what your debt would be if you refinanced your mortgage every 6 months.
e. Trump recently chastised the Fed for raising interest rates. Raising interest rates by the Fed increases our National Dept.
BTW: Mnuchen recently calling the banks after the stock market losses to ascertain their true health was wise as confidence in our banking system is crucial to financing our debt.
f. Our ability to finance our debt rely on the confidence others have in the USA ability to pay back the bond, the confidence and health of our banking system, our rising GDP, the sane practices of the Fed.
g. What could go wrong?
1. The major item is that we don’t have enough income (taxes) to finance our debt.
Revenues for this year have fallen dramatically.
2. Conflicts (wars) which drain our resources.
3. One-sided trade agreements that cause the loss of our GDP and dollars.
4. A financial crises that causes a loss of confidence in our ability to pay back the money owed.
5. A major banking crises as we have not fully recovered from 2008.
6. Minimal or decrease of our GDP.
7. Public resistance to the fiscal policies of the US Government.
8. A natural disaster that severely impacts revenues.
9. Wide spread civil strife.
10. Over extending commitments to other nations.
j. Red flag Warning! Most advanced nations have high debt which means that each country has to compete for money to finance their debt. Almost all developing countries have unmanageable debt.
We are nearing the point where there will not be enough money available to finance all nation’s debt.
k. All solutions to getting the debt down to a manageable level will be painful to the citizens and if it is not done wisely it could sink the country into chaos. One of theeasiest ways to decre4ase the debt is through raising the GDP. This will stiffle the outflow of money to other countries and raise revenue through taxes.
l. The main reason to decrease the debt is this; if the debt was zero we would have all that money to spend on our citizens and country.
a. The main measure used on national debt is debt to GDP. This is the measurement used but it is not a good one. The assets owned by the governments are figured into these figures.
b. The USA GDP in 2017 was $19.391 trillion dollars. Our National Debt is therefore at about 101% of GDP.
c. Who owns our debt? About 75% is owned by entities in this country. These entities are private citizens, the banks, the central bank (the FED,) and corporations. The balance is owned by foreign countries, foreign central banks and wealthy individuals seeking a safe place to stash their money. Downside? China owns about 6.1% of our National Debt. Who owns the debt is extremely important; Japan’s debt is about 150% of GDP but the debt is owned by Japanese entities almost in total.
d. The debt is financed by issuing bonds. These bond mature in 3 months, 6 months, 1 year, 4 years, 7 years and sometimes longer. The interest rates on these bonds reflect the going interest rates at the time and the confidence others have in the United States. When bonds become due we have been rolling over most of our debt (including the interest due.) Try to imagine what your debt would be if you refinanced your mortgage every 6 months.
e. Trump recently chastised the Fed for raising interest rates. Raising interest rates by the Fed increases our National Dept.
BTW: Mnuchen recently calling the banks after the stock market losses to ascertain their true health was wise as confidence in our banking system is crucial to financing our debt.
f. Our ability to finance our debt rely on the confidence others have in the USA ability to pay back the bond, the confidence and health of our banking system, our rising GDP, the sane practices of the Fed.
g. What could go wrong?
1. The major item is that we don’t have enough income (taxes) to finance our debt.
Revenues for this year have fallen dramatically.
2. Conflicts (wars) which drain our resources.
3. One-sided trade agreements that cause the loss of our GDP and dollars.
4. A financial crises that causes a loss of confidence in our ability to pay back the money owed.
5. A major banking crises as we have not fully recovered from 2008.
6. Minimal or decrease of our GDP.
7. Public resistance to the fiscal policies of the US Government.
8. A natural disaster that severely impacts revenues.
9. Wide spread civil strife.
10. Over extending commitments to other nations.
j. Red flag Warning! Most advanced nations have high debt which means that each country has to compete for money to finance their debt. Almost all developing countries have unmanageable debt.
We are nearing the point where there will not be enough money available to finance all nation’s debt.
k. All solutions to getting the debt down to a manageable level will be painful to the citizens and if it is not done wisely it could sink the country into chaos. One of theeasiest ways to decre4ase the debt is through raising the GDP. This will stiffle the outflow of money to other countries and raise revenue through taxes.
l. The main reason to decrease the debt is this; if the debt was zero we would have all that money to spend on our citizens and country.
- By Clownkicker