Uncle Sam: The Ultimate Negative Equity Borrower (US Government LTV = 446%)

Confounded Interest ^ | 10/05/2013 | Anthony B. Sanders

[whitedog57]

After the housing crash of 2008, millions of US borrowers were suddenly plunged into a negative equity position of their homes where the amount they owed to lenders exceeded the value of the property. The problem was so bad that it has motivated cities to consider eminent domain to seize the underwater debt of borrowers (as in Richmond and San Bernardino California). Here is a recent map of negative equity from Zillow.

zillowmapofnegeq

These borrowers have nothing on Uncle Sam. Uncle Sam now owes $17 trillion to bondholders.

GFDEBTN_Max_630_378 (3)

Currently, Uncle Sam has public debt equal to 100.46% of GDP. That is, negative equity.

GFDEGDQ188S_Max_630_378 (3)

Households are actually paying down their debt while Uncle Sam is gorging.

HDTGPDUSQ163N_Max_630_378

Now, one can argue that US Debt Held By Public is a better measure since the difference is inter-governmental holdings.

debttothepenny

Debt held by the public has really skyrocketed since 2008.

FYGFDPUN_Max_630_378

But as a percentage of GDP, it is “only” 76%. But is was as low as 25.75% as recently as Q2 2001.

hbygdp

Aha, you say! Uncle Sam has positive equity (24%) and is not in negative equity.

Just like in any measure of negative equity in housing, we have to consider what other liabilities Uncle Sam has promised.

If you believe James Hamilton, US debt and unfunded liabilities together amount to $70 trillion. That is a bummer since real GDP as of Q2 2013 is 15.68 Trillion. Instead of being 110% LTV like some borrowers, Uncle Sam is at 446% LTV!

I wonder if China and Japan will offer Uncle Sam a HARP negative equity refinancing program. Or The Fed, the largest holder of US Treasury debt??

usdebtholders

Poor Uncle Sam. He promised too much and is now in deep negative equity territory.

broke-uncle-sam

[whitedog57]

Uncle Sam, our deadbeat uncle.

[Zhang Fei]

Currently, Uncle Sam has public debt equal to 100.46% of GDP. That is, negative equity.

GDP is income. The correct comparison is to a guy making 30 grand per year having a 30 grand mortgage.

[Toddsterpatriot]

GDP is income.

No kidding. For a finance guy, that's a pretty silly mistake for him to make.

[Toddsterpatriot]

Instead of being 110% LTV like some borrowers, Uncle Sam is at 446% LTV!

You're using LTV wrong.