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

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.

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

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

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

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

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!

And if we use the USDebtClock.org measure of unfunded entitlements of $126 trillion plus $12 trillion in debt held by public, we get a CLTV of 880%.

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??

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

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

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

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

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

Debt held by the public has really skyrocketed since 2008.

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

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!

And if we use the USDebtClock.org measure of unfunded entitlements of $126 trillion plus $12 trillion in debt held by public, we get a CLTV of 880%.

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??

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

To quote Jeff Lebowski, “This is a bummer man.“

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