What's the Meaning of $9 Trillion in Debt?

American Gold Exchange ^ | 4/27/06 | American Gold Exchange

[wotan]

After rising to $570 an ounce in February and correcting down to $540, gold has been on a tear. In the past sixty days the spot price surged by an astonishing $100, closing above $635 an ounce yesterday, its highest close since 1979. Even more stunning has been the performance of silver. After hitting new highs in February at just under $10.00 an ounce, silver skyrocketed by 50% to almost $15.00 before profit-taking cooled the rally. Palladium and platinum have also enjoyed strong gains during this time frame, but not quite as sensational as gold and silver.

Just as remarkable is the time frame of these gains. Historically, the first quarter of the year is the weakest time for metals. Once Chinese New Year and the Indian festival season pass, international demand for physical gold generally subsides for a while and prices soften. But not this year. As 26-year market veterans, we haven't seen this kind of late-winter rise since the “mother of all bull markets,” the record-breaking run from 1976 to 1980, when gold reached its all-time high of $850 and silver peaked at $50 an ounce.

[wotan]

Don't knock the source. Tell me whether what they're saying is false.

[wotan]

$9 trillion in debt equals:
--- More than the GDP of China, the world’s second richest nation.
--- More than the combined GDP of Japan and India, the next richest nations.
--- The equivalent of all monies invested in all U.S. mutual funds.
--- Four times the combined net worth of the nation’s 691 billionaires.
--- $30,000 for every man, woman and child in the United States.
--- $120,000 home mortgage for a family of four.

Time span of U.S. debt accumulation:
--- 213 years for the first $3 trillion (1776 to1989)
--- 10 years for the second $3 trillion (1989 to 1997)
--- 5 years for the third $3 trillion (2000 to 2005)

Foreign U.S. debt holders:
--- In 1970 foreigners owned about 5% of our national debt
--- In 1980 foreigners owned about 17% of our national debt
--- In 1990 foreigners owned about 18% of our national debt
--- In 1995 foreigners owned about 22% of our national debt
--- In 2000 foreigners owned about 31% of our national debt
--- In 2005 foreigners owned about 45% of our national debt

Puts the failure of the US government in perspective. Something's gotta give.

[AZRepublican]

Immigration won't be of any help on this because immigration is causing more debt in support the surge. When you have a govt that cannot operate under the limitations of its own constitution means there is little hope it can operate rationally when it comes to finance.

[Steely Tom]

Gold is up because big run-ups in the price of energy usually lead to world-wide inflation if they do not correct naturally.

This happened in the '70's.

The reason is that energy has an objective value, and the Arab sheikhs have nothing to do with it. If the price of energy is bid up to a point above that objective value, money will "get cheaper" to compensate.

Gold bugs are betting on this scenario. A bet on high gold is a bet that the world is running out of cheap oil. Maybe it's true; I don't know. My gut says no, but I could be wrong.

[raybbr]

Don't worry. Pretty soon "they'll" be here to tell us how pointless this is since our economy is going great. In finance it's not the future that counts it's tomorrow's profit.

[R. Scott]

What's the Meaning of $9 Trillion in Debt?

It means we will be in debt a very long time, with an ever growing portion of our taxes going to pay the interest.

[Always Right]

Time span of U.S. debt accumulation:
--- 213 years for the first $3 trillion (1776 to1989)
--- 10 years for the second $3 trillion (1989 to 1997)
--- 5 years for the third $3 trillion (2000 to 2005)

Considering you did no adjustments for inflation, those numbers are meaningless. A $5000 car in 1989 would cost you $10,000 in 2000.

[Glenn]

no adjustments for inflation

Thank God for inflation. Without it, there might be actual financial problems in the world.

[Raycpa]

If business or personal analysts only counted the debt and did not recognize the assets associated with the debt they would be fired as incompetent.

To be upset about US debt and not recognize the substantial assets our country has in terms of physical infrastructure, support services, military protection, etc. is asinine.

To worry that our creditors are foreigners is like chicken little worried about the sky falling. Hint: The risk taker in a loan is the lender, not the borrower.

[Lancer_N3502A]

"In 2005 foreigners owned about 45% of our national debt"

You got any figures as to who these "foreigners" are?

[Raycpa]

Considering you did no adjustments for inflation

Or population. General Motor's probably started with something like 1 thousand dollars in debt and today probably has billions -all in less than 100 years. Shocking.

[Lancer_N3502A]

Never mind...LOL

U.S. debt held by foreign countries in 2005:
--- Japan -- $687.3 billion
--- China -- $252.2 billion
--- United Kingdom -- $182.4 billion
--- Caribbean Banking Centers -- $102.9 billion
--- Taiwan -- $71.8 billion
--- Germany -- $63.5 billion
--- Korea -- $61.7 billion
--- Opec -- $54.6 billion
--- Hong Kong -- $48.1 billion
--- Canada -- $47.8 billion

[driftdiver]

What does $9 trillion in debt equal?

I dunno, the bank I work for has $2.7 trillion dollars a day in financial transactions. Of course this is only one of its divisions.

[Raycpa]

The longer the list of countries loaning to us, the safer we are.

[Lancer_N3502A]

Agreed, but would rather we not have to borrow money at all. I know, a pipe dream. http://en.wikipedia.org/wiki/U.S._public_debt provides a real good explanation of it all.

[TrebleRebel]

I'm assuming a table can be created for each country showing each country's debt. Since the US is $9 trillion in debt this means there must be a total of $9 trillion in assets held by other contries. There must be many contries with zero debt and large assets - right?

After all, the whole planet can't be in debt. This is a zero sum game - right? Unless Earth owes money to Martians.

I'd like to see the whole table that balances to zero, but somehow this is never shown by anyone. Can anyone explain why?

[LIConFem]

"What's the Meaning of $9 Trillion in Debt?"

It means a lot of spaghetti dinners for the next 40,000 or so years.

[agere_contra]

I guess every government in the world owes money - but they owe it to private sector creditors. And the private creditors never appear on these lists? Not sure.

[ProCivitas]

Basic question: Does our national debt and/or foreign ownership of it contribute to devaluation of the dollar ('inflation')? If so, how?
I have generally thought that currency devaluation had to do with two things : an inordinate increase in the 'money supply'(m1,m2,...) and/or large-scale selling of a currency on the international currency exchange without many buyers. What would cause either?

[Always Right]

Basic question: Does our national debt and/or foreign ownership of it contribute to devaluation of the dollar ('inflation')? If so, how?

It doesn't. What it does show is that foreigners believe in the US economy.