National Debt approaching 9 Trillion dollars

Federal Government ^

[Capitalism2003]

Thank GOD we have a conservative in the White House!

[SoFloFreeper]

Imagine that number x2 if Al Gore had won in 2000 & 2004. Also imagine an economy tanking and Al Qaeda having attacked the U.S.A. more than once since 9/11.

I know it is cold comfort, but it could be worse.

[mtbopfuyn]

Can't be. I thought the illegals were paying their fair of taxes.

[Toddsterpatriot]

Public debt, the important number, is much lower.

[mnehring]

Sounds like a lot, and perfection would be $0 (unlike what Clintoon said, a surplus is not a good thing.) but the overall ratio of debt (outlays) to receipts has stayed pretty flat. You should also note that the trend lines are beginning to converge again. Yes, too much spending, no, not a crisis the media likes to make it out to be...

[Thrusher]

Hey, what's a few trillion between friends, baby?

[SengirV]

Where have all the Fiscal Conservatives gone? So sad.

[LtdGovt]

Well, at least the GOP Congress cut all the fat out of the budget, or did they, Tom DeLay?

[Cobra64]

I think we could make 2/3 of that go away if we shut down the Federal government for a year, i.e. ZERO payouts for all spending.

Too simplistic... yes. And, I know, it sounds like a boycott which never works because they'd just double the spending the next year because budgets don't mean anything in the public sector since there's no accountability.

Bureaucrats don't get fired for screwing the pooch.

[hubbubhubbub]

America's Total Debt Report - Update 2007
$48 Trillion - and Soaring
by Michael W. Hodges, Author
Grandfather Economic Report
March 15, 2007

America has become more a debt 'junkie' than ever before with total debt of $48 Trillion with the highest debt ratio in history.

That's $161,287 per man, woman and child or $645,148 per family of 4 -- an increase of $45,514 more debt per family than last year.

Last year total debt increased $3.9 Trillion, 5 times more than GDP. External debt owed foreign interests increased $1 Trillion; Household, business and financial sector debt soared 9%.

72% ($35 trillion) of total debt was created since 1990, a period primarily driven by debt instead of by productive activity.

And, the above does not include un-funded pensions and medical promises.


TWO GREAT QUESTIONS:
Can the production of debt forever replace the production of goods and savings?
Can Americans forever borrow their way to prosperity?
Easy Answer > NO WAY !!

I am concerned about the debt being passed to our younger generation. Who isn't?

BIG PICTURE - $48 TRILLION of DEBT in America and rising rapidly.
The economy is 2-3 times more debt-dependent with
$29 Trillion DEBT EXCESS compared to prior debt ratios

Debt is here defined as all U.S. debt (sum debt of federal and state & local governments, international, and private debt, incl. households, business and financial sector debts, and federal debt to trust funds).

For the period 1957 to mid 1970s, total debt was increasing close to the growth rate of national income despite war debt for WW II, Korea and Vietnam.

But, in the last several decades total debt has zoomed up, up and away - - growing much faster than national income. It has now reached $48.4 Trillion ($37.7 trillion private household/business/financial sector debt PLUS $10.7 trillion federal, state and local government debt). Here are some highlights:

Last year's total debt of $48.4 Trillion was 11 times higher than the $4.6 Trillion debt in 1957 (both measured in inflation-adjusted 2006 dollars).

Last year's total debt increased $3.9 trillion (up 8.7%). Federal government debt (incl. added debt owed trust funds) increased $510 billion (6.2%), household debt increased $1 Trillion (up 8.6%), business debt increased $750 billion (9.1%), state & local government debt increased $152 billion (up 8.2%), domestic financial sector debt increased $1.2 trillion (9.3%). Each sector reached a new, all-time record high.


Last year's total debt per person was $161,287 (up $11,379 over prior year's $149,908); this compares to $28,905 in 1957 (both measured in inflation-adjusted 2006 dollars). Last year's debt per family of four increased $45.514 to $645,148.

---

Stated differently, in 1957 there was $1.86 in debt for each dollar of net national income, but in 2006 there was $4.60 of debt for each dollar of national income - up 147%. It also means this extra $2.74 of debt per dollar of national income produced zilch extra national income. In 2006 alone it took $6.32 of new debt to produce one dollar of national income. What kind of 'so called productivity' is that? Answer > Negative Productivity.

---

Since 1990, 83% of today's domestic financial sector debt was created, as it increased by a factor of 6 times (2.5 times faster than the economy); household debt increased 60% faster.

2006 was a new, all-time record high in debt ratios of the household, business, and domestic financial sectors - also record debt ratios owed to trust funds.

In FY 2006 the federal government's bite out of trust funds of $328 billion set another record, bringing total trust fund debt to $3.6 trillion, including $1.8 trillion siphoned from the social security trust fund.

In 2004, the average credit-card debt of US households was $9,300, up from $2,966 in 1990, according to research firm CardWeb.com - - that's 214% more debt.

Even students are learning how to go into debt up to their necks. The federal General Accounting Office, according to AP's Martha Irvin, says college students are graduating with an average of $19,400 in student loans - a 58% increase after adjustment for inflation since 1993. Additionally, average student credit card debt rose 46% from 1998 to 2000, according to the student loan agency Nellie Mae. Meanwhile, universities promote credit cards issued by agencies who kick-back to them.

Since 1990 it is clear the economy was 'driven' almost entirely by the biggest injection of new debt in history, which produced a much diminished lower return in national income per dollar. Just as one hooked on drugs needs ever increasing amounts of drugs to 'survive', it appears America needs ever increasing amounts of new debt to eke out diminishing amounts of growth even with 2 wage earners per family.

America's total private and government debt is at least 100% higher compared to debt ratios of the recent past.

The total $48.4 Trillion debt shown at the top of this page can be broken down into two parts > $10.3 Trillion owed to foreign interests and $38.1 Trillion owed domestically.

According to the Federal Government Debt Report that debt was $8.7 Trillion at the end of 2006, including $2.2 Trillion owed by the U.S. federal government to foreign interests (which represents 46% of all Treasury bonds & notes).

The total external debt of USA (U.S. financial assets owned abroad) as of 9/30/06 was $10.3 trillion, representing 21% of America's Total Internal and External Debt of $48 Trillion shown at the top of this page. This external debt increased $1 Trillion (+11%) last year, representing 26% of the increase in total debt. Of that $10.3 debt owed internationally, the federal government and banks each owe more than $2 Trillion, and the rest of the financial and business sectors owe another $5.2 Trillion - excluding intercompany debts.

As of 2004, according to Gillespie Research/Federal Reserve, those U.S. financial assets owned abroad included 13% of all stocks and 27% of corporate bonds, and foreign investors & central banks also owned 13% of U.S. government agency debt (such as household mortgages financed by Fannie Mae) up from 5% in 1995. The largest supplier of mortgage funds is Fannie Mae which borrows the money on the open market - - and, according to Bloomberg Sept. 2002, "about a third of the Fannie Mae's benchmark debt is sold outside the U.S." - - (dangerous with a long-term falling dollar exchange rate).

Additionally, foreign interests own real estate and factories - - and some would be surprised to learn that the well-known and respected California-based Pimco, the world's largest bond fund that many believe is an American firm is in fact a unit of Allianz.AG, a German firm.

We should not be mad at foreign interests. We are the ones borrowing from others so we can consume beyond our own production and savings, thereby creating unprecedented debts and trade deficits PLUS excessive government spending. While America's debt used to be nearly all owed domestically, increasingly huge portions are now controlled by foreign interests.

America, therefore, is less and less independently in control of its economy
- - not a nice bequest we are creating for our children and grandchildren.

---

While facing this accelerating debt challenge:

America, already the world's largest international debtor with $10.3 Trillion external debt owed foreign interests. $6.6 trillion in cumulative trade deficits in goods have occurred since 1985, as international trade deficits explode to new records and America depends more and more on the production and savings of others than on itself (see International Trade Report); and

with each citizen carrying on his/her back more state & local government employees than ever before, because their headcounts again increased faster than general population growth; and

personal savings plunged to record lows; and

real median family incomes (Family Income Report) ceased their solid increases after debt ratios took off.

with household debt at the highest ratios in history,

whereas in previous times one bread winner per family was sufficient to provide for the family, build savings and reduce get-started debt loads - - the family now allocates the 2nd bread winner plus more debt and zero savings and less time for the children - - to do the same.

and - in previous times students graduated from college debt-free to themselves and their parents, because many worked their way via part-time jobs while minimizing consumptive spending. No longer.

The above debt ratio chart also adds evidence about the period of what some call the "financialization" of the economy by debt, including increasing domination by the nation's financial sector of the total capitalization based weight of the S&P index - - a topic discussed as a part of naming debt causes - - in page 2 of the full debt report (from link below).

More families than ever before, with every possible adult member in the work force, try to make-up the mounting pressure by turning to more debt and negative savings - - while more business debt is accumulated despite paying out fewer dividends to shareholders, as well as a much smaller manufacturing base.

A Few Hard Questions > With the lowest personal savings rate on record, with the federal government relying more and more on foreign entities to lend it funds to operate and prop up its currency, and with run-away trade deficits, where will this debt monster lead? Does America simply borrow savings of non-Americans until either they stop lending or until America has mortgaged or sold-off all its assets to others?

How can this direction be changed - - or am I the only one who does not believe individuals and a nation can, forever, borrow their way to guaranteed continual prosperity and security? Also, am I the only one who believes these trends represent major negatives regarding the future of our children and grandchildren - - in many, many ways?

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The End Game of Debt Expansion ??

Esteemed Economist Ludwig von Mises stated the endgame brought on by reckless expansion of credit (debt): "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Two Questions:
1. Does anyone wish to offer guarantees that Dr. von Mises is wrong?
2. Does anyone believe these debt trends can continue forever - without dire consequences?

[US_MilitaryRules]

What is after 999 trillion??

[mnehring]

Hell, we could cut it down by 2/3 if we pay an accounting firm $100 million to go through every line item and remove duplicates and unrelated riders on bills.

[nhoward14]

1000 trillion or 1 quadrillion

[hedgetrimmer]

Its nothing. Its just paper. We'll just print more money. No problem.

[Eclectica]

A Trillion here—a trillion there, pretty soon you're talking real money!

[Crusher138]

The GDP is about $13 trillion.

With the debt being about $9 trillion this is like a household making $100K being $69K in debt. If it is short term, high interest rate debt, you have a problem. If it is long term, low interest rate debt, you have a much smaller problem.

If I had only a $69K mortgage on $100K of income, I'd be pretty pleased.

If I had $69K in credit card debt on $100K of income, there would be issues.

Stating that there is $9 trillion in debt without detailing the structure of the debt is just too Chicken Little...

[Toddsterpatriot]

America has become more a debt 'junkie' than ever before with total debt of $48 Trillion

That's funny. What are America's total assets? $150 trillion? $200 trillion? Why doesn't Michael Hodges ever discuss assets?

[mnehring]

Two Questions:
1. Does anyone wish to offer guarantees that Dr. von Mises is wrong?
2. Does anyone believe these debt trends can continue forever - without dire consequences?

1. Yes, simply by looking at the history of debt w/ in this country one can see that, from an economic standpoint it is a straw-man argument. I've seen several articles like vonMises' dismissed by economists who point out that they fail to account for nonrecurring debt in these ratios & also what debt constitutes a capital investment. We had a giant debt after WWII (see chart on post above) that disappeared in just under a decade. Why, because most of the debt spending was nonrecurring capital expenditures and growth outpaced spending.

2. Yes, see post #1. One only has to look at our history to see this.

Now, is this debt good- No, ideally, we should have 0. Is this a killer however that vonMises and others like to sell, nope!

[shineon]

Million, Billion, Trillion...

© Copyright 1999, Jim Loy

People sometimes ask me the names of the large numbers. Here is a table. The system used in the U.S. is not as logical as that used in other countries (like Great Britain, France, and Germany). In these other countries, a billion (bi meaning two) has twice as many zeros as a million, and a trillion (tri meaning three) has three times as many zeros as a million, etc. But the scientific community seems to use the American system.
Number of zeros U.S. & scientific community Other countries
3 thousand thousand
6 million million
9 billion 1000 million (1 milliard)
12 trillion billion
15 quadrillion 1000 billion
18 quintillion trillion
21 sextillion 1000 trillion
24 septillion quadrillion
27 octillion 1000 quadrillion
30 nonillion quintillion
33 decillion 1000 quintillion
36 undecillion sextillion
39 duodecillion 1000 sextillion
42 tredecillion septillion
45 quattuordecillion 1000 septillion
48 quindecillion octillion
51 sexdecillion 1000 octillion
54 septendecillion nonillion
57 octodecillion 1000 nonillion
60 novemdecillion decillion
63 vigintillion 1000 decillion
66 - 120 undecillion - vigintillion
303 centillion
600 centillion

See Scientific Notation.

Addendum:

There are other big numbers with names. A zillion has come to mean an arbitrary or unknown large number. A googol is 10^100. A googolplex is 10^googol (10^10^10^2). This number is too large to write here without exponents. Skewes' number (gesundheit) is 10^10^10^34 was used as an upper bound in a mathematical proof. Recently 10^10^10^10^10^7 was used in a proof.

The googolplex has given rise to the n-plex notation: n-plex is 10^n. n-minex is 10^-n. Donald Knuth invented arrow notation, where m^n (^ is an up arrow) is the regular m^n. m^^n is m^m^m^m...^m, with n up arrows. m^^^n is m^^m^^m...^^m, with n ^^s. According to The Book of Numbers by J.H.Conway and R.K.Guy, chained arrow notation is the following enhancement: a^^^^^b is written as a>b>5, where > is a right arrow.

[coloradan]

Don't forget about entitlements, SS, medicare, the senior prescription benefit, federally insured pensions (GM, airlines) etc... Your graph implies things are going along just as usual, which will soon no longer be the case.