How to deal with the American goliath

The Observer ^ | Sunday February 24, 2002 | Andrew Rawnsley

[LJLucido]

LOL! You're welcome!

[LenS]

Debt can be a big problem. But it's severity depends on two questions -- what percentage of GDP is the total debt and what was the debt used to finance.

As long as debt growth doesn't overwhelm economic growth (e.g. higher federal debt in the late 80's was exceeded by even higher economic growth) over the long-term, then it's not a problem since assets are sufficient to cover debt in the aggregate. Japan in the 90's is an example of letting debt grow much faster than the economy.

Debt that finances new skills or businesses or other long-term benefits will generally create more wealth than other short-term benefit debts. Thus, the debt will be covered in the aggregate.

[Teacher317]

The largest naval armada assembled since 1945 currently cruises the Arabian Gulf. The decks of these warships bristle with weaponry of a sophistication and potency that no other state on Earth comes anywhere close to matching.

I can't help but smile while reading these particular lines.

(finding that silver lining!)

[TigerLikesRooster]

Re #22

Current debt level may be OK if current stock and real estate market level can be maintained. What is sustainable now may not be the case if the price level goes down. It all depends if one sees current level as over-valued or close to the real value. Since I think that market is still much over-valued, when there is a correction, the debt may become suddenly difficult to service. Besides, in an attempt to shore up these markets, Fed and others may pump more money into them, incurring more debts. I do not remember the exact figures, but U.S. debt level was about 5 trillion(public), over 1 trillion(consumer). I am not sure about the level of coporate debt. But they are no longer a small fraction of GDP. There may be debt which are not accounted in the figures above.

[F16Fighter]

America is an ideological "David."