The United States government has just crossed the magic line where its total national debt now exceeds (more than 100%) of GDP.
See here that ehe U.S. national debt of $15.033 trillion is now higher than the $15.032 trillion gross domestic product. The magic line usually means that a country is plunging into a long term malaise. There are other ways of calculating debt and GDP, but it is still not a pretty picture.
Here is national debt as a percent of GDP by country according to the CIA
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misprint: “that ehe U.S. national debt”
that should be “that the U.S. national debt”
How does this square with a) the Austrian skepticism of the usefulness of GDP as a measurement of anything and b) the libertarian skepticism of government statistics? Is it just that this is a metric the statists think matters? Or that it has some indicative value even if it’s extremely imprecise?
http://krugman.blogs.nytimes.com/2009/11/22/joke-europeans/
It is a statistic that the mainstream accepts and the idea behind it is generally endorsed by Austrians. Runaway deficits and exploding national debt leads to inflation and little or no growth.
It is funny that the CIA instead of the FED is collecting the data? Zimbabwe is followed by Japan. Cuba has very low debt but is full of poor people. Most countries are in trouble. It is all funny money. We should all transact in mg of gold; each mg is worth 5-6 cents. Maybe voters will someday wake up to the fiat paper money tax and stop trying to overtax the top 1%.
The real joke is that the US Federal Government is a modest $15 trillion in debt. This number does not even include ACTUAL liabilities in loans outstanding by the GSEs Fannie and Freddie in addition to the guaranteed student and other loans.
I have not even mentioned the elephants in the room of outstanding liabilities for anti-Social in-Security, non-Medicare and Federal Government Pensions.
And what about liabilities for private pensions from the various agencies insuring the pensions of GM, Delta Airlines, United Airlines, Chrysler, etc?
Ooopsie, I forgot US State and local government liabilities. Add these in and we get probably a factor of two times the $15 trillion and that does not count the elephants.
I think this graph says it all:
http://research.stlouisfed.org/fredgraph.png?g=3us
we can clearly see the trajectory and that almost all “growth” of GDP the last 7-8 years has been entirely government. There’s been pretty much no private sector GDP growth of any kind. Pretty clearly gov’t expenditures sort of flatlined from the early 90′s until 2000, yet GDP actually trended upwards. Perhaps the charlatan from Princeton would like to explain that one?
Of course he’d argue that without it, we’d tank. But without, the economy grew (well, not in the true savings based Austrian growth model, but in a mainstream kind of sort of way). Oh wait, there was a democrat in the white house then. But then the evil republicans came in and spent like drunken sailors (but wasn’t war supposed to boost an economy??) and the economy tanked. But now if we spend like drunken sailors, actually like a whole flotilla worth of drunken sailors, we’ll recover.
Come to think of it, that actually makes sense. I get it now. I feel much better.
I read a lot of estimates that say the US public debt is only around 60-65%. Is this because they’re not including debt held by the “Federal Reserve” or what?
Hooray! It’s just money. Well, fiat like money, but money still. Whee!
I don’t know why everyone is so concerned with the national debt. That number also reflects the amount of savings held by the private sector. I thought savings were good?
When savings go into capital goods, it means a higher standard of living in the future. When savings go into government debt, it means a lower standard of living in the future.
No, government deficits do not equal savings held by the private sector.
http://mises.org/daily/2020
The deficit represents real goods and services being siphoned away from the private sector.
I think the 65% figure does not include Social Security trust fund money that was borrowed. And yes, true debt is even much worse than the 100% figure.
So the U.S. is officially bankrupt?
Morally and intellectually?
define bankrupt.
Let me see if I got this. When money created by deficit spending goes into capital goods living standards rise and when the same money goes into government bonds living standards fall?
I don’t know if there’s a more technical explanation than what comes to mind when I consider government projects, but expanding the welfare/warfare state seems like a recipe for future immiseration relative to expanding private industry. The latter has the incentive to economize resources and produce commodities the public wants; failing either hurdle results in bankruptcy, and the reallocation of resources to successful businesses. The imperative in government programs is wastefulness, since a dollar economized is a dollar that program won’t see in next year’s budget. Add to this the questionable merit of any particular program, the moral hazards, market distortions, crowding out, Cantillon effects, etc., and with this recipe you have concocted future immiseration. But I’m sure better-read Austrians/ libertarians can add reams to this description.
I wasn’t talking at all about government programs. A previous commenter suggested that savings that went into capital goods were good and saving that went into government bonds were bad. The US uses a fiat currency that it creates and accepts in payment of taxes. therefore, in order for people to have money to save, the government has to run a deficit.
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