U.S. DEBT
As a self confessed short term, chart-trusting trader, I readily admit to not being sufficiently educated to fully understand the intricasies of high finance, fundamental analysis and political influences on our markets. As such, I would welcome assistance in dissecting the information I have compiled below which outlines the U.S. debt and its immediate and future influences on the markets, and our lives.
I know that a few years go that a billion dollars in a governmental budget was a lot of money. Then it suddenly was hundreds of billions. I understood that this was a lot, just because of all the zeros. I actually started to feel comfortable when this new number seemed small: the word “trillion”; it almost sounds comforting, as in $1.2 trillion for health care reform. No big deal, until you realize it has 12 zeroes behind it.
* One trillion: $1,000,000,000,000.00. YIKES!
The total public debt is now at 141% of GDP. That puts the United States in some elite company as only Japan, Lebanon and Zimbabwe are higher. When you add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP and our total debt is 557% of GDP. Just three years ago our total indebtedness crossed 500% of GDP for the first time.
Add the unfunded portion of entitlement programs and we’re at 840% of GDP.
I have read that the interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.
What does this all mean?
* Does this assures a period of economic devastation?
* In a last, desperate attempt, will politicians at the federal and local levels be forced to raise taxes to astronomical heights to raise revenues?
* Will that assures destruction of the economy?
Should we forget the politician’s promise of economic recovery. Unless there is a change in Washington by next year’s election, it appears there will be no way to turn back.
It must be noted that Japan’s recession is now 19 years old. It has the highest debt-to-GDP level (227%) of any industrialized country. The Fitch rating agency is talking about a potential downgrade of Japan’s debt. Japan’s stock market is still down 75% from the high in 1990. It is predicted that it will make new bear market lows next year. That will make it a 20-year-long bear market on the way to 25 years.
I have already confessed and pleaded ignorance to fully comprehending the significance of these statistics. Am I to believe the bullish theory that the U.S. situation is different than Japan’s or as I fear, that it is so much worse?
Anyone out there that can alleviate my fears and tell me how the U.S will return to fiscal sanity, please HELP!
