US Debt

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US Debt

Postby Fuzz » Thu Nov 10, 2005 9:29 am

I've been watching this page for awhile now and, about a month ago, the US debt rolled over 8 trillion dollars. It's now at 8.075 trillion dollars. It is interesting to note, a year ago, the debt cap was raised from 7.38 trillion to 8.18 trillion. At the current rate, the debt will reach that new limit within a month, and need to be raised again. here is a history of the debt, so you can see what has been happening over the past 50 years. Obviously, the debt is increasing at a rate never before seen ($3.48 billion per day).

This, combined with the ever increasing trade gap CNN cannot be helping things. I see this all as a ticking time-bomb, but I'm not an economist, so I am probably missing thngs here. Is there anything to worry about?

To add to this, I'm curious what the situation is in your country. I'll start a table here, and add to it, if anyone posts stats from their own country, and if anyone else has any more meaningfull information. The plus/minus is for if the debt is increasing or decreasing. Oh, I've converted all to USD for comparison.

Country__________Debt___________+/-_____Debt/Citizen

USA_____________$8.075 trillion____+______$27,129
Canada__________$678.1 billion_____-______$21,228
Sweden__________$162.5 billion_____-______$18,060
Holland__________$322.5 billion_____-______$20,160
India____________$117.2 billion_____?________$108

Just found this, for some economic indicators:
http://www.cia.gov/cia/publications/fac ... guide.html
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Postby Tacitus » Thu Nov 10, 2005 10:09 am

Most countries get into trouble if their debt rises to 5% of their GDP. The US' is now at 6%, but can get away with more owing to reasonably strong economic growth and the continuing influx of foreign capital to service the debt (you're probably already aware of China's role in this). Most economists are nervous (at least somewhat) about the situation but since nothing catastrophic has occured yet, a lot of their warnings are being brushed off. Nothing really to do but wait and see.
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Re: US Debt

Postby Sauron_Daz » Thu Nov 10, 2005 10:24 am

Fuzz wrote: Is there anything to worry about?

I'd say.. to who most countries owe to?
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Postby DIREWOLF75 » Thu Nov 10, 2005 10:25 am

Umm lets see if i get this right now:

Total 162.546 Billion USD
Per capita 18,060 USD
Debt going down.

It IS a ticking time bomb, more so for USA than many other countries, because of the scale of debt increase, USAs terrible trade deficit (Sweden in comparison has a positive trade difference), and due to the amount of debts held abroad, and due to the new shakiness of the USD.
Sooner or later, USA will be FORCED to do the same Sweden started with in mid 90s, and that is to seriously cut the budget deficit and start paying off on the debt.

That will most likely however cause a massive economic depression...
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Postby Sauron_Daz » Thu Nov 10, 2005 10:41 am

Holland: slightly over 275 billion Euro, or, assuming a population of 16 million, 17187 Euro per head, and it's declining.
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Postby psycho_mccrazy » Thu Nov 10, 2005 11:31 am

from the CIA factbook page
India:
GDP (purchasing power parity):
$3.319 trillion (2004 est.)
Debt - external:
$117.2 billion (2004 est.)
Population:
1,080,264,388 (July 2005 est.)

that makes it a 108 dollars per person. this is weird.... and external debt is much less than the GDP. or am i doin somefink wrong....
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Postby CPUagnostic » Thu Nov 10, 2005 2:13 pm

This is what happens when we have war spending combined with peace taxes.

We might be able to cut that down a bit if we taxed gasoline federally at a dollar or so per gallon. Or allowed the "temporary" tax cuts of the first GWB term to expire. Or both. AND, of course, we should stop spending so much.
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Postby Tiggerz » Thu Nov 10, 2005 11:12 pm

The US isnt doing too badly. Remember, if they paid off their debt, they'd probably mess up the economies of every other country on the planet. So I wouldnt bleat too loudly about it.

The currency is only a ratio of money supply in circulation in the US economy + (exports - imports). The number of dollars in circulation gives the US dollar its value and its what other currencies trade against.

As more countries switch over to valuing against their own production, then the US will adust their ratio.
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Postby Tacitus » Thu Nov 10, 2005 11:15 pm

LOL. Clinton's economic policies didn't seem to cause any hardship for any other countries. Sorry Tiggerz, not even full-time economists know what they're talking about half the time, so you'll forgive me if I take your post with a grain of salt.
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Postby CPUagnostic » Fri Nov 11, 2005 4:33 am

Tiggerz wrote:The US isnt doing too badly. Remember, if they paid off their debt, they'd probably mess up the economies of every other country on the planet. So I wouldnt bleat too loudly about it.

The currency is only a ratio of money supply in circulation in the US economy + (exports - imports). The number of dollars in circulation gives the US dollar its value and its what other currencies trade against.

As more countries switch over to valuing against their own production, then the US will adust their ratio.

Huh? And here I thought currency had become a marketplace, where it was only worth whatever people were willing to pay for it.
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Postby Tiggerz » Fri Nov 11, 2005 11:54 am

The short formula is MV=PY where:
m = money stock
V = velocity of circulation
P = price index
Y = real national income/output (GDP)

This is known as the exchange equation.

Y can be calculated as C+I + G + (X-M)

C = consumption
I = investment
G = government spending
(X-M) = xports - mports = net exports.


If Net exports is negative (ie the country is importing too much), then money is taken out of local circulation (as foreigners buy it) and you get a deficit.

However, remember that many commodities are traded between two countries in US dollars which creates a demand for US dollars for which america cant offset it with exporting goods. An example is when china buys oil from russia. The transaction is done in US$ meaning that money is taken out of american circulation (via the forex market) with no real way for america to buy it back.

Part of the US deficit accounts for this money being used by other people.

The US can use its interest rates to reduce velocity, however, it is constrained from doing so, by the pressures of the Yen and Yuan.

Most countries are moving over to this system of accounting, rather than pegging their currency against the US which is the old way of doing it.
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Postby D'Artagnan » Fri Nov 11, 2005 4:24 pm

I'm not sure if that is entirely correct, its possibly a bit simplistic. I do recall studying that equation in school but there are other ways of explaining currency values. There is another equation called interest rate parity which also explains the cost of money, there is the purchasing power parity model, the monetary model, Mundell-Fleming model, and the Dornbusch model to name a few.

However I think alot of the change in value of money comes from speculation on the foreign exchange markets. Currency prices change so quickly on the markets and its due to people trading it. Its true that people exchange currencies so they can buy goods like the example you gave of China buying oil from Russia but others trade it merely to make a profit from a change in the value of the currency.
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Postby D'Artagnan » Fri Nov 11, 2005 4:38 pm

Tacitus wrote:Most countries get into trouble if their debt rises to 5% of their GDP. The US' is now at 6%, but can get away with more owing to reasonably strong economic growth and the continuing influx of foreign capital to service the debt (you're probably already aware of China's role in this). Most economists are nervous (at least somewhat) about the situation but since nothing catastrophic has occured yet, a lot of their warnings are being brushed off. Nothing really to do but wait and see.

Yeh I dont think its a matter of working out the amount of debt per person, its more important to look at the debt relative to GNP or GDP and I think that the US is ok in that regard.

To give an example:
Ireland has a national debt of €37.8 billion (at end of 2004)
Its debt/GDP ratio is 29.4% (again at end of 2004)
In 1991 it stood at 96% of GDP!

Irish population in 1991 was 3,525,719 and debt was approx €32Bn which works out at around €9,076 per person. In 2004 the debt is almost €38Bn with a population of approx 4 million so it works out at approx €9,500 per person.
So debt per person has gone up but as a percentage of GDP it has declined significantly so perhaps looking at the figures per person is flawed.
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Postby Tacitus » Fri Nov 11, 2005 6:26 pm

To me this is similar to worrying about an earthquake or a meteor hit. No-one can accurately predict when it will happen and one is only able to make superficial plans for such an occasion. As such, it's not worth worrying about.
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Postby DIREWOLF75 » Sat Nov 12, 2005 3:09 am

Tacitus wrote:To me this is similar to worrying about an earthquake or a meteor hit. No-one can accurately predict when it will happen and one is only able to make superficial plans for such an occasion. As such, it's not worth worrying about.
:roll:

:?
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Postby Celt » Sat Nov 12, 2005 5:21 am

Tacitus wrote:To me this is similar to worrying about an earthquake or a meteor hit. No-one can accurately predict when it will happen and one is only able to make superficial plans for such an occasion. As such, it's not worth worrying about.


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Postby Tacitus » Sat Nov 12, 2005 6:34 am

DIREWOLF75 wrote:
Tacitus wrote:To me this is similar to worrying about an earthquake or a meteor hit. No-one can accurately predict when it will happen and one is only able to make superficial plans for such an occasion. As such, it's not worth worrying about.
:roll:

:?

Tell me how you're planning for the occasion. If anyone can tell me exactly how they intend to weather US (world) economic collapse (and it better not be something stupid, like buying canned goods or something!), I'll... do something ridiculous. :twisted: Since Dire just gave his usual cocky and sarcastic response, I would assume then that he has like a ten-point plan to get through or prevent world economic collapse. Please enlighten us, Dire! *waits for ridiculous plan*

*later*

Hey guys, I'm all worried about the Sun exploding! What do I do?! *frets*
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Postby Fuzz » Sat Nov 12, 2005 10:42 am

How to survive an economic collapse, By Fuzz:

Stockpile 10 000 bottles of beer and 10 000 bottles of wine. Consume.

There. Alan Greenspan would be proud.
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Postby Tacitus » Sat Nov 12, 2005 11:49 am

About as good a plan as any. I'll be over to share in the wine. The thing is, if there's a US "doomsday" economic collapse, we are ALL ****ed and there's nothing anyone can do about it.
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Postby Sauron_Daz » Sat Nov 12, 2005 1:30 pm

Count me in as well. And I'll bring some beer'nwine too!
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